FAQ: California's Upcoming Online Poker Hearings

California’s 2015 Online Poker Hearings: Questions And Answers

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With the scheduling of four separate events related to online poker, California lawmakers have laid out most of the procedural path necessary to pass an online poker bill.

Whether or not the state’s various stakeholders will decide to walk down that path remains an open question.

Below is a quick summary of the scheduled meetings, the primary purpose of each and a series of questions and answers related to the what to look for as we enter a critical phase for California’s ongoing attempt to regulated online poker.

Overview of the meetings

  • 4/27/15, 1:30 p.m. (Assembly GO) — AB 431 Gray. Gambling: Internet poker. This hearing is complete. Read a summary here.
  • 5/20/151:30 p.m. (Joint Assembly / Senate GO) —  Informational hearing: “Overview of Gambling in California–Legality, Authorization and Regulation”
  • 6/24/2015, 1:30 p.m. (Joint Assembly / Senate GO)  — Informational hearing: “The Legality of Internet Poker–How Prepared is California to Regulate It?”
  • 7/8/15, 1:30 p.m. (Assembly GO)  — AB 9 Gatto; AB 167 Jones–Sawyer.

What to expect from each

The four hearings effectively work in concert to provide a political path forward for online poker in California.

4/27/15: This hearing is complete. Read a summary here.

5/20/15: This is an informational hearing that brings together the GO Committees for both the Assembly and Senate.

There will be no vote held at this hearing. The topic of the hearing suggests a broader focus beyond online poker, but expect certain aspects of the online poker debate – especially the issue of participation by tracks  – to loom large.

6/24/15: Another informational hearing in front of the joint GO. Again, the hearing does not address any specific bill or result in a vote.

I’d expect a lineup and focus relatively similar to the hearing conducted last year. I’d also expect a lot of track to be laid regarding the needs and wants of the various agencies that would be involved in regulating online poker.

Critically, this hearing will provide one of the last, best chances to take the temperature of the various stakeholders and to handicap progress toward consensus.

7/8/15: Arguably the most critical of the four as it could provide a sense of what – if any – final bill is emerging from the process. While the meeting is currently scheduled to cover AB 9 and AB 167, that could change – as could the content of the two bills in the months between then and now.

What do the hearings suggest for online poker’s chances in California?

In blunt terms, the existence of the hearings is a positive for California online poker, insomuch that an absence of the hearings would indicate a truly moribund process.

But the scheduling of the legislative events does not necessarily indicate that stakeholders have reached a consensus on if – and how – online poker should move forward in California.

Rather, they simply indicate a willingness by lawmakers to forge a legislative path for online poker should consensus be achieved.

It’s also worth noting that the meetings have been anticipated for several weeks and do not constitute a new development or signal some sort of behind-the-scenes breakthrough.

Will there be a live stream of the hearings?

It appears that at a minimum there will be an audio stream for all of the events.

There’s a good chance that video streaming will be available for at least some of the events. The short-term televised schedule for the Assembly can be viewed here. Many California legislative hearings are broadcast via CalChannel.

The online poker bills currently in play

California currently has four live online poker bills. Of those four, two are bills with articulated visions of regulated online poker, and two are essentially placeholder – or “shell” – bills.

In order of introduction:

  • AB 9 – Introduced by Assemblyman Mike Gatto in December. Does not allow tracks to participate, contains pseudo-bad actor clause. Full text / tracking here.
  • AB 167 – Introduced by Assemblyman Reggie Jones-Sawyer in January. Allows tracks and contains no bad actor clause. Full text / tracking here.
  • AB 431 – Introduced by Assemblyman Adam Gray in February. Contains no details. Full text / tracking here.
  • SB 278 – Introduced by Senator Isadore Hall in February. Contains no details. Full text / tracking here.

The key sticking points

As the brief survey of the bills in play above suggests, there are two key sticking points – at least as stakeholders tell it – to consensus on how to regulate online poker in California.

Role of tracks

The first – and foremost, according to most opinions – is what role California’s race tracks will play in regulated online poker.

A powerful coalition of California tribal gambling interests oppose the participation of tracks, arguing that licensing the tracks as online poker operators would represent an expansion of gambling. Unsurprisingly, California’s tracks hold a different view

With the two camps sitting firmly entrenched at the two poles of a wide spectrum – and both lacking obvious motivation to compromise – this issue appears to be the primary stumbling block to legal online poker in California.

“Bad actors”

The second issue that dominates the public conversation around legal online poker in California is whether legislation should automatically disallow participation by so-called “bad actors” – individuals, entities and intellectual property involved in taking online wagers from the U.S. following the passage of the UIGEA.

The clause is generally understood to primarily – many would argue exclusively – target PokerStars.

While there’s quite a bit of sound and fury around the issue, there are also indications that a compromise on the matter is possible.

Other potential issues

In addition to the role of the tracks and the bad-actor issue, a number of other sticking points could emerge if the bill appears to have a serious shot at passage:

  • Tax rates: AB 9 and AB 167 propose rates of 5% and 8.5%. Lawmakers may look to New Jersey’s rate of 15% as a justification for a bump that the industry will resist.
  • Fees: Both bills assign TBD fees for regulation, enforcement, consumer protection and responsible gambling. And the upfront license fee ($10mm in AB 167 credited against tax owed) could also spark heated debate).
  • Regulatory structure: Online poker could end up serving as a proxy for the larger debate over California’s bifurcated regulatory system for gambling.

Key dates on the horizon

Along with the hearing and meeting dates are a number of key dates and deadlines to watch. Two things are worth noting:

  1. Bills with urgency clauses are not subject to many of the legislative deadlines below.
  2. Most – but not all – of the legislative deadlines below are softer than they appear, with lawmakers (especially those in positions of power) having a variety of procedural tools at their disposal to work around the calendar.

So the dates below are less a collection of drop-dead dates (save for the final one, of course) and more of a collection of dates to watch for activity that might indicate progress – or a lack thereof.

  • May 1: Last day for policy committees to hear and report fiscal bills for referral to fiscal committees.
  • May 22 – June 7: No policy committee meetings.
  • June 5: Last day to pass bills out of house of origin.
  • July 17: Summer recess begins.
  • August 17: Recess ends.
  • August 31: End of committee meetings, except for Rules and Conference Committees.
  • September 4: Last day to amend bills on floor.
  • September 11: Last day for any bill to be passed.

The size of the market at stake

There are a wide array of opinions regarding the value of the California market for regulated online poker:

SourceCircaYear 1 (mm)Mature (mm)
Gambling Compliance2015$217$366
Deutsche Bank2015n/a$365
Eilers Research2014$222$273
NV model ‡2014$151$210
NJ model †2014$125$204
Capitol Matrix2013$729$1300
Morgan Stanley2013$435$1189
Blue Sky*2011$317$732

My conclusion after surveying the various data available is that (base case) the market will likely generate about $215mm in revenue during year 1 and eventually ramp up to a number in the $300-$350mm range at full maturity.

Image credit: trekandshoot / Shutterstock.com.

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