Is Pokerstars Using a Scorched Earth Approach in the US?

PokerStars needs to take a step back and give the US market some space to breathe.

PokerStars may be the world’s largest online poker operator, and may be the most trusted name in the business, but they are not a good fit for the US market at this time, and their insistence at gaining entry could halt online gambling expansion in several locales, most notably in California.

California Dreamin

PokerStars alleged preliminary talks with the Morongo Tribe, Commerce Casino, The Bicycle Casino, and Hawaiian Gardens that would see the alliance fight to remove the “bad actor” language from the final bill in California has caused enough blowback from the other entities in this fight that is appears the “bad actor” clause is enough of a hot-button issue that it will cause the rest of the California cardrooms and tribes to pull their support for legislation.

Essentially we are dealing with a situation where if PokerStars is allowed into the market the bill can’t pass.

Perhaps the larger question here should be directed at PokerStars’ proposed partners: If PokerStars is not allowed into the market (the bad actor clause remains) will Morongo, Commerce, The Bike, and Hawaiian Gardens withdraw their support of online poker, or will they move on sans PokerStars?

If the Stars coalition is adamant that the “bad actor” language be removed, and the tenuous union of California card-rooms and tribal casinos falls apart, it will be PokerStars (and their longing for a US return) that is seen as the main cause of the bill’s failure.

It will look like the classic example of, if I can’t play than nobody can play.

If PokerStars is responsible for killing the California online poker bill, or is seen as one of the reasons the bill failed, their reputation in the poker community will take a massive hit. It would be hard for even PokerStars most ardent cheerleaders to continue to say the company has the interests of the players at heart when they will be seen as implementing a scorched earth policy in California.

Not to mention it’s likely against their best interests as well.

Killing the bill in 2014 with the hopes of passing a more favorable one in 2015 is no guarantee. Instead of eliminating “bad actor” language the following year, they may simply be adding another year or two on to their time in purgatory by delaying the bill’s passage for a year or two. Nor does the removal of “bad actor” language assure PokerStars of a license, evidenced by New Jersey.

Why is PokerStars being blacklisted?

Thus far, PokerStars has found entry into the newly regulated online poker markets somewhat similar to walking into the trendiest New York City restaurant on a Friday night and trying to get a table. Even the mere mention of PokerStars as a possible player is enough to elicit a powerful response, evidenced by the above cited push-back against PokerStars and their potential partners in California.

There are two issues at work in California, with one playing off the other:

1. Competitors do not want to have to compete against PokerStars, and PokerStars is an easy company to tear down because…
2. Lawmakers (unfamiliar with the minutiae and history of the industry) don’t see PokerStars as a savior but as a federally indicted, illegal offshore site.

Putting California aside for a moment, there are also a number of deeper concerns that go beyond California’s unique dynamic; after all, New Jersey doesn’t have a bad actor clause and PokerStars license application has been suspended there.

So what’s the holdup?

There is of course the huge black eye from the Black Friday indictments, with civil and criminal indictments, some of which have been settled with massive fines (which may not be an admission of guilt but we all know how these settlements are perceived), and of course the ongoing criminal indictment revolving around Stars founder Isai Scheinberg, who is still involved in the company as are several other key figures from the company’s pre-Black Friday days.

This was enough for New Jersey regulators to suspend PokerStars license application – a move that stops just short of finding the company unsuitable.

Also working against PokerStars is the New Jersey market, which has clearly shown that online poker, while beset with some problems (problems that are largely out of control of the operators) has done perfectly fine without PokerStars. The same can be said of the Nevada market, which is right in line with other regulated markets (where PokerStars is allowed) in terms of player participation.

Basically, PokerStars needs the US market far more than the US market needs PokerStars at this point.

What should PokerStars do?

From my perspective PokerStars should remove itself from consideration in California and stop fighting the “bad actor” clause. That being said, PokerStars should continue to form long-term partnerships and use these partnerships to fight for a reduction of the probationary period for bad actors: perhaps getting the sentence reduced to two to three years?

It’s not like PokerStars wasn’t a bad actor, they were, so if you’re caught sometimes a plea bargain is a better option than fighting tooth and nail. Based on this statement from the company it doesn’t look like they are going to take that approach; scorched earth it is then.

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