Reaction To California Online Poker Bill Amendments

Gray’s Changes To California Online Poker Bill May Not Appease Politically Powerful Tribes

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Tax and license suitability amendments to proposed online poker legislation in California intended to appease rival American Indian tribes will need some additional work to get the bill through the state Legislature, sources said Thursday.

Gaps remain on tax, suitability issues

The amendments released Wednesday by Assemblyman Adam Gray, sponsor of AB 2863, apparently made strides in getting consensus on bill language from a dozen politically powerful casino tribes Sacramento insiders believe is necessary to get a bill to Gov. Jerry Brown’s desk.

But sources say tribes will seek “tweaking” of what Gray proposes as a graduated tax rate on gross gambling revenues that begins at 8.47 percent and climbs to 15 percent for website operators generating $350 million a year.

The bill also calls for a license fee of $12.5 million.

Meanwhile, a coalition of about six tribes led by the Pechanga Band of Luiseño Indians and Agua Caliente Band of Cahuilla Indians are reportedly less than pleased with suitability language that would facilitate licensing international online giant Amaya/PokerStars.

Gray’s bill would preclude licensing companies that accepted online wagers after December 2011.

The presumed logic behind that date is that it corresponds with the release of a DoJ opinion that effectively limited the application of the Wire Act to sports wagers.

PokerStars stopped servicing the U.S. market in April 2011 following a settlement with U.S. officials.

The amendments also prohibit “licensed service providers” from using “any list of customers or database” developed prior to enactment of California’s online poker law. The prohibited lists cannot be used until 2019.

The value of the PokerStars player list is questionable. But most in the industry agree the brand and platform is worth a great deal.

The Pechanga/Agua group has stood fast in its opposition to licensing PokerStars, arguing that the company’s questionable activities generated valuable resources and give it a competitive edge.

Tribal officials on Thursday declined comment.

“I don’t think they like the language,” said an informed source who requested anonymity. “If they don’t, there will be no iPoker in California.”

Clear support from one side

A coalition comprised of the San Manuel and Morongo Mission Indians, three Los Angeles area card rooms, and Amaya/PokerStars – in a three-paragraph joint statement issued Thursday – praised Gray’s amendments.

“We applaud [Gray] for moving the ball forward on iPoker and addressing the final two key issues,” the coalition said in its release, calling the amendments “a step in the right direction.”

“Our coalition has long supported a competitive online poker marketplace in California that offers choices and strong consumer protections, rigid suitability standards, strict oversight of operators and licensees and provides a financial return to the state.

“Our coalition commends [Gray] and his leadership … For too long this issue has left consumers vulnerable and we are hopeful that 2016 brings closure and a safe, regulated and competitive marketplace,” said the statement.

The Rincon Band of Luiseño Indians, (whose San Diego County casino is managed by Caesars Entertainment, owner of the World Series of Poker), the United Auburn Indian Community, and the Pala Band of Mission Indians also endorse the Gray bill.

“From our side, we’re fine with his proposed amendments,” said Steve Stallings, chairman of the California Nations Indian Gaming Association and a Rincon councilman. “The stakeholders – the tribes, card rooms and the tracks – I think everybody will be on board with this.

“The opposition may have problems,” he said of the Pechanga/Agua coalition.

Gray’s office declined comment.

Stallings said he could not predict how the Pechanga/Agua group will react to the draft bill.

“It depends on whether they’re going to be obstructionists or contribute to making things better, somehow,” he said.

“If the issue is only suitability, I don’t think [the amendments] gave them 100 percent of what they wanted.

“But clearly [Gray] advanced pretty strict suitability language without creating a constitutional issue whereas this would be illegal, targeting one company,” Stallings said. “That’s the balance he has to achieve.”

Stallings did not rule out additional negotiations on suitability language as the bill winds its way through the Assembly and then on to the Senate.

Eric Hollreiser, Amaya/PokerStars vice president of corporate communications, denied allegations the legal issues surrounding trading in Amaya stock were fractioning the coalition.

“Our coalition is strong and growing,” he said.

Racing issue appears more settled

While the tribes are split on suitability provisions, they are unified in providing the state’s pari-mutuel racing industry with an annual subsidy worth up to $60 million in lieu of allowing them licenses to operate poker websites.

“California horse racing interests were the first to compromise on internet poker, agreeing this year to give up both our current exclusivity for internet wagering and our right to offer our own iPoker sites,” said Greg Avioli, senior adviser to the board of directors for the Thoroughbred Owners of California.

“We believe [Gray] with his recent amendments has done a good job in creating an equitable balance that protects consumers, creates competition in the marketplace and reduces the barriers to entry for licensees in California.

“If California ever intends to legalize Internet poker, all the parties must be willing to compromise. Consumers have waited long enough for the protections provided in this legislation.”

Financial issues may be addressed in upcoming committee hearing

Most of Gray’s immediate emphasis on amendments has been with business and finance issues relevant to the Assembly Appropriations Committee, where the bill will be heard on Wednesday.

“There’s some tweaking to be done,” Stallings said, noting that tribes are hoping to get broader revenue ranges on the tax rates.

“That would be an issue, I think, for everybody. The bands on which the tax rate apply we think can be expanded a little bit. That would give people a little more room to get up and running.

“After five years, when we’re up and running, even a 15 percent tax rate is doable, if that’s what it takes to get the legislation done we’re prepared to live with it.”

Stallings also said the tribes are seeking assurances the $12.5 million license fee is a one-time payment.

- 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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