Fewer than half of Atlantic City's casinos have received the approvals needed to begin Internet gambling trials this week. But that might change today as regulators will likely vote on a licensing arrangement that could bring the resort's four Caesars Entertainment properties into the mix.
Caesars Interactive Entertainment, a subsidiary of Caesars, is seeking a license from the New Jersey Casino Control Commission. Unlike other Atlantic City casinos that applied for Internet gambling permits through their existing licensed casinos, Caesars is instead attempting to license its Internet gambling subsidiary, which it already uses to operate Internet gambling in Nevada and abroad.
In a hearing today, New Jersey regulators will likely scrutinize the company's financial stability and the past dealings of Caesars Interactive CEO Mitch Garber, who was recently flagged by Massachusetts regulators over his prior companies' involvement in non-prosecution agreements tied to past illegal Internet gambling.
Garber's appearance in New Jersey today as a witness in the Caesars Interactive hearing will mark the first time that he could be asked to address the concerns in a public forum. Company representatives could also be asked to address the $23.7 billion debt burden carried by parent company Caesars Entertainment and a plan to transfer some of Caesars' assets to Caesars Growth Partners, a separate publicly traded company also headed by Garber that has drawn concern from financial analysts.
Seth Palansky, a spokesman for Caesars Interactive Entertainment, said the company fully expected the licensing process in New Jersey to be complex.
"We've been in the regulated Internet gaming business for a long time, and we look forward to being able to answer the questions," Palansky said.
An investigative report led in part by Linwood-based Spectrum Gaming Group for the Massachusetts Gaming Commission last month made Garber's employment history one of four concerns that led to Caesars Entertainment's decision to abandon a proposed $1 billion casino in East Boston.
Prior to joining Caesars Interactive in 2009, Garber was the the CEO of Optimal Payments and PartyGaming. According to the Massachusetts report, Optimal, a Canadian company that handled Internet gambling payment processing, used a process that allowed it to avoid coding payments as Internet gambling transactions.
In 2006, Garber became the CEO of Gilbraltar-based online gambling company PartyGaming, which offered Internet gambling to American players through servers located outside of the U.S., according to the Massachusetts report. PartyGaming has since been merged into bwin.party, which will host Internet gambling in New Jersey in partnership with Borgata. Neither of those companies has faced difficulty obtaining New Jersey Internet gambling approvals; Borgata Hotel Casino & Spa was the first Atlantic City casino to receive an Internet gambling permit.
Both Optimal and PartyGaming have been scrutinized by the Department of Justice for illegal Internet gaming operations. In both cases, the companies Garber headed agreed to pay the U.S. Attorney's Office millions in exchange for non-prosecution agreements. PartyGaming paid $105 million, and Optimal paid $19 million. The agreements the companies made included statements that their activities violated prohibitions against Internet gambling in the United States.
The Massachusetts decision that called into question the suitability of a casino giant has drawn criticism from industry leaders who say the report set impossible standards. Gaming mogul Steve Wynn has told other media organizations that he was "flabbergasted" by Spectrum's report and has called the Massachusetts board "freshmen" regulators.
While there's no guarantee of what areas might be addressed in the New Jersey hearing, the Casino Control Commission acknowledged that Garber's background is fair game.
"Mitch Garber is a qualifier for Caesars Interactive and his employment is an appropriate area for the commission to explore," said commission spokesman Dan Heneghan.
Asked if the commission expects that regulators in other states will be monitoring how New Jersey deals with Caesars Interactive Entertainment, Heneghan said, "I assume they always watch what we do."
Israel Posner, a casino analyst with the Lloyd D. Levenson Institute of Gaming, Hospitality and Tourism, said it's not uncommon to see regulators react differently in different states.
"New Jersey's regulatory process is respected. I'm sure the regulators will be looking at all the facts that are relevant to any New Jersey activities," Posner said.
If Caesars Interactive Entertainment receives approval for a casino license today, other approvals could quickly follow. The New Jersey Division of Gaming Enforcement would also have to issue an Internet gambling permit for the Caesars properties - Harrah's, Showboat, Caesars and Bally's - to be ready for Thursday's Internet gambling soft launch.
Five Atlantic City casinos - Borgata Hotel Casino & Spa, Golden Nugget Atlantic City, Trump Plaza Hotel Casino, Trump Taj Mahal Casino Resort, and Tropicana Casino and Resort - have all been issued approvals along with their respective Internet gambling partners. Atlantic Club Casino Hotel, which recently filed for Chapter 11 bankruptcy protection, and Revel Casino-Hotel, which recently intimated that it could be pursuing a sale or debt restructuring, have not announced plans for online gambling.
Still unknown is the status of the partnership between PokerStars and Resorts Casino Hotel. The Division of Gaming Enforcement has yet to give Resorts an Internet gambling permit or its partner PokerStars a waiver needed for operation, spawning speculation that the companies may not be approved for New Jersey's soft launch on Thursday. All companies offering Internet gambling must take part in a five-day invite-only test period using real money before they are allowed to go live.
The earliest any company can open fully-launched Internet gambling in the state is Nov. 26.