Amaya Gaming to Buy PokerStars for $4.9 Billion

PokerStars, the largest worldwide online poker site, agreed a sale to Amaya Gaming for $4.9 billion in the hopes of expediting its re-entry into the U.S. market after previous conflicts with the US Authorities declaring it’s operations as in violation of US Law.

Shareholders of Oldford Group Ltd, the parent company of Rational Group Ltd and owners of PokerStars, have consented to sell their holdings to Amaya Gaming Group Inc., a Canadian online gambling company traded on the Toronto Stock Exchange. Mark Scheinberg, current CEO of PokerStars will not be part of the acquisition but the other poker brand Full Tilt Poker, will also be included in the deal.

PokerStars was founded by Isai Scheinberg, an Israeli-Canadian former IBM computer programmer. At that time, poker was booming and online poker companies such as PokerStars, Full Tilt Poker and PartyGaming boomed in parallel. Online poker rapidly expanded especially when an unknown native of Tennessee, Chris Moneymaker won the main event of the 2003 World Series Poker. Moneymaker earned a coveted seat to the World Series of Poker through a tournament he won at PokerStars.

In 2006, the UIGEA (Unlawful Internet Gambling Enforcement Act) was passed prompting PartyGaming to close it’s US operations. Meanwhile, PokerStars and Full Tilt continued to accept players from the US while moving it’s base to the Isle of Man.

In 2011, a group of federal lawyers in Manhattan indicted Isai Scheinberg and sued PokerStars for illegal gambling, forcing the company to shut down its operations in the United States. It was further deemed that Full Tilt Poker was a Ponzi scheme when the shut down resulted in insufficient funds to pay back the large amount of players cashing out their player balances. A settlement of $731 million between Manhattan federal lawyers and PokerStars was arranged. PokerStars acquired Full Tilt Poker’s assets and an agreement was reached to pay back US players. Scheinberg is still under indictment as he has not faced the charges.

PokerStars remains to be the largest worldwide online poker operator in spite of being out of the U.S. market for almost three years. US online gambling has progressed since then and now New Jersey, Nevada and Delaware have legalized and regulated online gambling. This should have been a “go” for PokerStars but its license application to the New Jersey Division of Gaming Enforcement was suspended for two years due to its continued association with Scheinberg. Meanwhile, big land-based casinos such as Caesars Entertainment and Tropicana have opened their online gambling sites including PartyPoker, 888Poker, and Virgin Casino who have entered the New Jersey market. In the state of California, Senate Bill 1366 and Assembly Bill 2291 includes a bad actor clause that would effect PokerStars from entering California and one that the company very much opposes.

In the end, selling PokerStars and Full Tilt is the best option for the Scheinbergs if the goal is to get back into the US and expand their operations in a regulated and legal online gaming market.