PokerStars Wants in on Pennsylvania Online Poker, But First They Need a Partner

PokerStars expects to be part of the soon-to-be booming online poker industry in Pennsylvania. But there’s a minor problem: PokerStars doesn’t operate a land-based casino there (or anywhere else in the US for that matter).

Rafi Ashkenazi, PokerStars CEO

Stars Group CEO Rafi Ashkenazi is confident his company’s pride and joy, PokerStars, will obtain a license to operate in Pennsylvania. (Image: Gaming Intelligence)

Pennsylvania recently became the fourth state to legalize internet gambling in the US. The world’s largest online poker site has publicly stated its intent to enter the market.

The new law that makes online poker legal in Pennsylvania only allows for its 12 land-based casinos to apply for licensure. That’s an obstacle for PokerStars, a global poker site that is only currently available in the US in New Jersey, but one that company representatives say won’t slow down their entry.

“We are poised to take advantage of the positive momentum in the growth of online gaming globally and the continued march towards regulation, including in the United States where we aim to be among the first operators to launch in Pennsylvania when that state opens its door to online poker and casino,” CEO Rafi Ashkenazi said during a conference call.

There are currently 12 land-based casinos in the state, and only 12 available licenses for online poker. A 13th will be added once the new Live! Hotel and Casino in Philadelphia opens its doors. That $600 million resort property located in the heart of South Philly’s stadium district is expected to begin construction in 2018 and be open for business by 2020.

Poised for Pennsylvania Entry

The Stars Group remains confident it will find a way to make its product available to Pennsylvania residents.

PokerStars’ ticket into the Keystone State likely will come as a partner to a brick-and-mortar casino, according to the Chief Legal Officer Marlon Goldstein. In this case, the world’s most successful online poker operator would provide the software and branding for the internet poker room as part of a partnership agreement, as they have done in New Jersey.

Stars Group executives are saying all the right things, speaking highly of the anticipated internet gambling launch in Pennsylvania, presumably to butter-up the politicians.

“We are optimistic that Pennsylvania will be a catalyst for other US states to continue the momentum of iGaming regulation in the US,” CFO Brian Kyle said in the company’s third quarter earnings call.

When Governor Tom Wolf signed the gambling expansion into law last month, Pennsylvania became the fourth state to legalize internet gambling, joining New Jersey, Nevada, and Delaware.

First-Mover Advantage

The new Pennsylvania law is expected to bring the state millions in tax revenue, which will be used to improve necessities such as schools. Poker site operators will be charged a 16 percent tax on gross gaming revenues. Slot machines will be taxed at a 54 percent rate.

Currently licensed brick-and-mortars in the state have a right to apply for an online license, in either slots, poker, or table games. The cost of these licenses would be $4 million for each, or a discounted $10 million if you buy all three.

Fortunately for PokerStars, there is no “bad actor” clause in Pennsylvania’s law, as has been proposed in California should online poker ever become legal there. A bad actor clause would prevent poker sites that ever operated illegally in the United States from obtaining a license for set number of years.

In states considering such a provision, sites such as PokerStars, which blossomed in the days after enactment of the Unlawful Internet Gambling Enforcement Act in 2007 and before Black Friday in 2011, would face a penalty that keeps them from gaining a first-mover’s edge.

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