Only one of the large California gaming tribes, the Morongo tribe, has not signed onto a proposed online poker bill that is before the legislature.
In a letter to key lawmakers, including Senator Lou Correa and Assemblyman Reginald Jones-Sawyer, 13 gaming tribes indicated their support for a bill that would allow the Golden State to tap into online gaming profits in the largest market in the U.S.
“As you know, this journey has been long and difficult, but the challenges posed by the internet demand that we harness rather than cede the technology of the future for California and for our tribal communities,” said the letter. “In achieving consensus for internet poker, we reaffirm our commitment to the longstanding principle of limited gaming that has guided California’s public policy toward gaming.”
Tribes signing the letter include: Agua Caliente Band of Cahuilla Indians, Barona Band of Mission Indians, Cachil Dehe Band of Wintun Indians, Lytton Band of Pomo Indians, Pala Band of Mission Indians, Paskenta Band of Nomlaki Indians, Pechanga Band of Luiseño Indians, Rincon Band of Luiseño Indians, San Manuel Band of Mission Indians, Sycuan Band of Kumeyaay Indians, United Auburn Indian Community, Viejas Band of Kumeyaay Indians and Yocha Dehe Wintun Nation.
Morongo opposes the bill because it includes a “bad actor” provision that would effectively bar its partner, PokerStars, the largest online poker company in the world, from participating. The Justice Department alleged that PokerStars violated federal law when it continued to offer online poker to U.S. residents after Congress passed the law. PokerStars settled with the Justice Department without admitting guilt.
The coalition that Morongo heads, which also includes the Bicycle, Commerce and Hawaiian Gardens card clubs issued a statement last week indicating that it intends to fight the new bill. “Efforts by a select few interests to rewrite longstanding and effective policy in order to gain a competitive market advantage or to lock out specific companies is not in the best interests of consumers or the state and will be vigorously opposed by our coalition, online poker players and many others.” Morongo and its partners argue that gambling regulators, not lawmakers, should determine an applicant’s suitability to operate a casino in the state.
The “bad actor” clause is protected from being overturned by lawsuit by being made a “non-severable” part of the bill, meaning that if that part of the bill is overturned in the courts, it would kill the entire bill. It specifically states that parties that engaged in online gaming after 2006, when the federal ban was adopted, are unsuitable for a license.
The tight bad actor clause eliminates an option that was included in Correa’s bill, which was to let the regulators determine if PokerStars deserved a license.
Near unanimity is required for the poker bill to pass, since it would require two-thirds of both chambers of the legislature since it is a bill that would raise revenue.
Federal law bans interstate gambling activities, but allows each state to allow online gaming within its own borders. Online poker is currently legal in Nevada, New Jersey and Delaware, with the latter two states also legalizing all casino games.
The licenses would take effect one year after the bill is passed. Licensees would all have to launch on the same day. Only tribes or card rooms would be able to apply for the 10-year licenses. They would have to pay $5 million for a license, which would allow each applicant to operate two poker websites. Operators would pay 5 percent of gross revenues in taxes to the state. Only residents of California would be allowed to play, with players subject to verification rules that would include providing Social Security numbers, $1,000 fines for providing false IDs, and all players must be located within California borders. Only poker style games would be allowed. In general only California residents could be employees. The poker rooms would collect a 5 percent “rake” or fee for each hand, the same as a brick and mortar operation.
The bill provides funding to enforce the law against offshore websites that operate without a California license and municipalities will be encouraged to ferret out such activities within their own borders by being awarded half of the fines imposed. Cities and counties would not be allowed to regulate the games within their own boundaries. Internet cafes where customers could play online poker would be banned.
According to columnist Steve Ruddock of the website California Gambler, “A California online poker industry without PokerStars would likely be very competitive, with a lot of jostling and with several legitimate contenders for the top spot prior to launch. Marketing campaigns would be almost certainly massive affairs, as each provider attempts to best position themselves for the launch date.”
With PokerStars allowed to particulate, writes Ruddock, “Prior to launch I would expect the other online poker sites to work their tails off to release the best product they possibly can. They are going to want to close the gap with PokerStars as much as they can, and will likely try to trump them in one way or another: Be it customer service, an initial bonus, or a VIP Program.
If they don’t, and they decide to launch with an inferior product, with PokerStars as an alternative in the market, it will be the equivalent of online poker suicide.”
Ruddock believes that without some resolution of the bad actor situation, either by the Morongo coalition backing down or the bad actor clause getting stripped out of the bill, online poker in California is doomed.
“The new bill forces the Morongos and the trio of card rooms into a very difficult decision, assuming the bill is eventually introduced and the bad actor language remains intact through the amendment process—which is no small task or guarantee.
“They must either disavow PokerStars and sign off on the new bill, or withdraw their support from online poker expansion effectively killing the bill in 2014.”
