Thoughts on the Ultimate Gaming Situation in New Jersey

September 20, 2014
Thoughts on the Ultimate Gaming Situation in New Jersey

We are not even a year into New Jersey regulated online gaming and there is already a casualty. Ultimate Gaming is leaving the market in the very near future.

Deposits are no longer accepted by UCasino or Ultimate Poker in New Jersey.  A message by both sites states, “Please go to your account and withdraw any balances you may have by following the normal withdrawal procedures.”

The closure appears to be more about Trump Taj Mahal going into bankruptcy than anything under Ultimate Gaming’s control.

Ultimate Gaming is listed as a creditor that is owed about $1.5 million by Trump Entertainment.  This represents multiple months of revenue.  Ultimate Gaming had to cut its losses.

I cannot help but think Betfair is in the same situation. The two sites are comparable in gaming win and both operate under a partnership with Trump Entertainment.  Trump Plaza closed and Betfair is operating under a temporary order by the New Jersey Division of Gaming Enforcement (DGE).  Betfair claims in a DGE petition that Trump Entertainment has ignored its requests to discuss the situation.

Underdog from the start

Ultimate Gaming was at a disadvantage from the beginning in New Jersey. The Trump Taj Mahal brand could not be used in marketing for online operations due to the lack of an agreement with Donald Trump to license his name to the products. The company was also unable to parlay its first-to-market advantage in Nevada into New Jersey success. The well established brick-and-mortar brands dominated the market from the first day.

Ultimate Poker threw hundreds of thousands of dollars at the site in promotions in an attempt to draw players. This included massive tournament overlays and cash game promotions. None of it seemed to work. It certainly was not for a lack of trying.

Atlantic City’s woes affected online operations

Online gaming opponents may try to spin this into something it is not. These lobbyists may try and lay the blame directly on Ultimate Gaming to demonstrate that online gaming is not a successful business model. The blame lies more in the fact that its Atlantic City partner was not in the financial shape to continue as a going concern. The industry will need to be quick to point that out if an attack from that angle occurs.

The online market also shares the same problems that Atlantic City has experienced. There are too many operators. Some attrition is necessary. Ultimate Gaming reported that its partner was in breach of contract and not getting paid. It was also last in the market in terms of year-to-date revenue. This made it the natural casualty. It may not be the last.

New Jersey regulations should address this problem

It seems that this scenario of a live casino going bankrupt owing a partner months of revenue was overlooked when interactive gaming regulations were being considered. One conclusion to draw from this situation is the profits from interactive gaming owed to a vendor were being used to operate the live casino as it seems payments stopped before the bankruptcy filing. This should not be happening.

Interactive gaming providers must have their interests protected or this situation will occur in the future and hurt the perception of the industry in the eyes of players, interactive operators and industry opponents.  Creating escrow accounts to hold this money is one solution that could have prevented this situation.

Player funds are required to be kept in separate accounts from operating expenses.  The same safeguards should apply to vendor payments.

What about Nevada?

This decision does not affect Ultimate Poker in Nevada. It is business as usual.

There is some speculation that the writing is on the wall in Nevada. One argument made by that position is that the loss of New Jersey will prevent Ultimate Poker from having the ability to network player pools should an agreement ever be made between states. That is not necessarily true.

There is nothing stopping Ultimate Poker from finding a partner in New Jersey. Ultimate Poker Nevada is about the same size as 888 in New Jersey. This could make it a viable turnkey partner for a New Jersey operator if a liquidity sharing agreement is created.

Tropicana and Golden Nugget do not operate poker rooms in New Jersey. Betfair does, but it has generated only $1 in rake in the last three months  All three of these could be potential partners in a future interstate compact.

California seems like a market Ultimate Gaming would be able to easily enter.  Station Casinos manages Graton Resort and Casino in Rohnert Park.

I do not see Ultimate Poker abandoning Nevada. If they did, it would basically mean that Ultimate Gaming is completely closing and giving up on the industry. I would like to think that they planned for years of operating expenses waiting for markets to open.

The New Jersey situation appears to be created entirely by a partner that is not paying its vendor.  There is no concern about that  in Nevada.  The UFC connection is another reason to think there is a future for Ultimate Gaming.

Maybe I am being overly optimistic.  If you know me, that is not common.  I just feel that the people involved with this company are sharp and have the ability to get it through this hard time.  I also think that their survival is important to Nevada and beyond.

What can Nevada players do?

Ultimate Poker is a necessary part of the Nevada online poker market. Without it, would have nearly 100% of the market share.  Showing support for Ultimate Poker right now might be a good idea to help ensure continued competition in the market.

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