Will A Gamble On PokerStars Pay Out For Amaya?

Poker fanatics will remember the year 2013 as the Year of Canada as an unprecedented number of Canadian poker players successfully won live cash tournaments on world poker tours.  Canada is home to a pool of growing poker champions and businesspeople, who are quickly becoming integral members of the global poker industry.

The country’s latest limp into the global poker pot involves the Montreal based company Amaya Gaming, whose President and CEO David Baazov negotiated a $4.9 billion (C$5.2 billion) deal to acquire the PokerStars and Full Tilt Poker brands.

PokerStars and Full Tilt Poker are global online poker domains, with a loyal base of 86 million customers all around the world.  Many Canadian poker pros are sponsored by the online poker domains, including Daniel Negreanu who is arguably the most famous and successful Canadian poker player today – who serves as an ambassador for PokerStars.

Despite the size of the networks, Baazov and Amaya have a lot of work to do to make their acquisition a success.  Amaya is taking on nearly $3 billion of debt to take control of the online poker sites, and many experts believe the Canadian company is taking a real gamble on their new investment.

The online poker market in North America is one of the most challenging for Baazov to manage.  Canadians are legally allowed to bet on PokerStars, Full Tilt Poker, and many other poker domains, and those same sites are free to advertise to the Canadian market – provided they keep their operating servers outside of Canadian jurisdiction.

The US market, which is ten times as large as Canada, will be far more difficult for Baazov.  Federal US laws prohibit online poker sites from servicing US players, but many states are unilaterally authorizing online poker within their borders.

However, Amaya has their work cut out to even enter those few legal states.  PokerStars and Full Tilt Poker were kicked out of the US following the Black Friday poker scandal in 2011, and have failed to reenter any newly legal online poker states.

US authorities refused to allow any business associated with Isai Scheinberg from operating within their borders.  Scheinberg was the founder of PokerStars, and remained active in the company even after being branded a fugitive by US authorities.  Gambling lawyers in New Jersey held Scheinberg’s continued involvement with the company against PokerStars when the online poker site sought a license in the market earlier this year.

But Amaya’s deal to buy the poker sites included demands that Scheinberg and his family sell their remaining stocks in the company, as well as remove themselves from any association with PokerStars in the future.  Baazov is betting on this clause satisfying US regulators, and allowing both PokerStars and Full Tilt Poker to negotiate their way back into the US market.

Time will tell if Baazov’s gamble pays off, but with the amount of money he and Amaya are sinking into this deal, he better flop a flush for his own sake.