Wait a minute: an online poker company is potentially buying a brick-and-mortar casino in the USA? Yes indeed. Rational Group US Holdings, the parent company of PokerStars and Full Tilt Poker, is asking the New Jersey gaming board for permission to buy the Atlantic Club Casino Hotel. The exact amount is undisclosed, but the fact that they’re even asking in the first place is quite surprising.
April 15, 2011, wasn’t so long ago. On this date in history, the online poker world imploded on what is now dubbed “Black Friday”. Indictments in the U.S. Southern District of New York were revealed targeting Poker Stars, Full Tilt Poker, and Absolute Poker. Charges ranged from violation of the UIGEA (Unlawful Internet Gambling Enforcement Act of 2006), to money laundering, and operating an illegal gambling business. The case was brought in criminal form against several founding members and payment processors of each respective company, in addition to a civil suit seeking forfeiture of assets illegally obtained from online poker operations.
On July 31, 2012, the U.S. courts dismissed the civil complaints against PokerStars and Full Tilt Poker with prejudice. PokerStars settled with the government and bought out Full Tilt Poker, although each company did NOT admit any wrongdoing.
While the Civil case is officially over against these companies, the criminal indictments against all the individuals originally named remain in force. Two people have plea bargained and served sentences in prison. Others remain outside the jurisdiction of United States law enforcement.
Now, it seems PokerStars is back in the United States and in the real estate business. Obviously the settlement and criminal charges against founding individuals are still fresh in everyone’s mind. One would think the last thing PokerStars would do is attempt to buy into the brick-and-mortar Atlantic City casino market. Law enforcement must be skeptical. Moving to purchase a gaming property exposes a company to detailed accounting audits, background checks, compliance with tax law, and other regulatory measures every land based gaming operator in the United States faces.
Jaxcasinos.com believes the core management of the United States division of PokerStars is a different group of people. PokerStars itself is based in the Isle of Mann, and can therefore continue operating its websites for the rest of the world. There are creative legal ways to construct corporations with foreign interests in the United States that have limited exposure to prying eyes. The Rational Group US Holdings company must be above board legally, even if it was derived from what some USA officials might consider “questionable” funding sources.
The Huffington Post has a good summary of the situation in its article about PokerStars.
Clearly, this is a “get your foot in the door” tactic. Republican Governor of New Jersey Chris Christie is already bucking party lines in his bid to legalize sports betting at the state level. If he’s successful, New Jersey will join Nevada as the second state to allow single game sports betting. Delaware’s recent attempt to fully legalize sports betting was met with resistance, and supporters had to settle for parlay betting only. If New Jersey is open to sports betting, would Atlantic City based online poker be a such a stretch?
Courts in the United States have already ruled that poker is a game of skill, hence why it remained strong on the internet after the UIGEA of 2006. The government obviously clarified its position when indictments were unsealed, making it apparent that while poker is a skill game, online poker and processing payments to offshore entities is illegal. Whether or not this position is reasonable would be a good legal debate to have in this country. The best alternative to offshore online poker would be legalized online poker in the United States that the government can license, tax, and regulate. The internet isn’t going away.
If PokerStars is successful in its bid, it would be the first internet gambling company (essentially) to own a land based casino. Once it’s established in Atlantic City and profitable, PokerStars could easily begin the process of lobbying the state of New Jersey for legal statewide online poker. Nevada’s march towards legal online poker is already underway, and if New Jersey follows, a domino effect will begin across the nation. States hate to miss the boat on new tax dollars, and might be willing to forego their reservations about internet gambling to balance shaky state budgets.
Of course, once several states legalize it, a National debate will begin at the Federal level. PokerStars is playing the long ball: they’re going to quietly step into the USA market legally, push for legalized online gambling, and once it happens they will be one of the first companies to enter the new market. A well positioned, highly experienced online gambling company already situated on USA soil would stand to make millions – if not billions – once online gambling becomes fully legal.
Then again, they could just be diversifying their investment money into the real estate market. That’s a good hedge for their “Hail Mary” bet, and is a very unoffensive, fully legal way to setup shop in New Jersey.