Gambling bill would allow PokerStars, Full Tilt to apply for an online gaming license

State Sen. Terry Link amends proposed bill to allow companies charged with violating gambling laws to apply for online licenses

A gambling expansion bill is back, but it now includes a provision that would allow PokerStars, once accused by federal prosecutors of money laundering and fraud, to compete for an online gaming license in Illinois.

In the first draft of Senate Bill 1739, introduced by state Sen. Terry Link, D-Waukegan, PokerStars and sister company Full Tilt Poker would have been barred from obtaining an Internet gambling license in the state because they had "accepted wagers" in violation of U.S. law.

But on March 7, Link amended the bill to say companies had to be "convicted of accepting" wagers in order to be disqualified.

PokerStars settled those charges in 2012 for $731 million.

"We admitted to no wrongdoing," said Eric Hollreiser, a spokesman for PokerStars and Full Tilt, based on the Isle of Man, between Ireland and Scotland. "And in the process of that, we were given the assets of our biggest competitor, Full Tilt Poker, by the Department of Justice. And the settlement states that nothing in the agreement should prevent us from applying for licenses in the U.S."

In Illinois, PokerStars hired lobbyist John Kelly Jr., president and owner of All-Circo Inc., to advance its position. According to state records, Kelly is registered as lobbying for "Rational Services LTD," a subsidiary of PokerStars' parent company, The Rational Group. Kelly declined to comment.

According to PokerScout.com, Americans gambled $16 billion in 2010 through Internet poker sites, all based outside the U.S.

But on April 15, 2011, a day the industry calls Black Friday, the FBI shut down PokerStars, Full Tilt Poker and Absolute Poker, alleging they violated fraud and money-laundering laws. (As I reported in October, the companies were accused of violating the Unlawful Internet Gambling Enforcement Act of 2006, which basically forbade financial institutions from processing payments for online wagers.)

As part of the settlement, according to The New York Times, PokerStars agreed to forfeit $541 million and acquire Full Tilt, based in Dublin. Also, PokerStars agreed to make $184 million available to foreign players who didn't get their money back from Full Tilt.

Since then, cash-starved states have been weighing and, in rare cases, approving Internet wagering; Nevada and Delaware being two of them. Waukegan-based slot machine maker WMS Industries operates an online casino in the U.K. and has received a license in Nevada. And billionaire Chicago real estate and casino investor Neil Bluhm is building an online gaming operation called Rush Street Gaming.

Tom Swoik, executive director of the Illinois Casino Gaming Association, said he normally wouldn't have a problem with Link's change because he's confident the Illinois Gaming Board would never let PokerStars operate in the state based on its history.

"The problem is that under the bill online gambling isn't regulated by the Gaming Board, it's regulated by the lottery," Swoik said.

UI Labs incorporates

UI Labs, the University of Illinois-affiliated technology center, has incorporated as a nonprofit and named its first board members.

They are former Northwestern University President Henry Bienen; Lawrence Schook, U. of I.'s vice president for research; and Warren Holtsberg, managing principal of private-equity firm MVC Capital and the former head of Motorola Ventures.

"Our first job is to find and recruit the rest of the board," Holtsberg said. "The next step is to hire a CEO."

Bienen said that other universities, not only U. of I., will be involved.

"The name (UI Labs) is really a place holder right now," Holtsberg said. "We wanted to get incorporated. Now the heavy lifting begins."

Crain's Chicago Business first reported the news.

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