THE FIGHT: Caesars Aims for the Stars

Some weeks, all you can do is shake your head.

This past Tuesday the American Gaming Association filed a brief with the New Jersey Division of Gaming Enforcement opposing Rational Group’s petition for an Interim Casino Authorization to purchase the Atlantic Club casino. The brief represents the latest skirmish between the brick-and-mortar casinos (which provide the bulk of the AGA’s funding) and the online poker giant seeking re-entry into the U.S. market for the first time since Black Friday.

How states treat “bad actors” – sites that took bets in the U.S. after the UIGEA was enacted in 2006 – will be a key part of THE FIGHT as regulation takes shape across the country. Unlike Nevada, New Jersey failed to include any bad actor poison pills in its legislation, to the disappointment of the brick-and-mortar casinos. The AGA brief can be viewed as an attempt by the casinos at an end-run around that failure.

“They are motivated by greed,” state Sen. Jim Whelan (D-Atlantic) told the Press of Atlantic City.  “They want to keep foreign investors out…The gaming association is their vehicle.”

Not to be outdone, Rational Group fired back by revealing to Forbes that Caesars Entertainment offered to sell “certain assets, such as the Rio Casino in Las Vegas and the World Series of Poker”, to Rational Group in early February. The implication of the revelation was clear: how could the AGA – of which Caesars is a key member – claim PokerStars is a “criminal enterprise” when one of its own members wants to sell a casino in order to, according to Rational Group, “help PokerStars gain a license in Nevada”?

“Stunned at the Caesars/Stars story,” tweeted i-gaming lobbyist Joe Brennan Jr. “PS doesn’t go public w/o proof, right? If true, how does Caesars put AGA, Fahrenkopf in this spot?”

How, indeed. According to the Las Vegas Review-Journal, the vote to file the brief wasn’t unanimous. Perhaps that was because the brief revealed no new facts or novel legal theories about Rational Group. It relied primarily on the public record created by the Black Friday civil and criminal cases – a public record that Rational Group was likely required to include with its application to the DGE.

The lawyers who filed the brief didn’t even appear to have that strong a grasp of the material. Poker journalist Martin Harris wrote on his personal blog that after reading the brief, “I felt more like a teacher reading a student essay. That is to say — rightly or wrongly — I felt as though I was in a situation where I could be fairly confident I knew as much or more than the author did about the chosen topic and argument.”

No doubt there will be more to come in this tug-of-war.

There were a few positive regulatory developments this week as well. Internet gaming legislation in Pennsylvania, rumored for about a month, is likely to be introduced next week — along with a measure to ban internet gaming. A bill was introduced this past Wednesday in the Illinois Senate and almost immediately cleared its first hurdle, a committee vote. Even Texas, a state with virtually no casino gaming, is considering a bill that would permit internet gaming  — but only if a federal law is enacted that authorizes it.

Pennsylvania and Illinois already have casino gambling. The Pennsylvania casinos, led by Parx Casino near Philadelphia, started offering tables games and poker in 2010 after opening with slot machines in 2006. Those casinos are a big part of the reason why Atlantic City casinos have seen their revenue decline so markedly the last five years. With New Jersey getting into internet gambling, Pennsylvania’s move can be viewed as trying to maintain its edge.

The move by Texas is more surprising. Even though the most popular variant of poker takes its name from the Lone Star State, Texas is generally considered arch-conservative when it comes to gambling. The handful of casinos in the state are run by Native American tribes in extremely remote locations. That Texas would even consider any form of internet gambling shows that the mindset among state politicians in the United States may be changing. The passage of internet gambling legislation in New Jersey is probably at least partially responsible.

None of these bills have been signed into law yet though. Illinois has tried, and failed, to enact internet gaming legislation in the past. Texas’ anti-gambling roots may sabotage any real chance of reform there. Pennsylvania’s quest to keep pace with New Jersey makes it the leading contender of the bunch.

But in the often rough-and-tumble world of politics, few things are a sure bet. Judging by the actions of the AGA and Rational Group this week, THE FIGHT could get a lot bloodier before it gets any better for the players.

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Kevin McGrady

Legislative and Politics Beat Writer: Kevin McGrady practiced corporate law in New York City for eight years before moving to Las Vegas in 2008 to join the gaming industry. Kevin is a graduate of New York University and Columbia University School of Law.
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