California Online Poker Bill Hits New Hurdle

California Rep. Adam Gray’s bill, AB 2863, which would legalize and create a regulatory framework for online poker in the Golden State, seemed to be finding more success than any similar bill since the attempt began several years ago. Recently the Assembly’s Governmental Organization Committee unanimously moved the bill forward, and the Appropriations Committee appeared ready to act soon as well.

But in an attempt to get over the remaining hurdles, Gray’s bill has stumbled once again.

Gray himself wrote a bill that cleared both committees, and what makes the current bill different from others that have come before is that it sought to resolve a bitter sticking point between two factions of the gaming tribes that support some sort of bill: the issue of “bad actors.”

Previous incarnations provided licenses for gaming tribes and card rooms but excluded racetracks, which made the point that currently they are the only entities in the state that carry out wagering activities online. Some tribes were dead set against their inclusion because they felt it would violate gaming exclusivity that the tribes believe the state constitution grants them.

Gray’s bill addresses the issue of racetracks by paying them up to $60 million annually from online poker profits as a compensation for not being able to operate such sites themselves.

On the issue of bad actors—i.e. online providers that have previously run afoul of the law for allowing U.S. residents to play online poker in violation of federal law—a clause aimed at excluding PokerStars, the largest online poker provider in the world, is supported by one coalition of tribes and opposed by the consortium that hopes to partner with PokerStars. That consortium would like to leave it to California regulators to determine what groups are “suitable” to participate as licensees.

Lately, “bad actor” has been replaced by “suitability” in the lexicon of the bill. Gray’s bill doesn’t so much grasp the issue as it steps around it.

But that wasn’t good enough for the coalition of six tribes, led by Pechanga Band of Luiseño Indians and Agua Caliente Band of Cahuilla Indians. In a June 10 letter to Gray, the tribes said, “We deeply appreciate your leadership in bringing stakeholders together to try to resolve the outstanding differences regarding internet poker legislation. Although we have made some progress under your leadership, we regret that your amendments related to suitability standards and taxation force us to oppose the bill.”

The bill does provide direction to state regulators, i.e. the Gambling Control Commission, on the screening of applicants. It provides for a partial application and a “full” investigation of each applicant.

The bill does not address whether anything that comes to light in the investigation would cause an application to be denied, which the coalition pointed out “fails to provide any meaningful mechanism to assure that unsuitable entities are prevented from participating in the California market.”

The Pechanga-Agua Caliente coalition also objected to the proposed graduated tax rate of 8.47 percent to 15 percent for websites generating $350 million a year.

Pechanga Chairman Mark Macarro denied that the coalition was acting as obstructionists.

“We have made concessions. Racing has made concessions. It’s time for the other group to make meaningful concessions if they truly want iPoker legalized in California,” Macarro said in a statement. “If we wanted to stop iPoker we would not be dedicating the time, energy and resources to shaping good public policy that will protect our rights now and for the decades to come.”