AB 431 Moves Through GO Committee In Californai
Online Poker Report

California Online Poker Bill (AB 431) Moves Through Critical Committee Vote

Picture of California Assembly
This article may be outdated. Get the latest news on California here.
A key committee hearing resulted in a win for proponents of regulated online poker in California today.

The Assembly Governmental Organization Committee (GO) voted unanimously in favor of advancing AB 431, sponsored by Assemblymember Adam Gray.

Gray chairs the GO. You can track AB 431 here.

What the vote means

Today’s vote was simply a committee vote to move an individual bill (AB 431) out of the Governmental Organization Committee.

It does not represent the passage of an online poker bill in California – it simply moves the process for AB 431 to the next legislative step.

With that said, the vote is significant for two reasons:

  1. This is the first time an online poker bill has received a committee vote in California.
  2. Going into the weekend, it was unclear whether the bill would have the support necessary to secure passage by the GO.

The failure of AB 431 to clear committee would have been a strongly negative indicator for online poker’s California chances in 2015.

“With AB 431 advancing through GO, the framework is at least in place for continued progress in bringing regulated online poker to California this year,” said Steve “Chops” Preiss, VP, Business Development, BLUFF.

“Outstanding concerns such as track participation still need to be resolved, but today is clearly a win.”

What were the amendments to AB 431?

Prior to the hearing on Monday, several groups were registered as opposed to AB 431. But, following some last minute amendments to the bill, the majority of those groups – including Pechanga and Agua Caliente – switched their stance from opposed to neutral.

The amendment text has yet to be officially filed, but it’s my understanding that the changes were relatively minor, or appeared relatively minor on face.

We will update when the text is available.

What’s next for online poker in California?

Three hearings are on the docket in California:

5/20/151:30 p.m. (Joint Assembly / Senate GO) —  Informational hearing: “Overview of Gambling in California–Legality, Authorization and Regulation”

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.

6/24/2015, 1:30 p.m. (Joint Assembly / Senate GO)  — Informational hearing: “The Legality of Internet Poker–How Prepared is California to Regulate It?”

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, 1:30 p.m. (Assembly GO)  — AB 9 Gatto; AB 167 Jones–Sawyer.

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.

“I was listening the hearing and got thrilled by the real opportunity to see for the first time in 6 years a very strong signal,” Alex Dreyfus, CEO of Global Poker Index, told OPR. “I don’t want to be over optimistic, but I have never seen so much momentum from all the parties. It is not anymore an if, but a when online poker will come to California.”

“A lot of innovation and initiatives will be built from California and USA to grow poker globally and I’m excited to see this instant to come,” Dreyfus added.

When will AB 431 be filled out?

As several individuals noted during the hearing, AB 431 remains a brief bill that offers more of a general direction for regulating online poker as opposed to a specific vision for regulating the activity.

In response to a question regarding when the bill will be fleshed out, Gray suggested that the upcoming joint hearings would be the primary mechanism for populating AB 431 with specifics.

The issues to resolve

As several at the hearing suggested, the primary – but far from only – sticking point in negotiations over online poker in California is what role the state’s racetracks should play in a regulated online poker industry.

A secondary point of dispute involves so-called “bad actor” clauses, a debate recently rehashed during a panel at GiGse.

Should those two issues be resolved, other potential points of disagreement include:

  • 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.
  • Revenue sharing: It’s unclear what direct benefit smaller land-based operators can derive from online poker, suggesting that some sort of agreement will need to be reached regarding a revenue cut or similar accommodation.

Statements regarding the hearing

Statement from Pechanga Chairman Mark Macarro

“We look forward to a meaningful process and arriving at comprehensive legislation that respects California’s longstanding public policy of limited gaming, protects children and the vulnerable, creates jobs, provides additional revenues for the State, and protects consumers and the integrity of the gaming industry from organizations that do not and have not respected U.S. law.”

Joint statement from Amaya coalition

The following statement can be attributed to the coalition formed by the Morongo Band of Mission Indians, San Manuel Band of Mission Indians, California’s three largest card clubs –Commerce Casino, Hawaiian Gardens Casino and Bicycle Casino – and Amaya Inc. which owns and operates PokerStars. These groups joined together in a formal agreement in 2014 to work jointly to promote legislation that authorizes and regulates intrastate real-money online poker in California. 

“Today’s passage of AB 431 (Gray) out of the Assembly Governmental Organization Committee represents a milestone for authorizing online poker in California. While this is just the first step in what will be a long process, it’s still important. Never before has an online poker bill had anything more than an informational hearing, much less been voted upon and passed out of committee.

“Finalizing the details of the legislation that will regulate California’s online poker marketplace still need to be worked out. But so far, 2015 is different. Hard lines and tough talk have morphed into open minds and dialogue. The vote today underscores the momentum building to help ensure that California finally passes iPoker legislation.

“Authorizing online poker will be good for millions of consumers and poker players who will benefit from a safe, regulated environment where they are protected. Every year that California fails to act not only puts consumers at risk while playing online games from offshore localities that provide few protections and regulations, but our state also loses out on collecting hundreds of millions of dollars that can be used for essential programs like public schools, public safety, healthcare and social services.

“Our coalition is committed to putting in the time necessary to establish a vibrant, competitive marketplace, one that provides superior consumer protections, requires strict oversight and regulation of operators and licensees, and ensures that the state receives a reasonable return.”

Statement from Rincon

Rincon Band of Luiseño Indians Applauds Legislature for Historic First Vote on Internet Poker 

Chairman Mazzetti Praises Assemblyman Adam Gray for His Leadership

 SACRAMENTO – Rincon Band of Luiseño Indians Chairman Bo Mazzetti issued the following statement after Assembly Bill 431 (Gray) passed the Assembly Governmental Organization Committee.

“Today is a historic day as a California legislative committee approves a bill that will lead to legalizing Internet poker in California. Without the leadership of Assemblyman Adam Gray, this would not be possible.

“There’s still plenty of work to be done and issues to be resolved. However, the Rincon Band of Luiseño Indians is optimistic that this is the year for Internet poker in California. After five years of debates, some of the heavy lifting of crafting legislation has been done. Now, it is time for the stakeholders to come together, end the politics and solve the final issues.

“We look forward to the informational hearings and discussing the issues in greater detail. More importantly, we look forward to finding solutions to the sticking points and common ground through compromise.”

The size of the California online poker market

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
Academicon2014$217$263
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: Felix Lipov / Shutterstock.com

Sign Up For The Grove Report – US Online Gambling Industry Insights Delivered To Your Inbox:
Chris Grove
- 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.