A New Jersey state senator is calling foul on the state’s largest casino operator, saying it would violate state law if it were to purchase Revel Casino Hotel.
State Sen. Jim Whelan said he is “extremely troubled” by the possibility of Caesars Entertainment Corp.’s potential acquisition of the city’s newest casino, which has been shopping for potential buyers or considering a second bankruptcy since late last year.
Media reports citing unnamed sources highlighted the potential sale earlier this week. Whelan said he’d personally heard of the possibility in the past few days. The transaction, he argued, would leave the city in a precarious position with the resort’s health too dependent on the success of a single company — something that New Jersey law seeks to prevent.
“The reality is Caesars just bought the Atlantic Club and closed it when there were other parties willing to keep it open, and now this,” Whelan said. “This is bad for the region. It’s bad for Atlantic City, and more importantly, it’s against the current law.”
The former Atlantic City mayor and current head of the State Government, Wagering, Tourism and Historic Preservation Committee said he reached out to Gov. Chris Christie’s office and the New Jersey Division of Gaming Enforcement on Thursday to express his concerns.
Whelan’s comments reference a section of state law requiring that a casino license not be issued if it results in “undue economic concentration” of Atlantic City casino operations by one party. That’s one of many criteria the Casino Control Commission would have to examine in any licensure hearing in the case of a change in ownership for the property that cost $2.4 billion to construct and already underwent bankruptcy after a year in operation.
Undue economic concentration, however, is not based on a clear mathematical equation. Instead, the law is subjective and somewhat vague.
Nearly a dozen criteria are to be considered before that determination can be made, according to state law. Among the areas considered are: market share in rooms, slot machines, table games and net revenue. Also considered are current market conditions, and the potential impact of the licensure on the projected future growth of Atlantic City’s casino industry.
Last year, the four Caesars Entertainment-owned casinos accounted for $1.1 billion of the state’s $2.9 billion market, or roughly 38 percent.
Asked about the subjective nature of the law, Whelan referenced a famous 1964 pornography case in which Supreme Court Justice Potter Stewart said he could not define obscenity, but he could recognize it.
“It’s the classic analogy. I don’t know how to define it, but I know it when I see it,” Whelan said. “This is common sense.”
Caesars already owns four of Atlantic City’s 11 casinos — Caesars, Bally’s, Showboat and Harrah’s. In December, it teamed with Tropicana Entertainment, Inc. to purchase and shut down the former Atlantic Club Casino Hotel, leaving 1,600 people out of work. It’s not clear what Caesars will do with the property, but the company has said it will not operate it.
A slightly higher competing offer from Florida-based Sobe Holdings, LLC, would have kept the property in operation as a hotel but was not accepted by Atlantic Club’s owners.
Whelan speculated that a sale to Caesars could mean that company intends to shut down one of its underperforming properties such as Bally’s or Showboat, leaving even more people out of work.
Christie spokesman Colin Reed directed request for comment on Whelan’s concerns to the DGE Thursday.
Lisa Spengler, a spokeswoman for the DGE, said undue economic concentration is a topic that the division would investigate if a sale materialized. The division’s findings would be reported to the Casino Control Commission, she said.
Katie Dougherty, a spokeswoman for Caesars, declined to comment Thursday.
Rumors have swirled over who might take over Revel in recent weeks. The New York Post has also reported that Hard Rock is in the running.
Asked about Whelan’s comments regarding a potential acquisition by Caesars Thursday, Lisa Johnson, a spokeswoman for Revel, said there are no solid developments.
“There seems to be a lot of speculation when truly there is nothing concrete to report,” Johnson said.
Revel CEO Scott Kreeger has spoken publicly about a potential sale and the need to make Revel more competitive in the Atlantic City market, though he has never confirmed any of the parties in discussions. Changes are expected within the year, he has said.
Should a sale to Caesars materialize, this would not be the first time regulators would have been asked to address concerns of potential monopolies.
In 2005, the Casino Control Commission addressed the potential for undue economic concentration while approving one of the gaming industry’s largest mergers between Harrah’s Entertainment Inc. and Caesars Entertainment Inc.
The move was approved unanimously, but at the time the Division of Gaming Enforcement cautioned that the merger could threaten the survival of weaker casinos, and a DGE attorney said the rules governing “undue economic concentration” needed to be strengthened.
Meanwhile, witnesses for the division suggested improving boundaries that would prohibit Harrah’s from acquiring prime casino-zoned land on the Boardwalk, but the commission rejected that idea.
Prior to 1995, the law included a three-license limit for casino operators that had existed since the dawn of legalized gambling in the state. The law was changed as Donald Trump sought to open his fourth casino, the Trump Regency.
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