NJ Judge Rules Against PokerStars in Atlantic Club Casino Case

Posted By: Date: 05/23/2013 at 12:00 am Leave a comment

As many of you know, PokerStars has been in negotiations to purchase the Atlantic Club Casino in Atlantic City, New Jersey since entering into contract with the owners in December of 2012. The deal seemed to be going well until suddenly, in April, Colony Capital LLC, which controls ownership of the casino, called the deal off when the expiration date for purchase passed. PokerStars filed for a restraining order on May 6 to prevent Colony Capital from selling the casino to anyone else, but that order was lifted by a judge on May 17, ruling against the offshore online poker giant. 

The initial contract with Colony Capital would have seen the Isle of Man based-Rational Group, owner of PokerStars, purchasing the flagging Atlantic Club for $15 million. According to the lawsuit filed by the Rational Group, the company also agreed to contribute $750,000 per week to pay off the casino’s sizeable pension liabilities of $30,000,000 as per the original contract in December. As the weeks went by, PokerStars ended up funding $11 million towards payments of the casino’s debt.

Not only does Colony Capital have no intention of returning the $11,000,000, they are actually requesting payment of the remaining $4 million of the total $15 million intended purchase price. The casino’s owners claim that it was PokerStars fault the deal fell through because the expiration date of the contract, April 26, had passed.

However, according to the lawsuit, Rational Group claims it was Colony Capital LLC who originally breeched the terms of the contract. Unfortunately for PokerStars, a judge disagreed. On February 26, the state of New Jersey ratified a new bill that would require online gambling operators to have a physical presence within Atlantic City. Rational Group attests that Colony Capital broke off the deal simply because the company wants to sell the Atlantic Club Casino for a higher price, now that legalized online gambling has become a reality in the state.

Michael Frawley, the Chief Operating Officer for the Atlantic Club Casino, all but confirmed that theory with an emailed statement that read: “We are pleased that the New Jersey court has dissolved the restraints it entered on May 6. We are now free to build on the tremendous opportunity provided by online gaming.”

With the Atlantic Club Casino seemingly out of PokerStars’ reach, this brings up the question as to whether the online poker giant will ever gain a foothold in New Jersey, or the United States for that matter. On the day of the court’s judgment, PokerStars spokesman Eric Hollreiser stated via Twitter, “We are reviewing today’s ruling. We remain committed to New Jersey and to contributing to its economy.”

It is quite apparent that the majority of the United States’ gambling industry is opposed to PokerStars entering the US market. The American Gaming Association has spoken out in length against the company’s rights to operate on US soil. According to the AGA, the fact that PokerStars was involved in a federal case that involved prosecution for money laundering and bank fraud should be enough to prevent PokerStars from ever entering the US market. On the contrary, the Rational Group affirms its right to operate in the US due to the fact that they settled their case, never admitting to any wrongdoing in the process.

Working against the company are several states who are, or are in the process of, enacting online gambling bills with specific regulatory guidelines that would prevent PokerStars from participating. California, for example, is attempting to pass an online gambling law that stipulates any offshore gaming site that ever offered its services to residents of the state would never be permitted to apply for a license. While the future of PokerStars in the US remains uncertain, it appears that the Atlantic Club Casino will soon be back on the market for other interested buyers to consider; likely with a much higher price tag attached.

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