PokerStars Files Suit Over Atlantic City Casino Deal
Online poker website PokerStars has filed suit against the Atlantic Club Casino Hotel, with news breaking this morning that the Isle of Man-based parent company of PokerStars, the Rational Group, also sought, and was granted, a temporary restraining order that will prevent the Atlantic Club from entering into a purchase deal with any third parties.
Last week we reported that the deal had effectively been terminated as a result of “timing out” – that is to say that the contract had an expiration date, and when that date was reached, officials from the Atlantic Club Casino Hotel, a land-based Atlantic City casino resort property that has seen its share of fiscal woes in recent years, contacted PokerStars to notify them of the deal’s termination.
This notice apparently came as a surprise to PokerStars, which throughout much of last week had kept mum on the entire situation. On Thursday evening, however, Eric Hollreiser, head of corporate communications for PokerStars, remarked via Twitter, “The Rational Group remains entirely committed to resolving this situation and to our investment in New Jersey.”
After a quiet weekend in which both proponents of PokerStars’ acquisition of the property and opponents speculated as to potential outcomes in this matter, this morning came the news of the lawsuit, with PokerStars filing suit in a New Jersey Superior Court.
PokerStars posted a statement, written by Hollreiser, on its blog that read, in part, “The Rational Group (d/b/a PokerStars) today filed a lawsuit in New Jersey Superior Court seeking to restrain the sellers of the Atlantic Club Casino and Hotel from continuing to breach the purchase agreement which was entered between the Rational Group and the seller (who are led by Colony Capital LLC) in December 2012. This step has been taken to protect Rational Group’s rights and interests under the purchase agreement and reflects the Group’s desire to complete the acquisition of the Atlantic Club.”
The Atlantic Club has long been struggling, taking a loss of $43 million in 2012. Currently ranked among the worst-performing of Atlantic City’s twelve casinos, many saw a takeover by PokerStars as one of the few remaining possibilites for rehabilitating the property and preserving its jobs. The purchase price for the Atlantic Club has long been rumored to be below the $50 million mark, however the actual price of $15 million has now come to light.
According to PokerStars, the company has also been helping to keep the casino afloat during the months that negotiations have been underway, as Hollreiser said in his statement, “The Rational Group has funded Atlantic Club shortfalls throughout the winter season since October 2012 preventing its bankruptcy and the loss of over 1,800 jobs.”
It comes as little surprise that PokerStars is fighting back to preserve this deal, as closure of the purchase would mark a re-entry for the company into the United States poker market, which it exited in 2011 after a government crackdown on illicit gambling operations. While PokerStars last summer settled its case with the United States government without admitting any wrongdoing in continuing to offer US-facing real money online poker games after the UIGEA’s passage in 2006, there are some who believe that the company should be prohibited from operating based upon this history.
The American Gambling Association is one of the major opponents of a PokerStars license approval; in March they released a memo stating that they believe PokerStars should be barred from offering online poker games to US players in regulated markets, which so far include New Jersey, Delaware, and Nevada.
“Allowing PokerStars to be licensed would send a damaging message to the world of gaming and to the world beyond gaming, that companies that engage in chronic lawbreaking are welcome in the licensed gaming business,” the group said.
