iPoker Bill Moves Closer to Vote in California Assembly

Internet poker in the Golden State is reaching a crisis point in the California Assembly. The fate of AB 2863 will be decided by the Assembly within the next week or two. Rincon Chairman Bo Mazzetti (l.) says Assemblyman Adam Gray has brought together the disparate elements of the issue.

A bill that would authorize online poker in California has moved closer to a floor vote in the Assembly.

On June 22 AB 2863 by Assemblyman Adam Gray passed the Assembly Appropriations Committee, moving to consideration by a vote of the full Assembly. There was one no vote and several abstentions. This is the first time that an online poker bill has made it to the floor of the Assembly.

Speaking in favor of the vote were representatives of the Rincon Band of Luiseño Indians, the United Auburn Indian Community, the Pala Band of Mission Indians, the San Manuel Band of Mission Indians, the Morongo Band of Mission Indians and the Sycuan Band of the Kumeyaay Nation. Plus representatives from the Jockeys’ Guild, California Thoroughbred Trainers, Churchill Downs Inc., Thoroughbred Owners of California, California Thoroughbred Breeders Association, Del Mar, and the Oak Tree Racing Association.

Speaking against the bill was the seven-member coalition headed by the Pechanga tribe.

It had looked for several days as though the bill wouldn’t move out of the committee, but more Gray and Appropriations Committee Chairman Lorena Gonzalez decided that more negotiations and amendments were needed.

Several amendments were added to the bill before the vote. One was a two-level “bad actor” clause that states that firms such as PokerStars could pay a $20 million penalty for its alleged allowing of U.S. citizens to play on its site in contravention of U.S. law. It could pay the penalty or wait five years to participate.

To be considered a “bad actor” any company that accepted wagers in the U.S. would have to have done it after December 31, 2006.

The Unlawful Internet Gambling Enforcement Act (UIGEA) was passed in 2006. The U.S. Justice Department accused PokerStars of allowing U.S. customers to play on its offshore websites. PokerStars did not admit to any wrongdoing, but agreed to pay a fine. “Bad actor” provisions are aimed to prevent PokerStars from participating in the California market.

Another change aimed at PokerStars would be the limiting of the use of accrued assets, such as players list, with the limit to be determined by regulators.

Another amendment changed the $60 million payment that would be made to racetracks in return for them not having a place at the table. Instead of automatically getting $60 million, they would be paid after certain revenue thresholds have been met, including earmarking 10 percent for the state’s general fund first.

“Racetracks” include the California Horse Racing Internet Poker Account ($57 million) and the Fair and Exposition Fund ($3 million).

The tax rate to raise that revenue would be set at a sliding scale, beginning at 8.847 percent for gross revenue under $150 million and ratcheting up to 15 percent for gross revenue above $350 million.

This didn’t placate Leland Kinter, chairman of the Yocha Dehe Wintun Nation, who declared, “Companies that have engaged in any form of unlawful or unauthorized internet gaming should be disqualified from licensure.”

The adamant opposition to the bill by the Pechanga coalition appeared to mean less and less to supporters. Pechanga conducted a poll that showed that most Golden State residents oppose iPoker legalization. But the fact that Pechanga was willing to conduct the poll told some veteran Sacramento watchers that Pechanga feared that its opposition might not prevent a vote after all and that the growing coalition that favors the bill believes it can pass a bill without Pechanga.

According to the Poker Players Alliance there are now 35 groups that have gone on record in favor of Gray’s bill. The group includes gaming tribes, card rooms, racetracks, labor and service organizations.

A recent convert to the pro-AB 2863 coalition is the Sycuan Tribe, which had been in the Pechanga group—but switched.

Some observers have concluded that Pechanga doesn’t want a bill that a “bad actor” rider so much as it doesn’t want a bill at all. Or at least is not willing to compromise on any of its objections to a bill.

Steve Rudduck of California Online Poker wrote last week: “It’s becoming quite apparent that Pechanga, Agua Caliente and several other allied tribes have no interest in compromise of any sort when it comes to online poker. The recent release of the polling data touting a majority of Californians being against legalization is a clear sign that they’re not just against certain aspects of online poker, but online poker in general. They’re essentially making the case that Californians don’t want legalization at all.”

The poll, conducted by Fairbank, Maslin, Maullin, Metz & Associates found that 52 percent of likely voters opposed iPoker, with 41 percent supporting it. In 2009 a similar poll found that 54 percent supported online poker. The recent poll also showed that 74 percent of voters agreed that “bad actors” should not be allowed to get a gaming license.

Ruddock added that when potential solutions are found to Pechanga’s objections that it then raises questions about other parts of the bill. This is leading some political observers and supporters of a bill to use the term: obstructionist.

Supporting that point is the fact that Pechanga and its coalition members have not build in house online poker sites or partnered with potential providers.

However, another interpretation is that Pechanga’s view is that no bill is better than an imperfect bill. A casino the size of Pechanga will only realize a small profit from even a well-functioning iPoker site, but it stands to lose market share if its competitors develop a successful site that draws business away from the southern California gaming giant.

Ruddock concludes, “Essentially, Pechanga and its allies see no reason to compromise, even an inch.”

But with the passage of the bill in the Appropriations Committee, Pechanga may have to marshal all of its political clout to keep the bill from passing in the full Assembly. Also continuing to oppose online poker is gaming mogul Sheldon Adelson, who is the chief backer of Coalition to Stop Internet Gambling.

Rincon Chairman Bo Mazzetti hailed the vote for iPoker: “I applaud the Assembly Appropriations Committee for passing Assembly Bill 2863 and moving the bill to the Assembly Floor. We thank the Assembly Leadership and Assemblyman Gray for their leadership on this issue.”

He added, “Assemblyman Gray brought together an unprecedented group of tribal governments, card rooms, horse racing industry and labor groups to support Internet poker legislation.”

Even though the bill has passed the Appropriations Committee, Chairman Lorena Gonzalez hinted that it faced an uncertain fate in the full Assembly.

She said, “We have to ensure this is really going to work, and work for everybody. There is a market-share component that needs to be addressed.”

If the bill passes the Assembly it would still need to be passed by the Senate and signed by Governor Jerry Brown.