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On AGA vs. PokerStars: Las Vegas Sands Corp. (LVS), Caesars Entertainment Corp (CZR), MGM Resorts International (MGM)

At the end of the day, it’s a game. It’s business. It has nothing to do with “right” or “wrong,” and everything to do with the interests of the parties involved. And this is true regardless of which side you’re on.

Back in January, with an eye on the potential online gaming market in New Jersey, Isle of Man-based Rational Group — parent company of PokerStars, the dominant online poker room operator — launched a bid to acquire the struggling Atlantic Club Casino Hotel on the Atlantic City Boardwalk from Colony Capital. The transaction — thought to be in the $50 million range — is reportedly contingent on Rational Group’s receiving a grant of Interim Casino Authorization from the New Jersey Division of Gaming Enforcement, or DGE, which is essentially preliminary approval to acquire the Atlantic Club before receiving final approval from the New Jersey Casino Control Commission.

Las Vegas Sands Corp. (NYSE:LVS)On Feb. 26, New Jersey Gov. Chris Christie signed legislation legalizing full-scale online casino gaming in New Jersey, with the requirement that any company seeking to operate online in the state must own a brick-and-mortar casino in the state. And perhaps most notably, the version of the bill signed into law did not include a “bad actor” clause present in previous versions of the bill (as well as the new online poker legislation enacted in Nevada), which would otherwise have precluded PokerStars — which continued to operate in the United States following the passage of the Unlawful Internet Gambling Enforcement Act of 2006 — from applying for an online gaming license in New Jersey.

But on Monday, the American Gaming Association, or AGA — the lobbying group representing virtually every casino operator in America, including Caesars Entertainment Corp (NASDAQ:CZR), MGM Resorts International (NYSE:MGM), Las Vegas Sands Corp. (NYSE:LVS), and Boyd Gaming Corporation (NYSE:BYD) — filed a brief with both the New Jersey Casino Control Commission and DGE seeking to block PokerStars from obtaining a license to operate a brick-and-mortar casino in New Jersey and thus effectively block PokerStars from operating in the newly legalized New Jersey online gaming space.

Without getting into too much detail, the brief essentially argues that PokerStars “operated as a criminal enterprise” and that the integrity of the U.S. gaming industry would be “gravely compromised by any regulatory approvals of PokerStars.”

The move marked the first time the AGA has ever intervened in a state casino licensing proceeding, and it has caused an uproar in the online poker community, which appears to strongly support PokerStars in the matter. Meanwhile, New Jersey state Sen. Jim Whelan has alleged that Caesars Entertainment Corp (NASDAQ:CZR) is using the AGA as its “vehicle” to shut PokerStars out of the market.

But while there seems to be much debate over the nuances of the AGA’s arguments, the details are mostly irrelevant.

It’s really not any more complicated than this:

Caesars is a member of the AGA — as are MGM Resorts International (NYSE:MGM), Las Vegas Sands Corp. (NYSE:LVS), Boyd Gaming, and virtually every casino operator and gaming equipment manufacturer in America except for Wynn Resorts, Limited (NASDAQ:WYNN) — while PokerStars is not.

PokerStars picked the Atlantic Club Casino Hotel because the purchase price is only $50 million or so, New Jersey was on the verge of legalizing online gaming, and the state might be the only one in the Union desperate enough to let them in.

That the poker community seems to back PokerStars in the matter says a lot about both Caesars and PokerStars. On one hand, it says that while Caesars’ brands — most notably the Caesars, Harrah’s, Horseshoe, and World Series of Poker brands — are high on name recognition, Caesars itself has a very weak reputation as a gambler’s brand; the simple fact is that if Caesars Entertainment Corp (NASDAQ:CZR) had such a strong reputation among gamblers, gamblers wouldn’t be clamoring so hard for PokerStars.

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