Last week California Assemblyman Mike Gatto introduced an online poker bill, AB 9, that will, he said, “expand the pie” and address many of the concerns that have kept such a bill from passing before.
In introducing the bill, Gatto declared, “The status quo is a lost opportunity. California could receive significant revenue for merely regulating and legitimizing an industry that Californians already participate in but send their dollars overseas.” He estimates that 2 million Californians play poker. There are no credible figures for how many residents play online poker since it is currently illegal and unregulated. Nevertheless many overseas online poker sites currently accept American players in defiance of federal law.
Gatto’s bill is very similar to one proposed by Assemblyman Reggie Jones-Sawyer in the previous session. The main difference: it would require an initial deposit to be made in person and withdrawals for as high as $10,000 to also be made in person through satellite service centers. Gatto envisions that these would be operated by smaller casinos, such as tribal casinos or card rooms, which might make up for most of the gaming “pie” being divided between a few larger players. Most potential players are within about an hour’s drive of such establishments, he said.
“A lot of people in the gold rush got rich selling shovels, and we think we have a proposal that has shovels in it now,” he commented.
The politics for the legalization of online poker in California has altered since last year when a solid block of 13 tribes were united against allowing the participation of PokerStars in partnership with the Morongo Band of Mission Indians. That alliance greeted Gatto’s bill with extreme skepticism, however, calling it “a rehash of previously unsuccessful proposals.”
Since the last legislative session, Morongo and PokerStars and three card clubs have picked up more allies, including the San Manuel Band of Mission Indians, which initially opposed PokerStars. Morongo has made it plain from the get-go that it would fight legalization if the statute included a “bad actor” clause designed to exclude PokerStars.
Some things have changed to make PokerStars more palatable. One is that, despite its earlier problems several years ago with the Justice Department, PokerStars is on the verge of being licensed to operate in New Jersey, one of a few states that has online poker (Delaware and Nevada are the others). Another is that a Canadian company, Amaya Gaming, now owns PokerStars and is licensed in New Jersey and elsewhere. Amaya never ran afoul of the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) by allowing Americans to play with real money.
This creates as close to a clean slate as it is possible for the legislation, including a new committee chairman to shepherd the legislation. Gatto is the new chairman of the Assembly Committee on Appropriations, which has previously been charged with overseeing gaming related bills.
Last week he told PokerNews, “I think we have a proposal that can unite all the various groups that were not previously united. We have a lot of the same language from last year, but what I think makes our bill special is a regime for weeding out money laundering, guaranteeing foot traffic to casinos and expanding the number of parties who will be able to participate in the marketplace.”
Industry observers point out that the legislation is likely to proceed with lower expectations for tax receipts based on the experience of the states where the game has been legalized. In those states expectations of a tax windfall was much more optimistic than was borne out by the actual results.
Challenges to creating a viable online poker market in the Golden State include calming the fears of banks in the state so that they will allow funds to be transferred to the poker sites.
Another challenge is the effort by casino mogul Sheldon Adelson to fight online poker wherever he finds it. Adelson is an active contributor to political campaigns and so has plenty of clout to help him in his crusade, which includes the goal of getting Congress to pass a law forbidding online poker.
If California does eventually legalize online poker, it will likely break the logjam in the rest of the country since its population is four times larger than any state that has so far legalized the practice.
Gatto’s bill is the latest in a list of bills. Retiring Senator Lou Correa shelved a bill in August that would have legalized online poker after determining that he couldn’t corral enough votes in time.
Gatto emphasized that he was not introducing it at the behest of any special interest, and was open to including other interests in it, and that would include allowing racetracks to possible participate.
“This is a Mike Gatto bill,” Gatto told PokerNews. “It’s not Coke or Pepsi. I’ve always been a fair legislator, and we’ll work with a lot of different participants. This is an opportunity for everybody to make lots of money.”
He added, “We put a lot of thought into addressing the external concerns with online poker in general. I still maintain that if we don’t address those concerns, there will not be a bill. When we address the external concerns and get everyone on board, then you’ll get the momentum, and the different industry groups will feel this is more real and come to the table to participate in a discussion on how we can make this something everyone signs off on.”
Gatto has received campaign contributions from both tribal factions.
The Pala tribe, a member of the coalition that opposes participation by PokerStars, indicated initially that the bill was good for getting a conversation going. A spokesman for the tribe, stated: “From a preliminary review we believe that there are a few gaps that will require reconciliation amongst the various stakeholder. We also believe that the bill will be a catalyst to these discussions. Pala continues to be committed to securing online poker legislation and will work with the various stakeholders to achieve this goal in 2015.”
However PokerStars and its allies said they would oppose the bill, “As a coalition, we are committed to working with legislators and our other partners in the gaming community to pass Internet poker legislation in 2015 that establishes a vibrant, competitive marketplace, provides superior consumer protections, and ensures that the state receives a reasonable return. We are convinced that the various interests must work together if we are to be successful in establishing a well-regulated environment and the best-in-class internet poker industry for California,” said a statement from the coalition.
The coalition added, “Unfortunately, AB 9 is a rehash of previously unsuccessful proposals. Any bill that seeks to establish artificial competitive advantages for some, while denying Californians the best online poker experiences, will only serve to divide the community and will be opposed by our coalition.”
