With the end of the California legislative session a few months away, skepticism is mounting that lawmakers will pass an online poker bill. This is the seventh year an online poker bill has been introduced. Sticking points remain between tribal coalitions that refuse to budge on their positions.
At stake is an online poker market that some experts estimate would be about $300 million a year.
Recently Adam Gray’s AB431 moved to the Assembly Appropriations Committee, where it was passed on May 28. This was the first time that an iPoker bill passed out of committee. Its passage by a second committee raises the hopes of supporters.
Steven Miller, California state director of the Poker Players Alliance praised the committee’s action. He wrote, “Today marks another historic day for online poker in California. A second committee has cleared a bill that marks a monumental step toward providing thousands of consumers with what they need and deserve—a safe place to play poker online.”
Groups supporting and opposed to Gray’s bill sent letters to the chairman of that committee, Jimmy Gomez, outlining their positions.
Gray’s bill is a so-called “shell bill,” which means that most details need to be fleshed out. But the devil, as they say, is in the details, which powerful groups do not agree on.
Last week two tribes that are not part of the battling coalitions asked one coalition, led by Pechanga, to soften its opposition to allowing racetracks a place at the table along with card clubs and gaming tribes.
Laurie E. Gonzalez of the Rincon Band of Luiseño Indians in San Diego released a statement urging that the tribes achieve consensus, “rather than digging their heels in the ground.”
This was followed by a statement by Chairman Lynn Valbuena of the San Manuel Band of Serrano Indians who during a speech at a gambling conference in Sacramento, said, “We’re evaluating all of our options right now, with the race tracks.”
She added, “As we all know there are tribes who are opposed to having the tracks in. We have an open mind. We’re still discussing those issues and looking at every option available.”
Pechanga leads a group of gaming tribes that argue that allowing racetracks to have licenses would violate the state’s policy on limited gaming. They also fear that this could undermine the tribe’s exclusivity in casino gaming.
Pechanga Chairman Mark Macarro recently told members of the GiGse conference in San Francisco, “The only entities that can play poker in California are Indian tribes and card clubs, period.”
Jeff Grubbe, chairman of the Agua Caliente Band, agrees, “We respect their industry and what they do but they’re not licensed poker operators, and this would be a crossover into our industry.” He adds, “I don’t know why they’re even in the discussions.”
Racetrack officials have also drawn a line in the sand, claiming they already have the right to operate gambling websites as long as the legislature permits iPoker. They have offered online wagering for 15 years. They demand the right to operate their own websites and say they won’t settle for merely being paid subsidies from the activity.
Robyn Black, a lobbyist for the California Thoroughbred Breeders Association, last week told the Bee, “We’re the only major racing state in the country that doesn’t have some other kind of gaming at our racetracks. So when you’re competing for horses to bring in to California to race, the Eastern states are more competitive with their purses.”
Card clubs, which typically have no more than ten tables, are letting the gaming tribes battle over the issue, although they will probably participate in any online poker operations. According to Kyle Kirkland, president of the California Gaming Association, “Most of these guys are focused on day-to-day operations,” and have adopted a “wait and see approach.”
Valbuena says her tribe views iPoker as a business opportunity rather than a threat to existing brick and mortar casinos, as some gaming tribes view it. They also do not believe that it is covered by the Indian Gaming Regulatory Act, but is purely a commercial gaming activity.
“We do not believe our exclusivity for Class III casino-style gaming in California is threatened by authorizing iPoker in California,” said Valbuena.
There is still some bad blood between the four remaining racetracks and some gaming tribes, who don’t forget that the racetracks opposed the amendment to the state constitution that allowed Las Vegas style casinos on the reservation. The interests have clashed several times since when racetracks went to the voters to try to expand the type of gaming they were allowed to offer.
The other sticking point with some tribes is whether PokerStars will be allowed to participate. Some tribes want to exclude it as a “bad actor” because PokerStars ran afoul of the Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006; or so alleged the U.S. Justice Department. PokerStars never conceded guilt, although it did agree to a fine. PokerStars was allowed to continue to do business in the U.S. and is in the process of applying for a license in New Jersey.
Tribes who oppose PokerStars’s participation argue that it should not be rewarded for its behavior in 2006 and that the database of players it built up during that period gives it an unfair competitive advantage.
Chairman Grubbe recently told the Sacramento Bee, “They profited from that illegal gaming. They built a database from that illegal gaming.”
According to PokerStars spokesman Eric Hollreiser, “We always took the position that poker was not covered” by UIGEA because it is a game of skill and not of chance.
Pechanga’s coalition includes Amaya/PokerStars and several of the largest card clubs in the Golden State.
Caesars Entertainment also has a business alliance with Amaya/PokerStars. The United Auburn tribe has partnered with Bwin party/Digital Entertainment. Pala Casino operates PalaCasino.com in New Jersey, which has legalized online poker.
Some tribes believe that a bill will never be passed without the racetracks because Governor Jerry Brown has said that such a bill is a non-starter and two-thirds of the legislature is required to pass any bill that has a financial character.
Because of these challenges most political observers in Sacramento think that the chances of a bill passing is vanishingly small.
Phil Recht, who is a potent lobbyist in the capital commented last week, “Both groups of tribes have a great deal of political power.”
Mike Gatto, who authored the first iPoker bill this session, is predicting no passage this year. Most lawmakers prefer not to get in the middle of a tribal dispute.
Former Senator Roderick Wright, who championed iPoker for several years, predicts, “There will be no bill until all of the lobbying money is spent.”
A recent Online Poker Report claims that Churchill Downs has entered the fray in California and has signed agreements with two poker rooms: Oceans 11 and Crystal Casino. This would be the first time that Churchill Downs has attempted to enter online poker. In 2014 Churchill CEO Bob Evans called online gaming “a significant opportunity” and said his company intends to become a “major player,” in the industry.
Evans said that while waiting for the states to legalize the activity that Churchill planned to spend money on building a technology platform on which to offer the games.
“We can’t make states legalize internet gaming any faster than they would otherwise. But as that occurs, we want to be a player. We will make the appropriate investment to do that,” said Evans.
Gaming tribes and racetracks aren’t the only ones who want California to legalize iPoker. Jason Somerville, a 28-year-old Nevada entrepreneur known nationally as a professional poker player, is trying to persuade lawmakers to legalize online poker. PokerStars recently brought him to Sacramento to give a hands-on demonstration of how it works to lawmakers.
He was joined by Daniel Negreanu, winner of the World Series of Poker six times over.
Somerville argues that it is silly to allow people to bet on the horses online and buy lottery tickets online but not bet on a poker game. He says he once lost $100,000 to an offshore poker site and that other consumers need the protection that only a government regulated gaming system can provide.
It will also open the game to those with smaller stakes to play with. Online poker players can enjoy the game for hours on just a few dollars.
PokerStars, which operates in most jurisdictions outside of the U.S. estimates that tens of thousands of California residents already play the games at illegal offshore sites. It says it has the sophisticated technology to limit the games to those over 18 and to guarantee that the players are within California’s borders.
While federal law does not allow interstate online gaming, it allows states to offer it within their borders.
Once California legalizes the games that will open the way for other states, says Somerville.
But looming off in Washington is the possibility that Congress might co-opt the state and ban online poker. That is what billionaire casino owner Sheldon Adelson wants and what he is spending large amounts in lobbying to try to achieve.
Brick and mortar casinos are already being threatened by the growth of social gambling on mobile platforms. Many tribes recognize that they need to be part of this train rather than standing in front of it.
