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Further Disagreement about Online Poker in California

Posted on by John Lathram

California PokerAssemblyman Adam Gray´s recent proposals aimed at bringing stakeholders together have resulted in further disagreement about online poker in California.

If regulated online poker in California is going to become a reality in the near future, a consensus among the stakeholders is going to have to be found pretty quickly. The deadline for introducing legislation for the 2016 session is next Friday – February 19th – by which time a lot of issues have to get sorted out.

Assemblyman Adam Gray has been working hard to add content to his “Internet Poker Consumer Protection Act of 2016” and, last week, the first draft of what the bill might look like was released for public consumption. Gray´s amendments were heralded by some stakeholders as heading in the right direction, while others vehemently disagreed with the economic implications.

Previously on “Regulated Online Poker in California”

In the past, the main stumbling block for regulated online poker in California has been opposition to the involvement of the racetracks and PokerStars by a coalition of Indian tribes. The coalition says that allowing racetracks to offer online poker would amount to an expansion of gambling in California – something that the legislature has no authority to do without seeking voter approval (the coalition also opposes the regulation of DFS for the same reason).

The coalition´s opposition to PokerStars and other “bad actors” is seen as protecting their own interests. Several industry observers suggest that PokerStars would not be the dominant force in a regulated market; but, despite recent unpopular changes to the VIP system, there is no viable alternative to the “world´s largest online poker site”. PokerStars would definitely be the largest operator in a regulated Californian online poker market – and the coalition know this.

It is not just Indian gaming interests that have stalled the progress of legislation to regulate online poker in California. Representatives of the racing industry have previously said they should have the exclusive rights to offer online poker as they are the only entity legally allowed to offer Internet wagering in California. Indeed, Governor Jerry Brown has said he will refuse to sign any legislation into law that fails to include the racing industry.

Subsidy Proposal Creates More Barriers

A potential compromise suggested in last week´s amendments really set the cat among the pigeons. Gray suggested that the online poker industry should pay a $60 million subsidy to the racing industry each year in return for the racing industry relinquishing its “rights” to be a provider of regulated online poker in California. Pretty much all the tribes were immediately kicking off – for two reasons.

The tribes (rightfully) questioned why online poker was being targeted to support the racing industry, when proposals to regulate DFS (also authored by Adam Gray) have no such provision. Furthermore, the figure of $60 million was described as not being in the “real world” by tribal representatives – who did not dismiss the proposal, but who said that the fundamental economics of the bill (in its present state) would mean that there would be no income left for the state to tax.

On the other side of the fence, Union lobbyist Barry Broad and Robyn Black – a lobbyist for the California Thoroughbred Breeders Association – agreed that the $60 million subsidy would be welcomed, but warned that any attempt to reduce this figure would “blow the deal”. Black was also concerned that, by forfeiting its rights to offer online poker, a precedent would be set if other forms of online gambling were to be regulated in the future.

Will a Lack of Urgency Cause Legislation to Fail Again?

At the same time as Assemblyman Adam Gray was introducing new barriers to regulated online poker in California, Assemblyman Mike Gatto (the author of the “Internet Poker Consumer Protection Act of 2015”) was telling the poker media that the continued disagreement and a lack of urgency would push the proposals onto the backburner for another year.

Pointing to the speed at which DFS legislation was authored, introduced into the Assembly and passed; Gatto commented that a consensus could be found if the stakeholders really wanted it. He said that people inside and outside of the legislature were too focused on their own egos to come together.

Gatto has a good point. The only people who appear to want regulated online poker in California is the coalition of tribes and card rooms that have already partnered with PokerStars. The Pechanga Band of Luiseño Indians have often stated that no bill is better than a bad bill, while Joe Morris – President of the Thoroughbred Owners of California – said last year that the horseracing industry wanted to be part of online poker if it happened but if it doesn´t happen, we´ll get along as we do now.

Over/under for 2017 anybody?

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