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California Online Poker Hearing Deals Optimism

Horseracing Industry Supports Bill, But Some Powerful Tribes Still Oppose PokerStars


It’s been nine years since California first considered regulating online poker, and on Wednesday the state moved closer to the finish line for what one lawmaker called “one of the most complicated issues ever facing the legislature.”

Assembly Bill 2863, the latest attempt at online poker legislation from Assemblymember Adam Gray, moved out of the Assembly Governmental Organization Committee by a vote of 18-0 after a more than two-hour long hearing in Sacramento.

The hearing was only the second time ever that California lawmakers have voted on an Internet poker proposal in those nine years. However, the same committee approved a different version from Gray last April and no further progress was seen for the rest of 2015.

This year actually has a chance at being different.

When Gray and his co-author, Assemblymember Reggie Jones-Sawyer, introduced the bill in February it contained an important update: a $60 million annual payment to the state’s struggling horseracing industry in exchange for it not vying for online poker licenses. The politically powerful tracks came out in near unanimous support of AB 2863 on Wednesday.

The horseracing industry currently operates the only form of online wagering allowed in California, but tribal governments with gaming have long opposed the tracks from participating in online poker because the tracks don’t currently offer live poker.

Gray said his bill has “unprecedented support” and that the opposition from the horseracing industry had been the no.1 issue to be resolved. That hurdle has been cleared, thanks to what Gray called a “creative revenue sharing model.” There was some testimony that called into question the projection of California’s online poker market (estimated at nearly $400 million), but Gray said that we “haven’t seen a [web poker] market the size of California in the United States.”

His bill doesn’t currently have a tax rate, a significant detail left to be determined because it would help explain how $60 million could flow to the horseracing industry each year.

GrayGray said that an estimated one million Californians are still playing online poker on offshore sites. He reiterated that his top concern is consumer protection.

The last remaining hurdle is “suitability” for the online gaming companies that California’s brick-and-mortar gambling facilities would partner with.

AB 2863 currently has what Gray called “placeholder” language on that point, leaving the so-called “bad actor” issue to be resolved in the coming weeks and months. Gray said that he has been meeting every two weeks with tribal governments and the card rooms to come to a consensus. He said that suitability language would be finalized before his bill comes up for a possible full Assembly vote.

“What assets can they bring from that time?” Gray said with regards to companies that accumulated customers thanks to facilitating games for Americans after 2006, which was the year the infamous Unlawful Internet Gambling Enforcement Act was passed by Congress.

It’s no secret that some tribes specifically oppose PokerStars, a platform with 70 percent of the worldwide online poker market, from being involved with California’s online poker industry. Other tribes support PokerStars and have formed tentative partnerships with the company. PokerStars was once in hot water with the federal government, but it settled in 2012 without admitting to any wrongdoing.

In testimony on Wednesday, Mark Macarro, the Tribal Chairman of the Pechanga Band of Luiseño Indians in southern California, said that his group strongly supports bad actor provisions, and he made specific reference to insider trading charges that were filed in March against the former CEO of Amaya Gaming, the parent company of PokerStars. The charges came the same week that PokerStars returned to the U.S. with its launch in New Jersey.

Gray called the suitability issue “thorny and difficult,” but that he wants to “ensure the licensing process allows for a level playing field.”

Steve Stallings, chairman of the California Nations Indian Gaming Association, added to that point by saying that there should be a “fair launch date to maintain fair entry,” so that all tribes get enough time to prepare for their respective online poker businesses. Stallings told Card Player in an interview this year that the state could likely only support 6-10 unique operators.

Despite the opposition from some tribal governments, many expressed their support or neutrality for the bill in its current version, as long as the details get flushed out soon.

A consensus couldn’t come soon enough for a representative from the Commerce Casino, a facility with more than 200 poker tables. He said that he’s "amazed that we’ve been here nine years” talking about online poker, and when the debate first started he had a full head of hair. He said he hopes that by the time it’s legalized he still has some remaining.

Though Gray said that we’re “closer than ever” to regulated online poker in California, there still isn’t a guarantee it ever happens. According to Stallings, California online poker efforts could be dead for good if legislation isn’t passed within the next two years.