PokerStars Eyes California’s Lucrative Online Poker Market

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Friday, March 21st, 2014 | Written by Shane Larson

Having been turned away from the regulated online gambling markets of Nevada, New Jersey, and Delaware, the world’s biggest online poker room, PokerStars, is currently working on gaining access to California‘s huge potential igaming market providing, of course, regulation is eventually passed in the state. Nevertheless, PokerStars will first have to contend with a “bad actor” clause, which effectively bars those online gaming companies which continued doing business in the US post UIGEA (2006) from being granted access to state regulated markets.

PokerStars success helped by PartyPoker’s 2006 exit

Pre-2006, Party Poker was the biggest online poker operator in the world with much of its business derived from the vast American market. A few days after Congress passed the UIGEA, however, the company announced it would “suspend all real money gaming business with US customers” and subsequently withdrew from the market, later paying a $105 million “non-prosecution agreement” with the Department of Justice in 2009.

With PartyPoker’s departure, PokerStars and Full Tilt Poker subsequently filled the void to eventually become the dominant players they are in the industry today. On the flip side, although PokerStars is currently the industry leader with around ten times the traffic of its nearest competitors, it is also being made to suffer for the previous disregard it showed for American igaming legislation.

PokerStars looking for way back in to USA

Eventually, PokerStars only quit the US market on April 15th, 2011, after the DoJ seized the company’s dot.com domain, and accused it of tricking banks into processing online poker payments contrary to the UIGEA. PokerStars subsequently agreed to prohibit US players from gambling on the site and eventually agreed to pay the DoJ $731 million, primarily in an attempt to ensure a return one day to US online poker, in case of future regulation.

Nevertheless, PokerStars failed to acknowledge any dishonest behaviour, and after the settlement was agreed released a statement saying that “PokerStars does not admit to any wrongdoing and is explicitly permitted to apply to relevant U.S. gaming authorities to offer real money online poker when state of federal governments introduce regulation.”

Meanwhile, although all civil complaints against PokerStars have been dropped, the company’s founder, Isai Scheinberg, still has an outstanding federal criminal indictment against him in place. Consequently, PokerStars continues to find its path back into regulated US igaming impeded, with the New Jersey Division of Gaming Enforcement, for instance, citing concerns over the company’s continued association with “bad actor” Isaia Scheinberg as justification for keeping PokerStars fromm the state’s new online gambling framework.

PokerStars turns attention to California

In any case, PokerStars has continued to use all means at its disposal to try and secure a foothold in the nascent US market, and has now turned its attention to the country’s most populated state of California. Needless to say, with 38 million residents and an online poker industry estimated to be worth $2.2 billion in its first year of operation alone according to a Academicon and PokerScout report, PokerStars could easily forgo its early disappointments in favour of winning approval from the jewel in the crown of US igaming. As the studies author Dr. Ingo Fiedler, explains:

“Without a federally regulated online poker market, which appears unlikely, state-by-state markets will stay well below their potential. While a large state like California has a large enough player base to support an in-state market and even reach up to 80% of its market potential, smaller states like Delaware will not be able to maintain a market on their own.”

PokerStars learning from past US state failures

Having seen its previous applications rejected on ‘bad actor’ grounds, The Rational Group, which is the parent company of PokerStars, is keen to avoid a similar situation in California and giving an indication to its latest approach, U.S licensed affiliate marketing platform iGaming Player, recently tweeted that “PokerStars and the Morongo tribe close to a deal in CA. No wonder there is not ‘bad actor’ clauses in the bill supported by Morongo.”

Currently, the state of California has two bills on the table, namely SB 1366, sponsored by Lou Correa (State Senator) and AB 2291, sponsored by Reginald Jones-Sawyer (Assembly Member). Whether PokerStars manages to gain a foothold in California remains to be seen, but the road ahead is likely to be tough, especially with other tribal interests likely wary of opening the Californian market up to such a formidable, offshore company. The fact remains, however, that analysts now believe regulated online gambling in The Golden State is an inevitability, possibly by 2015, and that a market leader like PokerStars could prove a major boon for the state in developing a profitable, viable regulated igaming environment.