California iPoker Legislative Hearing This Week

The California Assembly Appropriations Committee postponed taking a vote last week on Adam Gray’s AB 2863 that would legalize iPoker in the Golden State. A coalition opposed to Gray’s bill is claiming credit for slowing down the bill. California Nations Indian Gaming Association President Steve Stallings (l.) is unsure how the issue will play out.

Although a bill by Rep. Adam Gray, AB 2863 to legalize iPoker in California has advanced further than any similar bill ever has, its prospects for this year are looking increasingly dim.

Hearings were held last week on the bill, which still has significant problems with it that need to be worked out before all of the parties currently pushing for online poker will let it move forward.

The hearings were held before the Assembly Appropriations Committee, chaired by Lorena Gonzalez. However no vote was taken. Instead Gonzalez told the press that it would be voted on by the end of the month. Another hearing will be held on either June 22 or June 29.

The hearings followed the approval, a month ago by the Governmental Organization Committee that Gray chairs.

The bill had been amended to address issues that have proven stumbling blocks, specifically, the addition of a graduated tax that would start at 8.47 percent and peak at 15 percent for companies that generate more than $300 million annually. Each operator would also pay a $12.5 million license fee.

It also addresses the horseracing industry, which had insisted on a place at the table along with gaming tribes and card clubs. The bill provides $60 million annually from taxes for the industry. Gonzalez opposes a guaranteed $60 million if the tax receipts don’t justify it.

However it is the suitability or “bad actor” language that is the tougher row to hoe currently. The coalition of six tribes that include the Agua Caliente Band of Cahuilla Indians and the Pechanga Band of Luiseño Indians have continued to call for a “bad actor” clause that they hope would prevent PokerStars from participating.

Gonzalez doesn’t support the bill as written. She doesn’t believe that companies that illegally took wagers from U.S. players after 2006 should not be allowed licenses until 2021 unless they agree to pay $20 million to the state general fund.

After Gray amended the bill the Pechanga coalition sent a letter that indicated that he hadn’t gone far enough: “Although we have made some progress under your leadership, we regret that your amendments … related to suitability standards and taxation force us to oppose the bill.”

It does not agree with Gray’s new suitability standards, which is worded this way: Anyone who “accepted a bet or wager on any form of Internet gambling, or engaged in a transaction relating to those bets or wagers, from a person located in the United States” after 2011 is considered ineligible. Previous “bad actor” provisions have set the cut-off, (aka as the “bright line date”) at 2006, the year the Unlawful Internet Gambling Enforcement Act was passed by Congress.

On the Friday before the hearing 21 proponents of the bill, including some gaming tribes, card rooms, the horseracing industry and some unions released a letter that supported Gray’s amended version.

This was followed on Monday by a letter of support Sycuan Band of Kumeyaay Indians, which previously opposed the bill and was part of the Pechanga coalition before switching to a neutral stance.

The fact that the committee didn’t vote on the bill may mean that the bill will not be passed during this session.

The committee however did recommend that limitations be required for applicants that use assets, such as a customer base or lists, to gain a competitive disadvantage. One of the main reasons that the participation of PokerStars is feared is that it is assumed to have created a formidable customer list new operators would find hard to compete against.

It appears that the group wanting the bill to pass, whether or not the Pechanga Band opposes it, is growing while the Pechanga coalition is shrinking. The Pechanga group remains politically potent, however.

Steve Ruddock, writing for the OnlinePokerReport made this observation last week: “Legislators might be coming to terms with the fact Pechanga and its allies are going to oppose any bill it doesn’t have complete control of.”

He reported that rumors are running through the capital that the bill could move without Pechanga and even against its opposition.

Because the bill has a financial component it will require a two-thirds majority of both houses, which tends to magnify Pechanga’s ability to kill a bill it doesn’t like.

Pechanga Chairman Mark Macarro and his coalition took a victory lap over the postponement of the vote last week.

One source in the legislature told OnlinePokerReport: “I don’t think we’ll ever have 100 percent agreement in California. There’s a lot of entities involved in gaming in California, based on the size and number of truly legitimate players.”

Gray says he is open to more suggestions for amendments. He told OnlinePokerReport, “Through good faith discussions with all stakeholders, I believe we are closer than ever to passing an iPoker bill.”

Jockeys’ Guild attorney Barry Broad added, “I think there’s a good chance their political opposition can be overcome.” He added, “At least some of those tribes have a reputation for being bullies, politically. My sense is legislators are kind of fed up with that.”

California Nations Indian Gaming Association President Steve Stallings appeared to go along with that view when asked his view of the bill’s chances, said, “It depends on whether they’re (Pechanga/Agua group) going to be obstructionists or contribute to making things better, somehow,” Stallings said.

Macarro doesn’t like the term “obstructionist.” “If we wanted to stop iPoker we would not be dedicating the time, energy and resources to shaping good public policy that will protect our rights now and for the decades to come,” he said.