When Scheinberg Met Steve

How PokerStars won Wynn and made it fiddy-fiddy

by , Apr 7, 2011 | 8:56 am

Forbes associate editor Nathan Vardi published an article this morning entitled “How Casino Mogul Steve Wynn Went All In On Online Poker and PokerStars”, which despite the lame-o “All In!” header, is a compelling high-seas tale of how PokerStars founder Isai Scheinberg wooed and won the reticent Steve Wynn based on Vardi’s interview with the casino titan.

Because where else could billionaires come to grips with their future together but on a fabulous yacht in exotic locations and make the deal (surprisingly) even-steven 50-50?

I couldn’t help but think of Vardi’s post as if told in a novella….

When Scheinberg Met Steve

Chapter 1: The First Meeting

Nearly two years ago billionaire Las Vegas casino mogul Steve Wynn met Isai Scheinberg, the founder of PokerStars, the world’s biggest online gaming firm, for the first time. Scheinberg generally avoids traveling to the U.S., but the meeting took place on Wynn’s boat while it was anchored in the Mediterranean Sea. Over a three-hour lunch, Scheinberg tried to convince Wynn that the two of them should work together to regulate online poker in the U.S. with an eye toward setting up a joint venture.

Chapter 2: Relationship Doubts

It was a tough sell. Wynn had for years opposed online gaming. He was not a big user of technology. When Wynn needed information from the Internet he would just ask his secretary to find it. He also thought it would be tough to regulate online poker.

Chapter 3: Playing It Cool

During their lunch Wynn found Scheinberg to be quiet and reserved, carefully precise with his language and paying close attention to detail. Still, Wynn didn’t take the meeting too seriously. He did, however, take up Scheinberg’s offer to learn more in the ensuing months about how PokerStars conducted business. Wynn says what he learned shocked him, especially the company’s ability to identify any abnormal activity on its web site and stop it.

Chapter 4: Turning Point: Enter Reid

But the real turning point for Wynn came last year when Nevada Senator Harry Reid called Wynn to signal he was changing his mind about online poker. Wynn had no idea who put the issue before Reid, but he realized Reid was serious.

Chapter 5: We Meet Again

Scheinberg, meanwhile, continued to engage Wynn and the two met again on Wynn’s boat last year. This time the boat was anchored off the Bahamas and Wynn was taking Scheinberg’s proposals very seriously. During their discussions, Wynn asked Scheinberg why he was eager to change the status-quo in the American market. After all, PokerStars is making massive profits in the unregulated U.S. market, where it only has one serious competitor, Full Tilt Poker

Chapter 6: Let’s Get Hitched!

Wynn eventually agreed to work with Scheinberg toward establishing a joint venture that would be split 50-50, PokerStarsWynn.com, which was announced in March. Wynn says there is a written contract that obligates him to be responsible for the joint venture’s regulatory compliance if online poker becomes regulated in the U.S. For now PokerStars is getting a powerful ally who has been close friends with Senate Majority Leader Harry Reid for some 40 years.

Chapter 7: Shades of Grey

Wynn has clearly educated himself about the grey legal environment facing online poker firms like PokerStars. He brushes off the fact that his new strategic partner operates in the U.S. while the Justice Department takes the position that facilitating for-money online poker violates U.S. law. “In the United States of America the Justice Department has an opinion but several states have ruled and courts have agreed that poker is a game of skill, it’s not gambling. PokerStars rests their argument on that,” says Wynn. “I say there is a bit of sophistry here clearly. What difference does it make what PokerStars or the Justice Department says? The point is millions of people are playing poker and they are going to continue to play poker legally or illegally.”

Chapter 8: But What of Our Future?

Still, Wynn doesn’t think getting a Republican-controlled House of Representatives to approve online poker betting will be easy. “I don’t have any idea at this point,” says Wynn.” I know that as a nonbeliever I was convinced by the logic of the argument. And when I learn something and change my mind I may have the naïve notion that other people might be enlightened by the facts themselves. But that doesn’t mean I am right, especially in Washington.”

Nearly two weeks after the deal was announced, Steve Wynn told us all why he approved it.  If Reid, with the help of PokerStars, has made Wynn a believer in the future of iPoker, it is hard to believe that federal regulation is just a dream.

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