The Fallout From PokerStars’ Spurning of Caesars

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Let’s start with an interesting – and still unconfirmed – nugget from Nathan Vardi at Forbes:

In February, a senior executive of Caesars Entertainment Corp. contacted a high-level PokerStars executive and proposed a potential deal, putting Caesars’ Rio casino in Las Vegas and the World Series of Poker brand on the table, according to sources familiar with PokerStars.

Vardi’s wording suggests he’s talking about February of this year. A tweet from Eric Hollreiser, PokerStars’ head of corporate communications, confirms that’s the case.

It makes sense that Caesars would be shopping around parts of their substantial portfolio. The company (and its stock) has been facing increasing pressure thanks largely to massive debt obligations.

There were rumors in September 2012 that the company would be forced to spin off some of its more attractive endeavors (including the WSOP). And in early February of this year, Caesars announced plans for a spin off including its online operations, Planet Hollywood and other assets.

Around the same time as that announcement, Caesars was apparently making their overture to PokerStars – an overture that PokerStars rejected. Again from Forbes:

“Caesars Entertainment approached PokerStars and offered to sell us certain assets, such as the Rio Casino in Las Vegas. Caesars suggested that this acquisition would give us a better relationship with Caesars and would help PokerStars gain a license in Nevada,” said Eric Hollreiser, a PokerStars spokesperson in a statement. “PokerStars declined the offer because we had no plans to acquire another casino in the near term.”

So what happened next?

  • NV Assemblyman William Horne mounted an unexpected (and ultimately successful) attempt to insert a “bad actor” clause into Nevada’s online gambling regulations on February 13th – a bad actor clause tailored to apply almost exclusively to PokerStars.
  • The AGA filed a petition to block PokerStars from receiving approval to operate in New Jersey on March 4th.

Would either of the above have happened if PokerStars engaged Caesars in a deal for the Rio? A reasonable person could certainly conclude that these were retaliatory actions.

Caesars has yet to comment. I’m sure we’ve only heard the start of what’s shaping up to be a nasty battle that will twist and turn in all manner of unpredictable ways – but ultimately do little to benefit players in the United States.

- Chris is the publisher of Grove also serves as a consultant to various stakeholders in the regulated market for online gambling in the United States.
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