PokerStars is finally returning to America. It took striking a deal with the Department of Justice that included a $731 million payment, the Wall Street fueled sale of the company and its Full Tilt properties for $4.9 billion, and a regulatory journey that dragged on for years. But the New Jersey Division of Gaming Enforcement has finally given the green light for Amaya to offer Internet gambling in the state under the PokerStars and Full Tilt brands.
Shares of Amaya soared by 14% on Thursday and for good reason. The news is huge for Montreal-based Amaya and its young CEO, David Baazov, who purchased PokerStars, the world’s biggest online poker company, last year.
On the surface, it might not seem like such a big deal. New Jersey might be the biggest state to have regulated online gambling, but the state generated a little less than $100 million in online gambling revenue in the first eight months of 2015. This is not a huge market.
But getting New Jersey’s stamp of approval, especially after such a long and deliberate process, will help PokerStars in jurisdictions far outside the Garden State. It could forever cleanse the PokerStars brand, which was tarnished in 2011 when federal prosecutors in Manhattan shut its U.S. facing web site down, sued the company for operating an illegal gambling business, and indicted Isai Scheinberg, the man who built PokerStars with his son, Mark, who was never charged with a crime. The Department of Justice later reversed its opinion on one of the key laws it used to go after PokerStars, saying it did not make online poker illegal. Scheinberg and PokerStars always maintained they operated in accordance with all U.S. laws and claimed the deal PokerStars struck with federal prosecutors provided for the company to return to regulated U.S. markets.
But regulators didn’t always see it that way. In 2013, the New Jersey Division of Gaming Enforcement suspended the review of PokeStars’ application for an online gambling license, citing its continued association with Scheinberg, who is not a U.S. citizen and never came to the U.S. to face the charges against him. After an expensive and long fought effort to get into New Jersey, the decision helped spark the Scheinbergs to enter into a deal with Blackstone-backed Amaya and sell the company they built for cash.
The obvious assumption was that with Isai Scheinberg out of the picture, PokerStars would overcome the obstacle stated by N.J. regulators and be able to return to the biggest state to regulate online gambling. But the regulators did not welcome the Amaya-owned PokerStars with open arms and the regulatory approval took much longer than many anticipated. Meanwhile, without the giant of online gambling in the picture, New Jersey generated less online gambling revenue than expected. There are signs, however, that the market is moving in a positive direction and adding PokerStars and Full Tilt to the mix could further excite players.
Baazov consistently said that eventually New Jersey would approve the license for PokerStars and he has now been proven right. The N.J. license will help PokerStars and Full Tilt, which also got kicked out of the U.S. in 2011, seem like responsible businesses that jurisdictions can do business with. Some jurisdictions and opponents of Amaya have sought to keep PokerStars out of regulated markets by using so-called bad actor language in legislation and regulation. The N.J. license could arrest that kind of thing. It will probably help Amaya and PokerStars’ efforts in California, where online gambling proponents are trying to get lawmakers to open the nation’s biggest state to online gambling. For Amaya, it's a big win.
