GPWA Times Magazine - Issue 35 - June 2016

permitted to operate in New Jersey. After a lengthy investigation, New Jersey deter- mined that the “taint” of PokerStars’ pre- vious activities had been purged through the Amaya purchase. In the words of the DGE, “While [PokerStars] operated in violation of the law between 2006 and 2011, a number of considerations — including the severe criminal and civil sanctions imposed by the federal government, the complete and irrevocable separation of the previ- ous owners and almost all of the former executives, the acquisition of the assets by Amaya and their incorporation into a robust compliance and control environ- ment, as well as significant changes in the Internet gaming market since 2011 — lead to a finding of suitability.” PokerStars began its soft launch in mid- March 2016, with its full launch sev- eral days later, after a successful test period. It operates as the online poker provider for Resorts Atlantic City (iGam- ing in New Jersey may only be offered through a licensed casino). In less than a month, PokerStars reported revenue of approximately $600,000. New Jersey’s entire online poker revenue in March 2016 was $2.4 million. This revenue was not entirely taken from other operators: Overall online poker revenue grew 10.5% (up $233,467) over March 2015 and was up 23.4% ($466,981) from the previous month. While those numbers are still dwarfed by the $3.25 million the state av- eraged in the first three months of 2014 just after launch, this is still a favorable trend, representing the distinct possibility that PokerStars could help grow the New Jersey market by a significant percentage. That PokerStars has been thoroughly vet- ted by New Jersey’s gaming regulatory authority also bodes well for its ability to gain entry into other markets when they open. The depth of the investigation undertaken by New Jersey is certainly something that other gaming regula- tors will take into account when making their own determinations of suitability. Significantly, PokerStars’ entry into the market may be the catalyst for the one thing that the U.S. Internet poker industry truly needs in order to expand: interstate compacts to increase player pool liquidity. Although New Jersey’s Internet poker market appears to be growing with the addition of PokerStars (only time will tell if the trend continues — we only have a few weeks of data as of press time), it will eventually peak because of the finite population of the state. Delaware and Nevada’s disappointing Internet poker results to date show what happens when markets do not have sufficient liquidity. The growth of liquidity — and, therefore, revenue — in the U.S. will require states to share players. Federal law currently prohibits players in one state from play- ing in another state, but states may com- pact with each other to share players, as Delaware and Nevada have done. Having other states compact with New Jersey is an effective way to increase liquidity and revenue. Moreover, the most practical way to ad- minister such a system is for other states that wish to implement online poker to compact with New Jersey, allow New Jersey to handle regulatory responsi- bilities, and allow New Jersey to host the games. The other states can then simply collect tax revenue, confident that a well- established gaming regulator is maintain- ing the integrity of the games. It will also increase efficiency in the industry, be- cause providers won’t need to build out iGaming platforms in every state in which they want to do business. If PokerStars continues to grow New Jersey’s market, perhaps compacting between states to take advantage of New Jersey’s market is closer than we think. After only a short period of operation, PokerStars has already shown that its mere presence can stimulate growth in New Jersey’s Internet poker market. How much growth, and whether that growth will lead to opportunities beyond New Jersey, remains to be seen.” Christopher L. Soriano is a partner at Duane Morris LLP, a 700-lawyer global law firm. He focuses his practice on all facets of the gaming industry, including emerging areas such as fantasy sports, iGaming and eSports. 35 PokerStars and the New Jersey online poker market