A bid by the world’s largest online poker website to buy an Atlantic City casino is touching off a battle with brick-and-mortar casinos that is getting very nasty, very quickly.
The Rational Group, the parent company of PokerStars, wants to buy The Atlantic Club Casino Hotel. If approved, it would mark the first ownership of an American casino by a solely-online gambling company.
But The American Gaming Association, the trade association representing traditional brick-and-mortar casinos nationwide, is urging New Jersey regulators to reject the bid. It claims PokerStars “was operated as a criminal enterprise” for years, capturing more than half the $7 billion-a-year online poker market.
The company agreed last year to pay $547 million to the U.S. Justice Department and $184 million to poker players overseas to settle a case alleging money laundering, bank fraud and illegal gambling. It admitted no wrongdoing, and says it is in good standing with governments around the world.
The New Jersey Casino Control Commission on Wednesday will consider whether to let the gaming association participate in PokerStars’ licensing hearing.
The gaming association said in a filing it submitted to the casino commission that it opposes the PokerStars bid “because the integrity of the gaming industry would be gravely compromised by any regulatory approvals of PokerStars, a business built on deceit, chicanery and the systematic flouting of U.S. law.”
However, because The American Gaming Association is not a party to the PokerStars licensing application, the brief it sent to the casino commission cannot legally be considered at this point. The association is seeking permission to intervene in the licensing hearing. A decision on whether PokerStars can qualify for a license is not expected for several weeks.
PokerStars has emerged as perhaps the last, best hope to save The Atlantic Club, which has been struggling to compete in the cutthroat Atlantic City market for years. It came close to having to close two years ago, until a last-minute infusion of cash from its owner, Colony Capital.
Colony agreed to pump $15 million into it to keep it afloat. In return, lenders foreclosed on and took ownership of two casinos in Mississippi that Colony owned, Bally’s Tunica and Resorts Tunica, and wiped out the mortgage debt for the Atlantic Club, which at the time was called ACH, a reference to its former status as the Atlantic City Hilton.
Since the day the Rational Group announced its plan to buy The Atlantic Club, its path to approval appeared arduous. The opposition of the gaming association has turned up the heat another notch.
“Any action 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 law breaking are welcome in the licensed gaming business,” the association wrote in its brief.
The group accused PokerStars of setting up decoy websites with domain names involving golf, shopping, pet food and other topics to disguise the fact that payments made through them were for online poker transactions. It also said the company bribed a bank executive to handle the transactions, which the group said were illegal under federal law.
Eric Hollreiser, a spokesman for the Rational Group, which is based in the Isle of Man in the U.K., called the gaming association’s assertions “false and defamatory.”
“No court has found PokerStars or the four named PokerStars executives guilty of any offenses, and neither they nor the companies face any criminal charges,” he said. “Furthermore, the settlement with the DOJ includes no admission of any wrongdoing and explicitly says that it does not limit PokerStars from offering real-money online poker in the United States if and when it becomes permissible under relevant law.”
Hollreiser said PokerStars is “one of the world’s largest and most respected Internet gambling companies.” The company holds licenses in France, Germany, Italy, Spain, Denmark, Estonia, Belgium, Malta and Isle of Man, he said.
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