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Tribes Want 10 Year Ban and $60M Fine for PokerStars

Posted on by John Lathram

PokerStars CaliforniaA coalition of Californian tribes opposed to PokerStars´ participation in a regulated market has proposed new criteria to resolve the suitability issue.

One of the major obstacles preventing the progress of regulated online poker in California is the issue of bad actors – companies that continued to provide a service to the state´s online poker players after the passage of UIGEA in 2006.

Several significant stakeholders – known as the “Pechanga Coalition” – believe that bad actors developed their brand name at the expense of companies that complied with the law; and, in the case of PokerStars, the stakeholders may have a point.

Prior to 2006, PokerStars was a relatively small operator. When market-leading companies such as Party Poker and 888Poker withdrew from the US market in 2006, PokerStars and Full Tilt Poker continued to provide a service – ultimately becoming the two largest online poker sites in the world by 2011.

Black Friday and Re-Entry into Regulated Market

In April 2011, PokerStars was one of five sites whose domains were seized by the FBI and US Department of Justice following charges of bank fraud, money laundering and violations of UIGEA. The site was allowed to reopen in order that US players could withdraw their bankrolls, and entered into a $547 million settlement with the DOJ for the civil charges to go away.

In addition to the settlement, PokerStars acquired the assets of Full Tilt Poker and repaid $184 million to Full Tilt´s former players. The company´s actions generated a significant amount of goodwill from players who would have otherwise lost their bankrolls and laid the foundations for PokerStars´ return to a regulated US market – something that ultimately occurred in New Jersey in March 2016.

New Owners with Tainted Assets

In June 2014, the parent company of PokerStars and Full Tilt was purchased by Amaya Gaming – a Canadian company that already had a foothold in the regulated US market. At the time the deal was heralded as a positive development for PokerStars´ future participation in regulated markets by the Poker Players Alliance. The organization issued a statement saying:

Amaya’s acquisition should remove any perceived impediment for this popular brand to once again be available to players in regulated U.S. jurisdictions.

However, rather than clear the path for PokerStars´ universal acceptance, opponents to the site´s participation in certain regulated markets – including California – claimed that the new owners had acquired tainted assets. These tainted assets included anything from the software used to provide online poker between 2006 and 2011 to player databases – and even the brand name.

Bad Actor Argument Stalls Progress in California

The discussion about whether bad actors and companies with tainted assets should be allowed to participate in a regulated market has stalled the progress of online poker in California for years. While PokerStars insists it was never convicted of any wrongdoing, opponents to the site´s participation argue that – by operating post-UIGEA – PokerStars has an unfair competitive advantage that will enable it to dominate a regulated market.

Attempts to thinly disguise the issue as being about suitability standards – or to ignore the issue altogether by isolating it into a separate bill – have failed to gain any concessions from the opposing stakeholders; and the recent proposal of a $20 million fine for bad actors wanting to avoid a five-year prohibition period was described by Chairman of the Agua Caliente tribe – Jeff Grubbe – as a Get Out of Jail Free Card.

Coalition Offers Bad Actor Concession – of Sorts

Now, in an attempt to move the legislative process forward, the “Pechanga Coalition” has offered to abandon its long-standing position that PokerStars should be permanently banned from participating in a regulated online poker market in return for bad actors being excluded from licensing for ten years and then paying a $60 million fine prior to being allowed to operate in California.

In a letter to Assemblyman Adam Gray – sponsor of the current proposals to regulate online poker in California (AB 2863) – the coalition claimed that this concession provides a pathway for offshore service providers to access the Californian market and would take all parties closer to finding an acceptable compromise. Unsurprisingly, not everybody agrees.

A statement from Amaya Gaming´s VP of Corporate Communications – Eric Hollreiser – not only attacked the coalition´s proposal, but also any notion that PokerStars should pay any level of fine in order to eligible for a license in California. In a statement, Hollreiser said:

It is a shame that obstructionist forces continue to block the passage of a pro-consumer online poker bill in California. We finally have real progress this year, with the majority of gaming tribes supporting the legislation, along with the AFL-CIO, SEIU, Teamsters, horse racing tracks, card rooms and gaming operators. Unfortunately, a recent amendment to AB 2863 is unconstitutional and our opponents seem intent to expand upon that flawed and unconstitutional language.

A Step Forward or another Step Sideways?

Inasmuch as the concession might be seen in some circles as an attempt to bring opposing sides closer together, some commentators have described it as an attempt to “counter accusations of obstructionism” made against the Pechanga coalition. Those commentators claim that the concession – as it stands – is meaningless and fails to progress regulated online poker in California.

Furthermore, the issue of suitability – although a major obstacle to regulated online poker in California – is not the only issue preventing an agreement being reached. High tax rates, a lack of consumer protection and a terrible bill for players means that there is still a long way to go before regulated online poker in California becomes a reality. The dance continues.

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