Despite setback after setback, Europe-based PokerStars won’t give up on its quest to break into the US online gambling market. After failing in Nevada and New Jersey, the new target is California. But odds are PokerStars is once again drawing dead.
The company, operated by the Isle of Man-based Rational Group, is linked to three politically powerful Los Angeles-area card rooms and Riverside County’s the well-connected Morongo Band of Mission Indians.
The partnership wants to block Internet poker legislation in the state that bans PokerStars from participating in what many believe will be a massive revenue-generating Internet market that would dwarf Nevada’s online poker network.
How lucrative? Morgan Stanley gaming analyst Thomas Allen predicted last week that legal Internet gaming in the United States will produce $8 billion annually by 2020. California, he said, will legalize online poker and alone will see $1.18 billion in annual revenue.
The partnership was first reported two weeks ago by veteran journalist Dave Palermo for Gambling Compliance. A follow-up story quoted an influential state lawmaker who said the alliance creates “a significant wrinkle” in passing any legislation.
Nevada and New Jersey regulators took steps to keep PokerStars from gaining access to the states’ newly launched US online gambling opportunities. California is considering similar mechanisms in two bills pending in Sacramento that would legalize Internet poker. There is nothing simple when it comes to PokerStars. The company remains the world’s largest online gaming website, controlling 54 percent of the global Internet traffic through markets outside of the United States.
PokerStars pulled out of the United States in April 2011 following the indictment of its founder, Isai Scheinberg, and two other company officials on fraud and money-laundering charges. The action was part of the U.S. Justice Department high-profile “Black Friday” crackdown on US online gambling and poker websites that took wagers from Americans after passage of the Unlawful Internet Gambling Enforcement Act, which made financial transactions for online gaming illegal in 2006.
Sixteen months later, PokerStars settled its civil case by forfeiting $731 million. The agreement required Scheinberg to cease any managerial role at PokerStars. The Justice Department absolved the company of wrongdoing in accepting Internet wagers from American gamblers for the five years after the act became law.
Federal authorities didn’t prohibit PokerStars from entering legal U.S. gaming markets. State gaming regulators had an opposite view.
In Nevada, online gaming regulations include a five-year ban on companies that accepted Internet bets from Americans after 2006. The language was dubbed as a “bad actor clause,” and all but singled out PokerStars. Internet gaming companies that took wagers from Americans, but halted the practice after 2006, including 888 Holdings and PaddyPower, have been licensed or found suitable.
Read more about the politics of US online gambling at the Las Vegas Review-Journal
