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March 10, 2013 David L. Rebuck, Director New Jersey Division of Gaming Enforcement 140 East Front Street P.O. Box 047 Trenton, NJ 08625 Re: Matthew B. Levinson Chairman & Chief Executive Officer Casino Control Commission Arcade Building Tennessee Avenue & The Boardwalk Atlantic City, NJ 08401

In the Matter of the Petition of Rational Group US Holdings Inc. for Interim Casino Authorization to Own the Casino Currently Known as the Atlantic Club and Other Rulings in Connection Therewith Petition Ref. No. 3591201

Gentlemen: Please accept this letter in lieu of a more formal brief on behalf of Rational Group US Holdings Inc. (Rational or PokerStars) in opposition to the Petition for Participation which has been filed by the American Gaming Association (AGA). Under New Jersey Administrative Code 1:1-16.6, only an entity with a significant interest in the outcome of a case may move to participate, and participation will be allowed only if the participants interest is likely to add constructively to the case without causing undue delay or confusion. The AGA meets neither of these criteria.

The Casino Control Commission (Commission) should deny the AGAs petition to avoid setting a dangerous precedent that would eviscerate all requirements for participation in the context of the Commissions consideration of licensing applications, and would empower the AGAs thinly veiled anti-competitive campaign against the entry of a competitor into the market. 1. The AGA lacks a significant interest in the outcome of these proceedings. The AGAs petition should be rejected because it lacks a significant interest in the outcome of these licensing proceedings. The AGA explains that it is engaged in general gaming advocacy, including spearheading campaigns relating to responsible gaming and corporate philanthropy, hosting a global trade show, and lobbying See Brief in Support of Petition (Pet. Br.) 2-4; Patterson Cert. 5-10. However, it never explains how those activities give the AGA a significant interest specifically in Rationals petition for a license. The AGAs claimed interest in preserving suitability-based licensing of gaming operations, Pet. Br. 1, 4, 10, is irrelevant, because the integrity of the process by which the Division of Gaming Enforcement (Division) and the Commission conduct suitability-based licensing is not in doubt, or even at issue, in these proceedings. To the contrary, Rational recognizes that New Jerseys licensing statutes and regulations set the highest standards in the industry and are models for other jurisdictions. This case is only about fairly applying these rules to Rationals petition. And the Division and the 2

Commission recognized as leaders throughout the industry are more than capable of accomplishing this task without the unsolicited assistance of a self-appointed group of Rationals competitors. The AGA fails to identify any limiting principle that would distinguish its effort to participate from any gaming entitys attempt to block the licensing of a competitor. This is not a case in which the Divisions ability to investigate the relevant facts is impaired in any way or otherwise called into question. Properly understood, in such an ordinary case, the right to participate is limited to circumstances in which the would-be participant offers a unique, first-hand perspective on the licensing application. That standard will most often be satisfied when the would-be participant has personal knowledge of non-public facts or a direct, concrete stake in the outcome that distinguishes it from an ordinary marketplace competitor. For example, participation might be appropriate if a seller of a casino property to a license applicant, or perhaps a union representing its employees, has first-hand information that would be useful to the Commissions licensing determination, but which might be beyond the traditional scope of the Divisions investigatory process. For instance, such a participant might have specialized knowledge regarding the effect of granting a license on the solvency of the existing licensee or the effect on employment security for the employees.

The AGAs application is far afield from these types of situations. The AGA has no firsthand knowledge. It makes no suggestion nor can it that the Divisions investigatory process is flawed. And the AGA can offer no information whatsoever which is useful or outside of the scope of the Divisions usual investigatory process. The AGAs sole interest here is economic warfare. If AGA is permitted to participate here, the Commission will have set a precedent inviting competitors to intervene in every licensing proceeding, thereby permanently multiplying the proceedings and delaying the disposition of those matters indefinitely into the future. Even if the Commission accepts the AGAs claim that it has an interest in insuring that only individuals and entities of established integrity are licensed, Pet. Br. 4, that interest cannot be sufficient for purposes of seeking the right to participate in this proceeding. Everyone gaming customers, regulators and other governmental entities, and every citizen of New Jersey and elsewhere has an interest in ensuring the integrity of licensees. The AGA never explains what, if any, injury any of its members would suffer if Rationals application were granted, nor does it identify any other plausible, concrete interest that it or its members have in a licensing determination involving an unaffiliated entity. The bottom line is that the AGAs interest in this regard is no stronger (or different) than the interest held by any other member of the public, and the absence of such a specific concrete interest is fatal to its petition to participate.

For all of its lofty rhetoric, the only interest the AGA actually has in this proceeding derives from the fact that some of its members perceive themselves to be Rationals competitors. At bottom, the AGAs brief constitutes an attempt by these competitors to exclude Rational from the U.S. market. That interest cannot be sufficient to support participation. Allowing the AGAs participation here would therefore set a precedent in favor of transforming every licensing hearing into a platform for incumbents to make accusations of wrongdoing including false ones against aspiring licensees. Because the AGA has not articulated a legitimate significant interest, its petition should be denied. 2. The AGAs participation is not likely to add constructively to the case. The AGAs petition also fails entirely to show that the AGA is likely to add constructively to the case without causing undue delay or confusion. The AGA purports to justify its attempted interference in this matter on the grounds that it is uniquely situated to ensure the suitability of individuals seeking licensure, and to preserve suitability-based licensing. Yet, as noted above, both of these functions are delegated to the Division and the Commission, the public bodies charged by the Casino Control Act with this specific responsibility, and these bodies are amply capable to fulfill those functions without the participation of the AGA an entity composed of Rationals competitors with no firsthand knowledge of any of the facts in question.

Every piece of information that the AGA seeks to present comes from publicly available sources, and nearly all of it has been widely disseminated in both the traditional media and over the internet. Any person with even a passing interest in gaming would likely have become aware of the proceedings in the New York federal court, and, as the AGA itself notes, the individuals and entities whose identities have been included in the application featured prominently in reports on the New York matters. The Division is no doubt aware of these facts, and hence the AGAs participation would be virtually valueless. To be absolutely clear, Rationals unequivocal position is that the Commission must satisfy itself that the entities and individuals seeking licenses are entitled to the authorization they seek. In this regard, Rational is thoroughly committed to proving its good character, honesty, and integrity. But given that the Division has both the power and the obligation to undertake its own investigation before the Commission holds a hearing and rules on Rationals application, the AGAs proposed participation adds no value, and only threatens to undermine the process. The AGAs rote assertion that its participation in this case would not cause undue delay or confusion is belied by the AGAs own submission voluminous filings many hundreds of pages in length and measuring approximately three inches in height. The AGAs submissions will necessitate a detailed and lengthy response from Rational. The Division and Commission, in turn, would be required to consider the voluminous 6

(and duplicative) materials submitted by AGA as well as the undoubtedly equally voluminous responses and supporting documents that Rational likely will submit. This would, of course, be in addition to considering the report and documentation from the Division and the response from Rational. Undue delay and confusion are virtually guaranteed if AGA is invited to participate. Precedent from other administrative proceedings makes clear that the AGA fails to meet the required standard. In Matter of the Cap Waiver Appeal of the Board of Education of the Township of Lakewood, Ocean County, 95 N.J.A.R.2d (EDU) 317 (1994), the application of the Lakewood Education Association to participate in an ongoing cap waiver appeal was denied in language that neatly describes the situation posed by the AGAs petition: [T]he [Lakewood Education] Association . . . fails to meet the criterion of being likely to add constructively to the case without causing undue delay or confusion. (N.J.A.C. 1:1-16.6(b)) In terms of constructive addition to the record of a budget appeal, the perspectives of students and staff are properly presented through the Board of Education . . . . In terms of procedural delay, participation by the Association would encumber the record with additional filings on matters properly and ordinarily addressed by the Board, and would, through the necessity to permit responsive briefing . . . , further defer closing of the record and determination by the Commissioner in a matter of the type where expedition of proceedings is both inherent in currently applied regulation (N.J.A.C. 6:24-7.1 et seq.) and mandated by the Court in various recent pronouncements on the school district budget process. Nor has any special circumstance been advanced by the Association that would cause the Commissioner to alter his stance based on specific grounds unique to this case.

Similarly, in this case, the AGAs participation is not necessary because the Division and the Commission are amply capable of serving the goal identified by the AGA for its participation, and a decision to permit the AGA will unavoidably lead to undue delay and confusion. See id. (noting that New Jersey case law has always stressed an implicit balancing test to be conducted between claimed rights of a non-party to participate in an ongoing matter and the need for a prompt and expeditious administrative proceeding). These facts lead unavoidably to the conclusion that the AGA fails to meet the standard for participation in this proceeding. In this regard, the AGAs reliance on case law relating to standing in court is entirely misplaced. While courts rely upon the participation of parties with adverse interests as a means to ensure that opposing viewpoints are represented and all relevant information is presented to the judge or jury, the process here is different: The Division is duty-bound to undertake its own investigation to assess the application, and it is vested with investigatory powers appropriate to doing so. The Commission then holds a hearing and rules. In this paradigm, the participation of an opposing party particularly one whose sole interest is in economically undermining the applicant is neither necessary nor constructive.1 1 Rather than address the requirements for participation as set forth in the regulations, AGA speaks vaguely of generalized concepts of standing and argues that it has standing to participate in this case. But even if case law on standing were relevant to the question of whether the AGA should be permitted to participate here, that case law 8

The AGAs reliance on prior decisions on participation by this Commission is equally unavailing. The proposed participant in Petition of Adamar of New Jersey, PRN 2140705 a labor union representing members who worked at the Tropicana Hotel had a significant interest in the outcome of the case, as well as firsthand knowledge of filthy conditions at the hotel that were relevant to the Commissions determination of Tropicanas licensing application. The union stated that its workers had a significant interest in Tropicanas licensing because the poor upkeep of the hotel was driving away customers, upon whom union employees depended on for tips, which constituted a large part of the union members pay. The Division stated that while economic interests alone would not allow a party to intervene or participate, members interests in preserving their jobs were not just a purely economic interest. Transcript of Nov. 15, 2007 Special Mtg., Item No. 4, at 6, 1. 4-7. Despite union members interest in preserving their jobs, the

commission stated that the union ha[d] not demonstrated that the outcome of the renewal hearing . . . will have the requisite, substantial, specific, and direct effect on it to does not support the AGAs position. Standing doctrine requires that a party seeking to participate or intervene demonstrate that the outcome of an underlying case will injure them in a concrete and personal way. Summers v. Earth Island Institute, 555 U.S. 488, 497 (2009). A claimed injury for standing purposes must be plausible and not merely conjectural or hypothetical. Id. at 493. Standing is not found where a feared injury is not based in reality. Doe v. National Board of Medical Examiners, 199 F.3d 146 (3d Cir. 1999). Here, the AGAs purported interest in ensuring that unqualified persons are not licensed is transparently a manufactured pretext, not a realistic threat justifying its participation. Friends of the Earth, Inc. v. Laidlaw Envtl Servs., 528 U.S. 167, 184 (2000). 9

merit intervention. Nov. 15, 2007 Transcript, at 37, 1. 19-24. The Commission noted that it was reluctant to participate in labor-management issues, and that the union could address its concerns with Tropicana directly through collective bargaining. Ultimately, the Commission permitted the union to participate regarding those issues on which union members had firsthand knowledge; in this regard, the Commissions decision is clearly distinguishable from this case, in which the AGA offers no firsthand knowledge of any relevant information. Similarly, the Commissions decision in The Petition of the Trustee and Conservator of Adamar of New Jersey, Inc., PRN 0150901, which involved a bankruptcy proceeding related to the sale of a casino, is distinguishable because in that matter, the Commission granted standing to participate only to groups that had a concrete economic interest in the matter. In that Commission proceeding under NJSA 130.2C, the Commission sought to determine the eligibility for a casino license of the entity to whom a conservator was selling or conveying the property of a former licensee for the purpose of owning and operating that casino hotel. The statute in question specifically provides that such a sale is subject to valid liens, claims and encumbrances. Transcript of January 21, 2009 Meeting, Item No. 17, p. 89, 1. 18-19. Three parties sought to participate in the proceeding: a group of 27 former employees of the casino that had pending age discrimination claims, a committee composed of unsecured creditors, and a steering committee of secured lenders. 10

The former employees were not allowed to participate because they failed to show that they had mature claims that would be impaired by the sale. Jan. 21, 2009 Transcript at 76, 11-23. The Commission noted that to grant this group standing to participate would open the floodgates to other participation. Id. at 72, 1. 4-5. On the other hand, the committee of unsecured creditors was granted participant status based on the concrete economic interests of some of its members. In its brief, the AGA itself quotes the commissioners statement in this regard that the Commission in other cases has granted participation to similar unsecured creditors committee representing identified and established economic interests arguable effected by the license renewal proceedings or financial stability matters involving the casino licensee and bankruptcy reorganization. Jan. 21, 2009 Transcript at 89, 1. 5-11. The committee of unsecured creditors was granted standing to participate based on the conclusion that, unlike the group of former employees, at least some of the unsecured creditors held fixed claims against the entity in conservatorship. Id. at 90, 1. 2-14. The steering committee of secured lenders was likewise granted standing to participate based on its significant and concrete economic interest in the specific entity in question a $1.3 billion mortgage lien on the property. Id. at 91, 1. 11-15.The Commission noted that the members of the Steering Committee ha[d] fixed claims ha[d] not been disputed. Id. at 93, 1. 4-6. In citing this previous decision by the Commission, the AGA simply ignored the facts that led the Commission to its determinations on participation. Nowhere in the 11

AGAs petition does it identify any concrete interest that the AGA has in the sale or operation of the Atlantic Club Casino. Our research discloses no case in which an entity has been allowed to participate in a pending licensure hearing before the Commission based upon the type of abstract concerns on which the AGA bases its petition. Nor, of course, is there any precedent for allowing competitors to participate in the licensure process in order to try to prevent an entity from entering the Atlantic City market. What the AGA seeks is therefore not a continuation of an existing practice but a perversion of the participation process which is utterly without precedent, and which would turn every licensing decision into a battle waged by entities whose true interest in participating is to keep competitors out of the Atlantic City market. In sum, the Commission should conclude that the AGA has identified no concrete interest at stake and is simply not likely to add constructively to the case and should deny the AGAs petition. 3. To permit the AGA to participate in this matter would be destructively anticompetitive, and would do a disservice to the people of New Jersey. In addition to not being likely to add constructively to the case, the AGAs participation would in fact be destructively anticompetitive and harmful to the State of New Jersey and its residents. PokerStars achieved its status as one of the worlds largest and most respected internet gaming companies because it works closely with regulators and is in good standing with governments around the world. It holds licenses in France, Germany, Italy, Spain, Denmark, Estonia, Belgium, Malta and the Isle of Man, and 12

faithfully serves hundreds of thousands of customers worldwide in full compliance with the regulations of all of these jurisdictions. Having fully and finally resolved the civil action against it in the New York federal court without admitting any wrongdoing,2 PokerStars now promises to infuse the New Jersey economy and create jobs by bringing brand name recognition and well-recognized quality to the State. The AGAs inconsistency is also apparent in the stark contrast between the arguments raised in its petition and the prior efforts of one of its board members to form a business relationship with PokerStars. On February 8, 2013, AGA member Caesars Entertainment approached PokerStars and offered to sell it the Rio Casino in Las Vegas. At that time, Caesars suggested that this acquisition would give PokerStars a better relationship with Caesars and would help PokerStars gain a license in Nevada. PokerStars declined the offer because it had no plans to acquire another casino in the near term. Within weeks the AGA submitted its petition to the Commission. Conclusion The decision for determining suitability of a casino license rests with New Jerseys expert regulators. The quality of that decision will not be improved by the
2

Paragraph 16 of the Stipulation and Order of Settlement regarding PokerStars, which was entered on July 31, 2012 by the U.S. District Court for the Southern District of New York explicitly provided that "[n]othing in this Stipulation and Order of Settlement is intended to or shall limit the PokerStars Companies and their present or future affiliates from offering realmoney online poker to individuals within the United States (including under the PokerStars or the Full Tilt Groups brands) if and when it becomes permissible to do so under relevant law."

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participation of trade associations whose members wish to eliminate competition for purely economic reasons. To permit the AGA to participate would undermine the licensing process, create administrative inefficiencies, and set a negative precedent for a competitor to dictate and influence whether a casino receives a license. The Commission should not invite the counterproductive consequences to its investigative and deliberative process that will inevitably follow if the AGA is permitted to participate in this proceeding.

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For all of the reasons set forth in this letter, Rational respectfully submits that the Commission should deny the AGAs Petition for Participation.

Respectfully Submitted,

A. Jeff Ifrah David B. Deitch IFRAH PLLC Attorneys for Applicant Rational Group US Holdings Inc. cc: Brian J. Molloy, Esquire

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