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'Interest In Poker Will Die Off' If California Doesn't Act Soon, Says Tribal Gaming Insider

This Year Could Prove Pivotal For State's Longstanding Poker Debate

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If California doesn’t move to regulate online poker soon, the future for the issue in the Golden State could be pretty bleak, according to one tribal gaming insider.

Steve Stallings, chairman of the influential Cali­fornia Nations Indian Gaming Association, told Card Player that tribal groups with gaming should find a consensus on online poker in order for the state to legalize it this year. The window is closing for the games to be a viable business opportunity for the tribes and California commercial card rooms, he said.

A hearing on an online poker bill was planned earlier this month, but the legislation was pulled from the hearing’s agenda, much to the disappointment of Stallings. It’s just one of multiple proposals that will be considered in the Golden State in 2016. The crux of the debate is eligibility, with some tribes strongly opposing the struggling horse racing industry being allowed to operate online poker, while other tribes aren’t against their competition for licensure. Additionally, some tribes think PokerStars should be ineligible for a license due to its past business activity in America, while others think the world’s largest poker site should be dealt a hand. It’s a complicated situation.

Tribal gaming in California generates an estimated $8 billion in economic output each year, making it the most lucrative market of its kind in the country. While there are 60 tribal casinos in the state, there are nearly 100 brick-and-mortar facilities statewide that offer poker. The state could likely only support 6-10 unique online poker operators, according to Stallings.

It has been estimated that the state’s online poker market could eventually be worth more than $380 million a year. Between 2009 and 2010, California players accounted for 16 percent of U.S. revenue and four percent of worldwide I-poker revenue.

Card Player was able to ask Stalling a series of questions about the outlook for online poker this year, in what may prove to be a make-or-break year for the industry.

StallingsBrian Pempus: Do the majority of tribes in California want the racetracks to be excluded from online poker?

Steve Stallings: There are feelings on both sides, with some who think that the tracks having a license or not is not a critical element. Wounds are still there from the racing industry fighting against tribal gaming operations in California when the original compacting was going on. [This issue] has its roots in that political fight that took place. We are trying to reach a compromise among the tribal industry to launch this in California and have opportunity for additional growth beyond that. You have to get there in baby steps. We fundamentally believe that the way to get the industry launched in California is to do it this way: The card rooms and the tribes who currently operate poker expand by operating Internet poker.

BP: In the most likely scenario, do you anticipate that at least for an initial period of time the racetracks would be excluded from online poker?

SS: Yeah, although currently I think there is enough of a support to provide financial assistance to the racing industry. This happens in many other states.

BP: Going back to last year, do you think the committee vote in April did much of anything?

SS: Over the years, we’ve had a lot of starts and stops, but I think the difference here now is that there is a legislative history [for online poker]. We’re down to a couple of issues [with the legislation]. The issue about “bad actors,” specifically PokerStars/Amaya, is kind of a moot argument now, given that they are receiving licenses in other jurisdictions. We’re trying to reduce to obstacles to challenge the legislature to make this thing happen.

BP: Has anybody come out with an estimate regarding how many unique online poker operators California could support?

SS: I think that you’re initially going to get 6-10, and overtime we are going to see some dominant operators. But there will still be room for half a dozen operators. If you have a great product and service, there is money to be made, and there is a lot of opportunity for affiliates and other people to be a part of the process. If you look at the licensees, I think that’s only one aspect of the diversification that we have in poker rooms in California. Our problem, of course, is that we have a lot of lost time. There is going to need to be a lot of investment in California to rejuvenate that interest level in the [poker] player base and try to attract new players. Time will tell. I still think there is a viable opportunity here. We just need to get it launched.

BP: In a doomsday scenario, let’s say five years from now California has not went ahead and launched an online poker industry, do you think everyone could lose interest?

SS: You’re absolutely right; it would become passé. Maybe in just one or two years. I think that’s why we are trying to make a push here, because if we want to put in place consumer protections and launch a business opportunity for California we better do it now. It will be a lost opportunity if we don’t. The attention levels and the level of interest in poker will die off and it will no longer be this opportunity.

BP: Is it possible for a situation to arise where California switches to a proposal to authorize a bunch of different casino games for the web? Perhaps to give tribes the exclusive right to offer house-banked games but giving the tracks a chance at online poker?

SS: I think that’s a possibility as an outgrowth of a kind of step-by-stop process. I don’t think the bargaining chips are adequate right now for that to be the thing we do out of the gate. That’s the difficulty when you try to hold together various coalitions of people to make this happen. But, it’s like anything, people need to see the opportunity and get into the business and [other games] will be a natural outgrowth, which could include other operators. We aren’t going to start with a homerun. I think singles and doubles to get this thing launched.

BP: A lot of people say that California needs to regulate online poker for another poker boom to happen, given the state’s huge population. Do you think the U.S. online poker industry as a whole is dependent on the Golden State?

SS: I agree 100 percent, because the level of play has dropped off. With the number of people in California, you are going to have a lot of advertising spend. As you start to create online tournaments, circuit events and so on, we can rejuvenate poker play in California. It’s another lynchpin to the whole poker industry. Then you can get other states looking at the opportunity. I do think there will be an evolution toward interstate poker to create liquidity.