PokerStars, the world's largest online poker company, is mounting a campaign to gain access to the growing US online gambling market after being blackballed by regulators in 2011. It has hired a prominent constitutional law professor to argue that attempts to label PokerStars a "bad actor" are unconstitutional. While PokerStars has reopened negotiations with New Jersey, it faces opposition from tribes in California who want to pass legislation banning operators like PokerStars that previously operated illegally in the US. Gaining access to California's large market would help PokerStars enter other states, but the tribes view protecting their existing gambling operations as important for their economic livelihood.

1. June 23, 2014 9:56 pm
PokerStars shows
„game changer‟ hand
to US
By Aaron Stanley in Washington
©AFP
The new owner of PokerStars, who bought the world‟s biggest online poker website
this month for $4.9bn, is mounting a forceful campaign against opponents seeking to
keep the company out of the growing US online gambling market.
PokerStars, blackballed by state regulators after a 2011 crackdown by the
Department of Justice, has been on the losing end of drawn-out licensing battles with
New Jersey, Nevada and Delaware, the three states that have legalised online
gambling.
Now, it is locked in a fight against Indian tribes in California keen to legalise online
poker but keep PokerStars out via a “bad actor” clause in the proposed legislation
that would bar operators which operated illegally in the US after 2006.
The takeover of the group by Amaya Gaming, a Montreal-based gaming equipment
supplier, is seen by analysts as the key to unlocking the door to these licence deals.
“Under the Amaya acquisition agreement, PokerStars‟ owners will cut ties to the
company (although management will be kept in place), which may allow them to get
licensed,” Fitch Ratings said in a statement. A PokerStars re-entry into the US would
be a “game changer”, it added.
PokerStars has recruited one of the most eminent professors of US constitutional law
to counter rivals‟ campaigns to halt its return to US online poker.

2. Laurence Tribe, Harvard Law professor, has begun attacking attempts by PokerStars‟
rivals to label the company a “bad actor”, saying such language is unconstitutional.
The company‟s approach may be working – PokerStars last week reopened licensing
negotiations with New Jersey gambling regulators. However, being shut out of
California, widely considered to be the potential crown jewel of the US online gaming
market, would render it extremely difficult to enter states that adopt internet poker
in the future.
“What we talk about is the domino effect – that [states] by and large copy each
other,” said one state gaming regulator. “That means if you get in trouble in one
jurisdiction, you have to explain it in another.”
PokerStars is the world‟s largest online poker provider, with more than 90m players
and 11 operating licences worldwide. The company was exiled from the US after a
2011 Justice Department crackdown on offshore online poker operators.
In 2012 it settled charges of bank fraud, money laundering and other violations of
gambling regulations for $731m without admitting wrongdoing. The sum included
the acquisition of Full Tilt, PokerStars‟ main competitor, which was also a subject of
the crackdown.
While the company maintains that it did not do anything wrong, two of its
executives, including founder Isai Scheinberg, are still under indictment in the US,
though Mr Scheinberg has denied the charges.
Under the umbrella of Amaya Gaming, PokerStars is confident it will be able to heal
its old wounds.
“The agreement with Amaya will strengthen our business coalition in California,”
said PokerStars spokesman Eric Hollreiser, in reference to an agreement it forged
with one of the state‟s major gaming tribes this spring.
The first test will come in New Jersey, which suspended PokerStars‟ licence
application last year over the lingering Scheinberg indictment.
New Jersey “will be one of the first in the United States to take a bite out of the
suitability apple for this new entity. Certainly their view will be an important
determinant of the ability of this new entity to participate in regulated gaming in the
US,” said Richard Schuetz, a commissioner on the California Gambling Control
Commission.

3. While New Jersey will be the litmus test, the prize is still California and its
population of 38m. But for competitive reasons, 13 of the state‟s 14 gaming tribes are
determined to keep PokerStars out via the “bad actor” clause embedded in the
legislation. Unlike in other states, Indian tribes in California maintain exclusive
control over gambling.
“It would be hard for anyone to say that this is targeted to anyone else besides one
company,” said John Pappas, executive director of the Poker Players Alliance. “They
have singled out PokerStars as the „bad actor‟.”
While PokerStars blasted the language as protectionist and unconstitutional, the
tribes argue that they must protect their turf or risk losing one of their few means of
economic livelihood.
The tribes “are worried someone is going to come in and cut their throats during the
night”, said Victor Rocha, a veteran of Indian gaming politics in California. “They
have always been very protective of gaming because it is the only thing that has
allowed them to thrive.”