PokerStars’ Painless Pennsylvania Approval Highlights A Cleaned Up Image

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Buried in last week’s PA Gaming Control Board (PGCB) hearing was the fact that The Stars Group (TSG), parent company of poker giant PokerStars, BetStars and host of other gaming brands, was approved to operate inside the Commonwealth.

TSG was part of a group of over a dozen platform providers and manufacturers to receive conditional permits that day, in a hearing which mainly focused on iGaming licensing for Mohegan Sun and a brick-and-mortar license renewal for Penn National.

But while TSG’s approval may have flown under the radar, its importance can’t be overstated, and comes in stark contrast to what the company endured in its quest to reenter the U.S. market through neighboring New Jersey.

The seemingly painless PA process also highlights just how far the company has come in cleaning up its image in the eyes of regulators.

How it got its bad rep

In 2006, lawmakers passed the Unlawful Internet Gambling Enforcement Act (UIGEA), legislation which made it illegal for U.S. banks to process financial transactions for unregulated online gambling operators. While several publicly listed online poker sites like Party Gaming accepted their fate and bowed out of the market, PokerStars, along with others like Full Tilt and UB, kept chugging along, flouting the new law.

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The party came crashing down in 2011, when the Department of Justice (DOJ) seized the web domains of all three, and charged their founders – including PokerStars CEO Isai Scheinberg – with a litany of crimes.

What’s more, it soon became apparent that Full Tilt Poker (along with Absolute Poker and UB) could not cover their player balances. PokerStars eventually came to the rescue, reaching a $731 million settlement with the DOJ, which would allow it to purchase Full Tilt and make its customers whole.

Stars’ founder Scheinberg remained under indictment and continued to run the company well out of reach of U.S. authorities.

However, with Scheinberg at the helm, the nine-figure goodwill gesture wouldn’t be enough to satisfy regulators when the opportunity to reenter the United States in a legal capacity became a reality.

PokerStars’ NJ regulatory nightmare

When the DOJ made it possible for states to legalize online poker, New Jersey and Nevada were two of the first to jump on board. In the Silver State, PokerStars was deemed a “bad actor” due to its participation in the U.S. market after the UIGEA went into effect, and was locked out of the action.

Instead, the company set it sites on New Jersey, where online gambling companies are required to partner with brick-and-mortar casinos to become licensed. Stars quickly inked a deal with the now-defunct Atlantic Club Casino to buy the property for $15 million. While awaiting approval, it essentially kept the fledgling venue afloat with a $10 million investment.

However, it seems that greed overtook the owners of the Atlantic Club. After signing a contract to sell the property, the owners took advantage of a loophole in the contract, pocketing the initial $10 million investment and canceling the deal.

The venue subsequently went on the hunt for other iGaming partners, but came up short. The troubled property was forced to close in 2014.

The ever-aggressive PokerStars then activated its Plan B, linking up with Resorts in the hopes of finally receiving a coveted online gaming license.

But in 2013, the company was spurned again when the New Jersey Division of Gaming Enforcement (DGE) decided to suspend the review of its application for two years.

While PokerStars may have been revered by players, and regulated in over a dozen jurisdictions, DGE officials could not look past the continual participation of founder Isai Scheinberg, as well as his son Mark.

The rejection seems to have played a major role in what happened next: PokerStars sold itself to Amaya Gaming for $4.9 billion in 2014, excising both Isai and Mark from the company completely.

Shortly thereafter, NJ regulators reopened the approval process for Stars’ application, and officially gave it the stamp of approval in 2015.

The site launched to much fanfare the following March, but due to the ring-fenced nature of the legal U.S. market was not able to substantially grow the overall player pool in the state. It did however, become the overwhelming market share leader, at least until 888-branded sites in Nevada, New Jersey, and Delaware pooled their players in May 2018.

California another obstacle

California is considered the crown jewel of U.S. online poker, if the state’s disparate gambling stakeholders could come to an agreement on legislation, that is.

One of the main sticking points is whether PokerStars should be allowed to operate in the state or whether it should be considered a bad actor. While there is zero chance that online poker legislation will be passed there this year, PokerStars has spent considerable effort lobbying gaming interests in the state, hoping to have a seat at the table if online poker eventually comes to fruition.

But the going has been rough. A faction of tribal casinos has been vehemently opposed to PokerStars’ entry into CA, claiming that the company should be banned due to its actions after the passage of the UIGEA. Proponents of PokerStars believe that the tribes are simply trying to stave off competition in order to keep a larger piece of the pie for themselves.

PokerStars was eventually successful in forming an alliance with several tribes and brick-and-mortar poker rooms. But with so many gambling interests to please in the state, online poker could still be a long way off – and there’s no guarantee PokerStars will be allowed to participate.

PokerStars’ skates right through in PA

In contrast to Nevada, California and New Jersey, Stars’ approval in PA was a breeze. Regulators there clearly believe that the company poses no threat to players, and that it upholds the highest compliance standards. With approvals to operate in 19 jurisdictions scattered across the globe, including in the U.S., Australia and the European Union, it’s hard to make a case that PokerStars be considered a bad actor and not worthy of licensure.

In PA, PokerStars announced plans to partner up with Mount Airy and will offer online poker as well as online casino games. Sports betting could also be a possibility, if Mount Airy decides to pursue a sports wagering license.

Right now, the site is landlocked inside New Jersey but if PA enters into a compact with other legal U.S. poker states, the company will have a chance to link up with its Garden State sister site, and once again dominate the American online poker market as it did pre-2011.

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Bill Grinstead

Bill has over a decade of experience working in diverse aspects of the online gambling space. He is currently focused on legal, US online gaming, which he has reported on since the industry first became regulated in the country.

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