California Rep. Adam Gray’s bill, AB 2863, which would legalize and create a regulatory framework for online poker in the Golden State, is moving forward with more success than any other similar bill since the attempt began several years ago.
Recently the Assembly’s Governmental Organization Committee unanimously moved the bill forward and the Appropriations Committee appears ready to act soon as well.
Gray himself wrote a bill that cleared both committees, yet remained inactive after that. However what makes the current bill different from others that have come before is that it seeks to resolve a bitter sticking point between two factions of the gaming tribes that support some sort of bill: the issue of “bad actors.”
Previous incarnations provided licenses for gaming tribes and card rooms but excluded racetracks, who made the point that currently they are the only entities in the state that carry out wagering activities online. Some tribes were dead set against their inclusion because they felt it would violate gaming exclusivity that the tribes believe the state constitution grants them.
Gray’s bill addresses the issue of racetracks by paying them up to $60 million annually from online poker profits as a compensation for not being able to operate such sites themselves.
On the issue of “bad actors,” i.e. online providers that have previously run afoul of the law for allowing U.S. residents to play online poker in violation of federal law, a clause aimed at excluding PokerStars, the largest online poker provider in the world is supported by one consortium of tribes and opposed by the consortium that hopes to partner with PokerStars. That consortium would like to leave it to California regulators to determine what groups are “suitable” to participate as licensees.
Lately “bad actor” has been replaced by “suitability,” in the lexicon of the bill. Gray’s bill doesn’t so much grasp the issue as it steps around it.
It alludes to the issue with this paragraph: “The act that added this subparagraph shall not become operative until criteria are established by statute to address involvement in Internet betting prior to the state’s authorization of Internet poker pursuant to this chapter,” which, in essence leaves the bill to be settled later.
The bill does provide direction to state regulators, i.e. the Gambling Control Commission, on the screening of applicants. It provides for a partial application and a “full” investigation of each applicant.
The first screening would include “fingerprint-based state and federal criminal history checks and clearances, and inquiries into various public databases regarding credit history and any civil litigation. … A full investigation shall be conducted of only those service providers that pass the partial investigation …”
The more penetrating investigation will include background checks into just about everyone associated with the application, plus vendors. It would, says the bill, “include information necessary for the department to make a determination of suitability, consisting of, but not limited to, personal history, prior activities and associations, credit history, civil litigation, past and present financial affairs and standing, and business activities, including whether the applicant or an affiliate of the applicant has a financial interest in any business or organization that is or was engaged in any form of gaming or transactions related to gaming prohibited by the law of the federal or state jurisdiction in which those activities took place.”
The bill does not address whether anything that comes to light in the investigation would cause an application to be denied.
As one observer of the process business reporter, Steven Eichorn asked, “It’s not quite the definitive red card that some tribes have in mind, but could it stick some operators into a litigious licensing process like the one that PokerStars had to endure in New Jersey for years before being licensed?”
