California's path to online poker in 2016

Here’s How California Can Get Online Poker Done In 2016

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The closing of the 2015 legislative session in California marks another year where regulated online poker failed to advance to a floor vote.

That’s not to say there wasn’t progress in 2015. But after a string of years ending with progress and no passage, it’s time to consider that the status quo approach to advancing online poker regulation is deeply flawed.

Drawing upon the lessons of those years yields four critical components of any successful strategy for finally legalizing California online poker in 2016.

Create political pressure with a truly grassroots movement

California’s current stalemate is only tenable in a situation where voter pressure on lawmakers to act on the online poker issue is low. That’s unfortunately the case in California, where even supportive lawmakers have repeatedly stated that the issue simply doesn’t register with their constituents.

Increased voter pressure would give lawmakers the motivation (and cover) to either force a resolution or act in spite of a lack of consensus among stakeholders.

The route to that pressure is an advocacy group that:

  • Does not advocate for any particular approach to online poker – only for the online poker issue to be solved.
  • Is not publicly aligned with any particular stakeholder.
  • Puts the concerns of players first – not the concerns of potential operators, the government, etc.
  • Aggressively facilitates conversations between constituents and lawmakers on the issue.
  • Shows a willingness to contribute to key campaigns.

The fact that 2016 is an election year only increases the power that such a group could wield – even with relatively modest resources.

Make the state’s gaming regulatory agencies whole

Those who watched the various online poker hearings held in 2015 by the California Assembly no doubt noticed a thread running through all: the California DoJ and the California Gambling Control Commission have made it clear that they’re not being given the resources they need to manage their current remit, let alone online poker.

As long as that issue remains unresolved, there will always be an easy reason to defer action on online poker.

Stakeholders who want to see online poker pass must advance a legislative package that specifically articulates funding and support for the relevant agencies. That alone may not be enough – stakeholders should considering simultaneously tackling the issue of separate, broader increases in funding and support for relevant agencies.

Get PokerStars out of the spotlight

There is little reason for PokerStars to be the public face of an online poker advocacy effort in California, or for PokerStars to be taking part in public hearings regarding online poker:

  • Amaya is not a California company.
  • Fairly or not, PokerStars has become a lightning rod. The mere mention of the brand is enough to raise the temperature of the conversation.
  • The complex history surrounding PokerStars muddies the larger issue. And the acquisition of PokerStars by Amaya has not settled that history in the minds of most for whom it is a concern.
  • PokerStars’ track record of lobbying in the U.S. is characterized by stumbles in New Jersey, Nevada, California, and on the federal level.
  • PokerStars’ partners, including San Manuel and the Commerce, speak the local language and are far better suited to serve as the tip of the spear for online poker regulation.

PokerStars has a role to play, and valuable resources to contribute. But that role should be played primarily behind the scenes, and those resources deployed in a peripheral fashion.

Get the racing industry a good deal, and convince them to take it

I posses only a surface appreciation of the racing industry in California. So there may be nuances that escape me. But my understanding is that the industry is under significant – perhaps existential – financial pressure.

I am far more familiar with the potential of the regulated online poker market in California. I believe that there will be precious few true winners on the operator side – perhaps only one or two. Those winners will be competing for an operator profit pie (I estimate $6mm to $12mm a year) that is far smaller than most imagine.

Within this context, it surprises me that the racing industry is holding out for the right to operate online poker in California:

  • The operator bears the lion’s share of the cost and risk.
  • Tracks are not in the position to develop or acquire the necessary technology.
  • Tracks are not well-positioned to leverage online poker in California to achieve success or scale via entry into other regulated jurisdictions (the true long-term value of operating in California).
  • A deal where tracks receive a revenue share and can host skins on networks operated by others would generate immediate income with little overhead.
  • Hosting a skin would allow tracks to capture new customers and offer an additional product to existing customers, another immediate, positive impact on revenue.

If I am a track operator in California, I’m pushing for a healthy revenue share that goes to purses and the guaranteed (and possibly exclusive or semi-exclusive) right to own a branded skin on someone else’s network.

Now, it may be that the tracks see online poker as a step toward online casino, and tracks want to secure a place in that conversation. That’s fair, but it misses the plot on two levels:

  1. The unwillingness of the tracks to bend on this issue is causing online poker to stall. If it’s meant to be a path to online casino, tracks are holding up the thing they’re hoping to achieve.
  2. If online casino does become a possibility, tracks will face the same fierce resistance to their participation from tribal casino interests regardless of whether or not tracks hold an online poker license.

In any case, advocates of online poker need to develop the best deal possible for racing that doesn’t involve operational licenses, and aggressively sell that deal to racing interests.

Image credit: Nagel Photography /

- 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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