PokerStars’ Online Gambling License Application Denied in New Jersey

PokerStars New JerseyGaming regulators in New Jersey made a bold decision to suspend PokerStars’ online gambling license application for a period of two years.

The New Jersey Division of Gaming Enforcement (DGE) cited reasoning behind the suspension as not particularly pertaining to PokerStars’ bad actor status for continuing to operate in the U.S. market from 2006 to 2011. DGE officials instead based their decision on the fact that PokerStars’ founder Isai Scheinberg has avoided answering to the Black Friday charges filed against him in 2011.

Those charges include money laundering and violating both the UGIEA and Illegal Gambling Business Act (IGBA). Scheinberg is an Israeli-Canadian and not an American citizen and has avoided travel to the U.S. The 67-year-old turned over the CEO duties to his son, Mark Scheinberg, but has remained on the payroll in an advisory role.

As reported by Forbes, the elder Scheinberg has hired an ex-U.S. Attorney General, Michael Mukasey, as his attorney. This has the rumor mill churning with the idea that Scheinberg may be considering surrendering to federal authorities. Why would he need a high-powered U.S. attorney if he were not contemplating answering to the charges?

Should he decide to face the music and surrender, it’s possible that the DGE may again review PokerStars’ application for an Internet gaming license. The DGE statement on the matter said that the license application of PokerStars may be reactivated if significantly changed circumstances are demonstrated. Those circumstances may very well be a Scheinberg surrender.

PokerStars has been trying to enter the U.S. market in New Jersey for a year. The first attempt was by purchasing the Atlantic Club for $15 million, but that deal fell through when PokerStars did not receive interim casino authorization by a certain date as specified in the acquisition agreement.

The next move by the world’s top poker site to gain a foothold in the New Jersey market was a partnership with the Resorts Casino Hotel. Hoping to sweeten the pot and urge DGE regulators to approve that collaboration, parent company the Rational Group publicly stated that it would headquarter its U.S. offices in New Jersey if its license application was approved.

Also promised was the construction of a live poker room at the casino said to cost in the neighborhood of $10 million. A PokerStars home base and poker room would be a boon to the Garden State economy. But DGE officials were not swayed. Instead, they seemingly have taken the high road by requiring Scheinberg to first answer to the serious federal allegations.

Keep in mind that PokerStars rose to dominate the online poker industry partly because they did not leave the U.S. market when other [geolink href=””]US facing poker rooms[/geolink] did after enactment of the UIGEA in 2006. The American Gaming Association and rival gaming companies are undoubtedly celebrating the DGE decision, as several have spoken out about a need for punishment.

PokerStars issued a statement following the DGE ruling, with head of corporate communications Eric Hollreiser expressing disappointment regarding the suspension. But Hollreiser chose to put a positive spin on it, saying that the license application may be reviewed and that an open dialogue with DGE officials will remain regarding possible changes in our situation as they occur.

New Jersey’s online gambling scheme has been up and running for two weeks. It is being carefully watched worldwide to determine profit margins and whether or not land-based casino revenues may decline as a result. Online revenues would likely be higher if PokerStars was involved. But it appears that Scheinberg has to come clean before the DGE pulls out its rubber stamp of approval.

Jacqueline Packett
Jacqueline Packett