Two Steps Forward, One Step Back For California Online Poker

Two Steps Forward, One Back For California Online Poker Following Stakeholder Meeting

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California’s politically powerful American Indian tribes agreed in principle Thursday that draft online poker legislation should limit website licenses to tribes and card rooms while providing a yearly subsidy to the state’s pari-mutuel racing industry, sources said Friday.

But leaders of a dozen politically powerful tribes, meeting in Sacramento with Assemblyman Adam Gray, otherwise stopped short of pledging support of a draft iPoker bill Gray plans to file before a Feb. 19 deadline for introducing legislation.

Meeting results in progress, questions remain

The prospect of a newly drafted iPoker bill is viewed as an optimistic sign by a number of indigenous leaders.

“It’s been a good week for tribal gaming in California,” Steve Stallings, chairman of the California Nations Indian Gaming Association (CNIGA), said Friday.

“It seems like Gray has a specific strategy here and we’re going to see a bill and tribes have reached agreement on how to approach things and get it done this session.

“It’s all doable, given the basic agreements we have.”

But a coalition of at least six tribes led by the Pechanga Band of Luiseño Indians remains entrenched on “bad actor” and economic provisions of the Gray draft.

Daily fantasy sports a separate conversation

In addition, the Pechanga coalition and other tribal leaders at the meeting expressed opposition to Gray’s daily fantasy sports legislation, contending the bill needed “vetting” on regulatory and other issues.

“That needs to move forward on another track,” Stallings said.

Gray’s office declined comment.

The long path for California online poker

Efforts at legalizing online poker in California that began nearly a decade ago have been stymied in recent years by the inability of tribes to reach agreement on bill language, particularly “bad actor” provisions and extending license eligibility to race tracks.

But beyond tribes reaching consensus that legislation should not include licensing race tracks, there apparently was little progress reached at Thursday’s meeting.

One tribal representative said five tribes aligned with three card rooms and Amaya/PokerStars “agreed not to oppose” Gray’s draft iPoker bill.

But representatives of six other tribes in a coalition led by the Pechanga Band of Luiseño Indians denied such a promise was made.

The numbers must add up

And tribes with both coalitions questioned whether the market for iPoker could bear the weight of the tentative taxes, fees and racing subsidy in Gray’s bill. The draft calls for a $15 million license fee, 15 percent tax and a $60 million subsidy to the racing industry.

“I think those numbers, honestly have to be rolled back,” said Stallings, a councilman with the Rincon Band of Luiseño Indians, one of the tribes aligned with the San Manuel and Morongo Indian bands and Amaya / PokerStars. “The fundamental problem now is the total economics of the bill don’t work.”

Consultants have historically overstated the iPoker market, which has generated dismal earnings in New Jersey, Nevada and Delaware.

OnlinePokerReport prepared an analysis of the potential of the California online poker market, an analysis that suggests a challenging climate even absent such a subsidy.

“Our numbers say there probably won’t be any money in the fund until the fourth year of operations,” Stallings said. “Given the expenses, there’s not going to be any income to tax.”

Lobbyist David Quintana, whose clients include tribes with the Pechanga coalition, downplayed the significance of the meeting.

“There was consensus that the tracks are an issue, that’s about it,” he said. “It’s incomprehensible to say we wouldn’t oppose [legislation] then say the numbers aren’t right. The numbers aren’t real world.”

Bad actor debate requested

“That bad actor language has to be agreed to before [legislation] is brought up on the Assembly floor,” Quintana said.

A memo to Gray from six tribes in the Pechanga coalition suggested progress was made at the meeting, terming provisions limiting eligible licensees to tribes and card rooms as “movement in the right direction.”

But the coalition suggested revisions were needed on the economics of the bill and license suitability or “bad actor” provisions.

“We look forward to the debate in Assembly Appropriations [Committee] and reserve the right to oppose the bill should negotiations not bear fruit,” the coalition said in the memo.

One source said the coalition is demanding “neutral” license suitability provisions that while not identifying Amaya/PokerStars would preclude, or at least delay, the company from participating in an intrastate poker industry.

Racing on the issue

California’s racing industry – a broad-based, largely agricultural industry of tracks, labor unions and thoroughbred owners and breeders – has stood firm in demanding licensing eligibility rather than a subsidy.

But union lobbyist Barry Broad said jockeys, trainers and union track employees would welcome a $60 million subsidy.

“It’s probably a pretty good deal,” he said.

He warned the tribes the industry would push back against efforts to lower the figure.

“That just blows the deal,” he said.

Robyn Black of Eclipse Government Affairs, a lobby for the owners and breeders, commended Gray for seeking consensus from tribes, card rooms and the racing industry. She stopped short of indicating the industry would bend on its demand for licensure.

“There’s a great deal of discussions going on within the industry,” she said of the horse owners and breeders, unions and track operators.

Forty percent of track wagers are through online wagers, a vehicle for which the pari-mutuel industry has enjoyed a monopoly since 2001.

“We’re in a position to lose” with expanded Internet gambling, Black said.

Tone in Sacramento

A Sacramento source who requested anonymity expressed some optimism that Thursday’s meeting could lead to an iPoker bill in the current session.

“Any step is a big step, particularly for an issue that’s been lingering for eight years,” the source said. “But a good meeting today doesn’t mean a good meeting tomorrow.”

Arthur Terzakis, staff director for the Senate Government Organization Committee, which would take up iPoker legislation getting through the Assembly, declined to speculate on a bill getting through the upper house.

“We can’t comment until we see something in writing,” he said. “It still sounds like they (Assembly) got some things to work out.”

- Dave Palermo is an award-winning metropolitan newspaper reporter. He has written about American Indian governments for more than 20 years, working as an advocate for several tribes and tribal associations. He also has co-authored books on gambling and gambling law.
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