Optimal Approval in New Jersey a Green Light for PokerStars? Maybe, but Maybe Not

new-jersey-stampThree days ago, regular 4Flush contributor John “PokerAddict” Mehaffey authored a piece over at USPoker.com titled, “Is Optimal Payments Licensing in New Jersey a PokerStars Tell?  It’s a good solid piece, as we’ve all come to expect from PokerAddict, who’s one of the better and more thoughtful writers working in poker these days.

The gist of the story is that the approval of Optimal Payments as a vendor in the upcoming New Jersey online gambling regime is very good news for PokerStars.  The link between the two is that Optimal was once a very famous payment processor under a different name, NETeller, until its founders were indicted in 2007 for evading US banking regulations and the company was forced to depart from the US market.

NETeller eventually settled with the US Department of Justice, as did the erstwhile founders, Stephen Lawrence and John Lefebrve, who also left NETeller soon after.  The company rebranded itself as Optimal soon after, and moved its corporate headquarters from Canada to Europe, where it has reestablished itself as a premier payment-processing service for online customers of gambling sites.

Mehaffey correctly notes two very important correlations between NETeller and Optimal (which has a deal with Caesars Entertainment to provide online processing services), and PokerStars and its parent Rational Group, which has a similar deal with Resorts International Atlantic City (operated by the Mohawk tribal nation in recent years) to provide gaming software in New Jersey.

The two correlations: (1) Both NETeller/Optimal and PokerStars reached financial settlements with the US government without formal admissions of corporate wrongdoing; and (2), both Optimal and Stars are recognized as leaders in their respective niches, with broad-based consumer support and years of reliable industry service, devoid of the fraudulent activities that have plagued other, lesser sites.

As Mehaffey noted, “In my opinion, the Neteller licensing shows that New Jersey is less concerned with a company’s past and more concerned about its current ability to operate in a legitimate manner.  It may even go so far as to say that the current reputation of a company is what truly matters.  In terms of the industry, Neteller and PokerStars are leaders in their respective fields.”

This is all very true, just as it’s true that both NETeller and PokerStars were caught doing some underhanded things.  NETeller lied about the true nature of its customer base — it was literally nothing but gambling sites, which included many sportsbetting sites offering services to US punters — while Stars tried too hard to establish a within-US processing home and ran afoul of banking regulations, particularly in connection with the SunFirst Bank fiasco in Utah.

It’s all well thought out, properly correlated, and yet, it may just be too optimistic.  I think the pressures that exist will force New Jersey regulators to take a very hard look at PokerStars, regardless of whether Resorts International wants them as a partner, or whether Stars will pull out of its promised $10 million live-poker-room development at that casino if they don’t get approved.

I chatted with John about my concerns, and he has no problem with this counterpoint, which like his original editorial is designed to help readers understand the entirety of the New Jersey situation with greater clarity.  Extenuating factors?  Regarding PokerStars and New Jersey, there are several:

1) PokerStars has been directly targeted by the American Gaming Association, which fears Stars’ brand recognition and customer loyalty and wants desperately to keep Stars out of any fully regulated US online gaming market.  That the AGA took the unprecedented step of assembling thousands of pages of documentation about PokerStars’ former US-facing activities, and tried to co-opt the earlier New Jersey approval process connected to PokerStars’ abandoned attempt to buy the Atlantic Club casino, shows how entrenched the anti-Stars forces are.  Atlantic City has 12 land-based casinos.  All 12 are attempting to obtain online approval from the state, and to the best of my knowledge 10 of the 12 are AGA-affiliated.  That’s a lot of industry pressure being placed on New Jersey by the rest of the state.

2) New Jersey still has all that anti-Stars documentation.  It was disgraced former Full Tilt president Howard Lederer who correctly noted, regarding the passage of the UIGEA, that “you can’t unring a bell.”  The corollary here is that even though Stars dropped its application process regarding the Atlantic Club when that purchase deal collapsed, all the documentation amassed by the AGA remains available to New jersey officials, probably sitting on a desktop in a corner, in plain view.  Stars has to go through a similar approval process now, and it has to overcome all that anti-Stars slant the AGA foisted unto New Jersey.

3) Optimal Payments was backed by Caesars, which owns fully one-third of New Jersey’s operational casinos.  No one outside the process can say how easy Optimal’s approval process was, but it didn’t hurt that its benefactor, Caesars, operates four of Atlantic City’s 12 casinos: Caesars, Harrah’s, Bally’s and the Showboat.  There’s even the chance that others among the remaining eight Jersey casinos could reach a separate deal to use Optimal’s services, which are time-tested.  The takeaway: Despite the company’s previous sins, there was no mass opposition from the state’s casino faction.

4) Optimal rebranded itself, away from the tarnished “NETeller” name; PokerStars has not, and in fact continues to hope to trade on its brand recognition.  Call it what you will; Optimal is still NETeller.  But Optimal took the hits and endured a process to remake itself, getting rid of Lefebvre and Lawrence, changing its name, moving overseas.  Optimal no longer has any connotation, positive or negative, for the majority of New Jersey’s online players.  Meanwhile, PokerStars and its brand recognition is feared by exactly 11 of the 12 New Jersey casinos, excepting the one (Resorts International AC) with whom Stars has a deal.  It’s possible that these competing casinos may even “accidentally” let it be known to regulators that Resorts International AC and PokerStars might receive an unfair marketing advantage if approved in its current form.  Yes, that would be dirty pool, but it’s New Jersey.

5) Speaking of New Jersey…. The state’s regulatory regime is generally viewed as being somewhat cleaner than Nevada’s, which it simply had to be to institute gambling for its residents decades ago.  In its early decades, Nevada’s casinos were run by organized crime, and New Jersey’s proximity to the mob hub of metro New York City forced extra diligence when that state set up its regulatory framework (the first casino-gambling locale in the US outside Nevada), under the watchful eye of the feds.  That said, New Jersey still isn’t perfect.  Atlantic City as a gambling destination remains gripped in a long decline, and the industry as a whole still gives a lot of weight to the wishes of those 12 casinos — a partial explanation as to how New Jersey approved online gambling in the first place.

The arguments Mehaffey made are very valid: If comparing apples to apples, PokerStars should be approved in New Jersey.  But this may well be an apples-to-oranges comparison instead, with both PokerStars and the poker world in general waiting to see if that regulatory approval comes through.

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