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Under the boardwalk – GVC gets the green light in New Jersey

borgataThe New Jersey regulator has now approved both Bwin.party and GVC to offer gaming services in the state, when previously it was thought that such an outcome was unlikely. Scott Longley looks at the development.

Jim Murren, the chief executive at MGM Resorts International, proclaimed after his company bought out erstwhile partner Boyd Gaming’s half share in the Borgata earlier this month that the casino’s best days were “yet to come” which in truth is an optimistic statement for any casino in Atlantic City right now.

Murren would be in surer ground, though, if he were talking about the still nascent online market in New Jersey, despite the recent interventions of the Division of Gaming Enforcement (DGE) which has clouded rather than clarified its stance on grey markets, much as a fog bank can obliterate the views from the famous AC boardwalk.

Earlier this month GVC – which has inherited BwinParty’s supplier relationship with the Borgata – announced that the DGE had determined that the New Jersey licences held by BwinParty would remain valid under GVC’s ownership and that a transactional waiver was not needed in connection with existing contracts.

Kenny Alexander, chief executive at GVC, said the company was “delighted’ with the news. “This is an important development for GVC and one that places the enlarged Group in a strong position should further regulated opportunities in the US arise,” he said.

Previous to the news there were clearly worries on both sides of the deal about whether the DGE would give the GVC a pass. Back in February it was announced that Gameaccount, already the supplier of a social gambling product to the Borgata, had extended its agreement to cover real-money online gambling “in the event certain conditions are met”.

The wording of the deal seemed designed to ensure that MGM has optionality when it comes to the provision of online gambling. It is a word that GVC chief executive Kenneth Alexander used previously when he spoke about what gaining a licence in New Jersey would mean to the group.

Viewing the deals between BwinParty and MGM and Boyd in light of the subsequent two-and-a-half years of online operations in New Jersey, there are reasons enough for Alexander to hold back from being too effusive about the prospects of New Jersey moving the dial for his company.

Although in 2015 the four Borgata websites (including an NJPartyPoker offering) were the market leaders with a gross win of $45.7m, the operation is now coming under pressure from PokerStars which only entered New Jersey in March this year and is already the dominant poker site and along with its other two Resorts Casino sites is pushing for top spot across both poker and casino.

But GVC’s enthusiasm for New Jersey would also have been tempered ahead of the licensing decision by the official advisory note issued by DGE director David Rebuck in late April.

The note attempts to clarify the DGE’s position with regard to online grey markets and how it pertains to New Jersey online licensees and in part it does a good job of attempting to discriminate between black markets – where New Jersey licensees should fear to tread – and grey markets – where broadly they can carry on as they were.

In the case of the latter, Rebuck and the DGE acknowledge the difficulties that arise in the EU between interpretations of national and supra-national laws. In particular, the note makes the point that any attempt to understand the motives of another sovereign government when it comes to their own gambling laws is “fraught with the likelihood of error or misinterpretation”.

As legal sources suggest, this admittance of the limitations of one regulator with regard to gambling laws in another jurisdiction – and the specific issue in Europe of the status of national law and EU statutes – is helpful.

But it is what comes next that is more of an issue. The advisory note states that it is “extremely difficult” for New Jersey to apply what it calls a “stringent approach” to what constitutes activity that would preclude licensing in the state. But, it says, the DGE will examine whether another jurisdiction has taken “affirmative, concrete action to enforce that law” including criminal or civil actions or the issuance of a “formal cease and desist” letter sent by a government official.

This, according to legal sources, is “not very helpful” as a definition given the potentially wide variation of interpretation of who can issue a cease and desist letter. It also puts New Jersey rather in the position of judge and jury, deciding what constitutes “concrete actions” and what and isn’t permissible as far as grey markets are concerned.

Michael Ellen

As the DGE itself admitted, it is a position which is indeed “fraught” with difficulties. Michael Ellen, partner at Regulus and ex-director of licensing for the Alderney Gambling Commission, notes it is a stance that the UK Gambling Commission notably steered clear of when it came to its online licensing regime. Instead the Commission contented itself (for now at least) with asking that operators inform them of any markets worth more than 5% of their revenues and also supply them with a legal opinion regarding their participation in that market.

What we cannot know at present is what the DGE makes of one particular market – Turkey – which would clear the UK Gambling Commission’s 5% threshold according to analysts at Cenkos. It remains the greyest of the regulatory stars in the GVC firmament, not least because the previous owners of Sportingbet in the region had some employees arrested on illegal gambling charges.

At present it would appear that the DGE clearly doesn’t consider this to be the type of “affirmative, concrete action” that might preclude GVC from being able to operate in New Jersey. As Ellen from Regulus points out, though this would appear to be good news for any operator with any dotcom revenues that might be wishing to look at entering any given regulated US market, it is not the same as a clean bill of health or any cross-border regulatory creep.

Developing situations in any other jurisdiction will now certainly have an impact elsewhere, he says. “A licence in a very visible jurisdiction which considers licensees’ wider business its business, makes it much harder to hide away (or even explain away) any developing issues in the .com environment.

“The NJ DGE’s decision has meant that operators might not have to choose between white and grey now, but it does mean that compliance is becoming increasingly global and increasingly strict – this is still something the sector is not entirely prepared for.”