Pennsylvania's top court to examine Cordish's case regarding Bally's Casino in State College.
The Pennsylvania Supreme Court recently agreed to review a case involving the Pennsylvania Gaming Control Board's (PGCB) decision to grant a Category 4 satellite casino license to SC Gaming OpCo, LLC near Penn State University at the Nittany Mall.
In January, the PGCB had unanimously decided to grant SC Gaming OpCo, LLC a Cat. 4 mini-casino license. The plan was for Bally's to create a casino out of the former Macy's department store at the Nittany Mall, less than five miles away from the university's main campus.
Although Bally's had failed to bid for the Cat. 4 license during the PGCB's auction round in September 2020, businessman Ira Lubert had been successful due to his small ownership in Rivers Casino Pittsburgh. Lubert's SC Gaming OpCo won the auction with a $10 million bid, defeating Baltimore-based Cordish Companies. Cordish operates in Pennsylvania as Stadium Casino RE, LLC, owning and running a full-scale Live!-branded casino in Philadelphia and a satellite location near Pittsburgh.
Cordish believes the PGCB erred by allowing Lubert to form a financing group to win the September 2020 Cat. 4 auction. Cordish's lawyers argue that according to the state's rules, only companies and key investors who possessed "an ownership interest in a slot machine license" in Pennsylvania were entitled to bid.
Cordish's Argument and State Response
Cordish alleges that before the bidding took place, Lubert brought on investors, including fellow Pennsylvania businessmen Robert Poole and Richard Sokolov. Cordish asserts that since Poole and Sokolov didn't meet the requirements to bid on the mini-casino license, Lubert's tender should have been disqualified by the PGCB.
Cordish's attorneys argue that the contributions were not just loans but instead gave the investors a stake in the Category 4 license that Lubert would apply for as the winning bidder. They claimed Lubert created an investment group, divided ownership and control interests in the group, and then presented SC Gaming as the applicant.
Lubert has contended that he only teamed up with Bally's after getting the license rights. The PGCB echoed this belief, arguing they performed their due diligence and found that Lubert placed the bid himself. However, PGCB counsel admitted Lubert had other sources of funding.
The PGCB believes the Act doesn't explicitly restrict how the winning bidder in a Category 4 auction should fund the winning bid, provided the funds' source is investigated for licensure purposes. According to them, the conducting authority doesn't demand that the winning bidder personally use their funds or secure a loan to pay the winning bid.
Supreme Court Involvement
Stadium Casino initiated a lawsuit in the lower Commonwealth Court, which is now being transferred to the Pennsylvania Supreme Court for a hearing. The Supreme Court has directed Stadium to file its appeal by October 16. Subsequently, the PGCB and SC Gaming will have 30 days to submit their own briefs.
Opposing argument:
Cordish is claiming that the PGCB, in approving Lubert's successful bid for a Category 4 satellite casino license in State College, Pennsylvania, wrongfully allowed Lubert to orchestrate a financing group to win the license. According to Cordish, its appeal centers on the fact that the regulations explicitly state that only companies and key investors who held an ownership interest in a slot machine license within the state were qualified to bid. States Casino argues that Lubert brought on investors, Robert Poole and Richard Sokolov, who not only did not qualify but specifically had no license stake. Cordish's attorneys elaborate that these individuals invested not just as a loan but to buy an interest in the Category 4 license Lubert would subsequently apply for as the winning bidder.
The PGCB counters that the Gaming Act permits a winning bidder in a Category 4 auction to use any funding source, as long as the funds' origin is evaluated during the pre-licensure investigation. While the Act does not stipulate that the winner must use their personal funds or a personal loan, its evident the PGCB considered Lubert's potential financing sources when awarding the license.
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