California’s Online Poker Hearing: 3 Takeaways and a Handful of Highlights

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The public was given a bit of insight into the mechanics bringing regulated online poker to California yesterday via an informational hearing on the subject in front of the Assembly Committee on Governmental Organization.

Video of the meeting can be viewed and downloaded from the CalChannel archives (direct link to video file here). An agenda of the meeting listing all of the speakers is available here.

Much of the hearing, chaired by California Assemblymember Dr. Isadore Hall III, covered territory quite familiar for someone who follows the online poker industry.

But among the dry recitations were some useful insights – some stated directly, others lurking between the lines – into how likely regulated California online poker is in the near term.

1) Tribal consensus is within reach – relatively speaking

The point was made early, and it was made often: California’s tribal gaming interest are closer than ever to consensus on how best to approach regulated online poker:

But while the general talk was of a group converging on agreement, the specifics of the hearing focused more on an issue that pits one tribe against a powerful coalition of others: so-called “bad actor” clauses in the two active bills to regulate online poker in California.

That conflict was illustrated in a forceful and public fashion when a press release announcing a partnership between PokerStars, The Morongo Band of Mission Indians and powerful cardrooms Commerce, The Bike and Hawaiian Gardens was released just as Morongo Tribal Chairman Robert Martin was condemning bad actor clauses as “smokescreens” designed to limit competition at the Assembly hearing.

The rhetoric on both sides is heated. Martin’s tone echoed the confrontational note struck by a statement signed by over a dozen tribes in late March that expressed “steadfast opposition” to PokerStars.

How do we resolve the contradiction between the split over bad actor with the general expressions that consensus is within reach? A few explanations come to mind:

  • PokerStars is being used as a lever by its partners (Morongo, et al.) to increase their negotiating power on other points.
  • Opponents of a bad actor clause are using their opposition as a similar lever and are more willing to abandon the position than publicly suggested.
  • The distance from consensus is actually much greater than publicly suggested. Those who want a bad actor clause are pushing the narrative of impending consensus to create an air of inevitability around the bill that they hope will help to quash opposition.

2) PokerStars isn’t the only opposition to a bad actor clause

As the primary – although not sole – target of a bad actor clause that excludes operators and assets that accepted US action online following the passage of the UIGEA, PokerStars is obviously a staunch opponent of such clauses.

But the company isn’t alone in their opposition.

Obviously they found support from their tribal and cardroom partners at the hearing; Robert Martin’s analysis of bad actor clauses as a hypocritical approach that undermines regulatory authority was comprehensive and compelling, while cardroom counsel Keith Sharp presented a concise, logical case for letting the status quo process abide. And Richard Gephardt was reportedly at the meeting on behalf of PokerStars parent company Rational.

The company also has an apparent ally in Assemblyman Brian Nestande (R-42), who sounded intensely skeptical of the need for a bad actor clause.  Wayne Quint Jr., Bureau Chief, California Department of Justice’s Bureau of Gambling Control did not speak directly to the issue of bad actors, but forcefully stressed his agency’s ability to handle any and all aspects of the licensing process. And, at least as I heard it, Betfair’s John Hindman warned against “artificial limitation” of the market via bad actor clauses.

3) Regulators are ready – with a caveat

Regulated online poker will present regulators with two primary responsibilities: the promulgation of regulations and then the execution of said regulations.

On the first point, regulators asserted that they were up to the task:

On the second, representatives from various agencies stressed that additional person-power and funding would be required before they would be capable of overseeing regulated online poker in the state:

The general consensus was that regulators and enforcement agencies – if given the sufficient resources – could have the process underway within months of a bill being passed.

Other highlights and items of note

Mark Lipparelli, former head of the Nevada Gaming Control Board

Chris Krafcik, North American Research Director for GamblingCompliance

Tom Ballance, COO of Borgata

Doug Lewin, Optimal Payments

- Chris is the publisher of Grove also serves as a consultant to various stakeholders in the regulated market for online gambling in the United States.
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