Why a Casino Group Stepped in on an Online Gambling Case

In an unusual move, the American Gaming Association, which has traditionally supported online gambling, spoke out against an online poker company's recent efforts to return to the U.S. market. Here's why.

You’ve got to know when to hold ’em, know when to fold ’em, know when to walk away, and know when to step up.

And with states slowly beginning to pave the way for online gambling after a period in which federal law banned the practice, there’s much is to be said for burnishing the industry’s image.

Perhaps that’s why the American Gaming Association (AGA) recently spoke out against one company’s efforts to return stateside after operating abroad. More details:

The backstory: In recent years, online gambling has increasingly become a hot-button issue in the United States, with shutdowns of brand-name poker sites such as Full Tilt Poker, Absolute Poker, and PokerStars having a devastating effect on the industry at large. A 2006 federal law made online gambling illegal despite its wide popularity, but recent efforts by groups such as the Poker Players Alliance have been pushing for changes to be made at the federal and state levels. In the case of PokerStars, the site settled with the U.S. government over its alleged usage of fraudulent means to transfer assets offshore, forfeited nearly $547 million in frozen assets to players, and purchased Full Tilt Poker’s assets.

Recent developments: Last week, a law signed in New Jersey—a state with an already sizable gambling infrastructure—legalized online betting. It became one of the few states to do so since the practice was banned at the federal level seven years ago. (Nevada, which passed its law five days before New Jersey’s, has legalized online poker only; meanwhile, Delaware’s offering involves the state’s lottery system.) The new law comes with some restrictions, however: The companies involved—along with the hardware and infrastructure used—must be based in casino-heavy Atlantic City. However, the law is broader than other states’ measures. It allows all existing operators to offer each of their current offerings online. The laws in Nevada and New Jersey allow for interstate compacts, which could allow online gambling across the country.

The controversy: In January, weeks before the law permitting online gambling was passed in the state, the Isle of Man, U.K.-based PokerStars’ parent company, Rational Group, made a deal to purchase a casino in Atlantic City. While the purchase of the Atlantic Club has yet to go through, such a deal would give PokerStars a base to work from in the United States. And that’s what prompted the AGA, which has never previously intervened in a licensing case, to get involved. “Allowing PokerStars to be licensed would send a damaging message to the world of gaming and to the world beyond gaming, that companies that engage in chronic lawbreaking are welcome in the licensed gaming business,” the group argued in a filing, one that noted that two former officers for the company were fugitives from the law facing criminal charges. The company called the claims “false and defamatory,” and denied any wrongdoing based on the prior settlement.

“These are matters for expert regulators to determine, not self-interested partisans picking a public fight,” the company’s spokesman, Eric Hollreiser, told Bloomberg. “We will continue to work positively with regulators in New Jersey and elsewhere whenever they review our qualifications.”

The deal still must be approved by the state’s Division of Gaming Enforcement and Casino Control Commission.

(Polka Dot/Thinkstock)

Ernie Smith

By Ernie Smith

Ernie Smith is a former senior editor for Associations Now. MORE

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