So who will get a licence in New Jersey?

1st November 2013 9:23 am GMT
The race for New Jersey is really hotting up. Licences and authorisations are being handed out daily with The Big Decision - whether PokerStars gets a licence - expected any day now.The departure of PartyGaming founders Ruth Parasol and Russ De Leon is a massive step for bwin.party - although the company’s application is still under review. More on them later. In the meantime, the most notable recent authorisation was handed to Optimal Payments. Its licensability, given the fact some clients were operating online sportsbooks pre-2006, was highlighted by the Massachusetts farrago surrounding Mitch Garber and Caesars. The Massachusetts’ investigator took the view that Garber’s role as CEO of Optimal was questionable because the payments provider had signed a non-prosecution agreement with the Department of Justice (DoJ), where it admitted wrongdoing. This seemed fair but one thing that seems to have got lost in the hullabaloo is that Optimal DID NOT admit wrongdoing in its agreement with the DoJ. It admitted that some of its merchants might have violated the Wire Act. That’s a big difference. One would hope that important detail would have been revealed if Caesars had continued with its application. Garber’s other former charge - PartyGaming - DID admit wrongdoing and the violation of the Illegal Gambling Business Act as part of its non-prosecution agreement. That was enough to concern the Massachusetts investigator, which raised another obvious question with the rest of us: did Party screw up by signing the agreement? Well, its executives will tell you it was forced to. It knew the DoJ was investigating it and as a public company it had to act in the best interests of its shareholders. Its executives would never have been able to enter the US and it would not have been able to buy the World Poker Tour, which became its US subsidiary.But PokerStars did not admit any wrongdoing, I hear you shout. Well, PokerStars did not sign a non-prosecution agreement. It settled a civil suit and admissions of wrongdoing are not standard as they are in non-prosecution agreements. And it does have the little matter of a criminal case still hanging over its head - well, over Isai Scheinberg’s head, who technically has nothing to do with ‘Stars anymore. It all gets terribly lawyerly, which is why the regulators have very good lawyers on hand to sort it out. And it's why Caesars, Stars, 888 and the rest have very good lawyers arguing their case. These are the questions that the New Jersey Division of Gaming Enforcement is wrestling with right now. The above is only a taster. There’s so much more. For example, what about bwin? It never settled with the DoJ. However, it is covered by PartyGaming’s non-prosecution agreement, which states that it will protect any successor companies. Sources close to the company tell me its pre-2006 sports betting operation is not an issue but, bound by secrecy, could not tell me why. They will have to explain it to DGE though. bwin.party has done a good thorough job of cleansing itself in preparation for the US, the latest act being the slow departure of founders Ruth Parasol and Russ De Leon. They might not be the last to leave. In fact, their enforced departure raises more questions about other shareholders and executives than it answers. 888 has never settled with the DoJ. Its CEO Brian Mattingley recently boasted: “We never had any consideration to have discussions with the DoJ over settling. We never took sports bets, we coded all our transactions, we pulled out the day after UIGEA and refunded all our customers, so it’s not an issue that has ever raised its head or will ever raise its head.” Previous CEO Gigi Levy was always more circumspect on this topic, with a defiant “no comment” to every enquiry. However it was whispered to me recently that 888 was investigated. Negotiations are said to have started but petered out as the DoJ had bigger fish to fry. These are the whispers from which the regulator has to attain facts. Caesars will argue that Massachusetts did not get near to establishing the facts. And to be fair, it was cut off by Caesars’ withdrawal before it passed final judgement. But Caesars screams that the regulator is holding gaming executives to a higher standard than those that hold the key to nuclear weapons - it is a frequent refrain from gaming executives up and down the US. The tension at companies such as Caesars and ‘Stars is palpable. The future of quite a few companies hangs in the balance these next few weeks. While neither Caesars or ‘Stars will go out of business if they - or any of their principals - are denied a New Jersey interactive licence, their future plans will be shot to pieces.   Which way will New Jersey jump on these issues? Well, it’s hard to tell. Nevada did nothing about the Watanabe incident, where a gambling addict was allowed to lose $120m. The Massachusetts report raised the issue and New Jersey fined Caesars for it earlier this year despite the fact the incident happened in Nevada. Despite Caesars’ best efforts to paint Massachusetts as some kind of rogue regulator, other regulators will look at these same issues in depth. This will happen time and time again as internet gambling is rolled out state by state with different regulators holding different people to different standards of accountability. New Jersey could well be a fiercer regulator than Nevada. Although it is under some political pressure to make sure internet gambling works, the competition for licences is strong. So if a few don’t make the grade there will likely be others only too happy to step into their places. Watch this space. The law was never as interesting as it is right now.sah@gamingintelligence.com
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