Opposition To Amended California Online Poker Bill Emerges

Tribal Group: Recent Amendments “Force Us To Oppose” California Online Poker Bill

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A politically powerful coalition of six American Indian tribes announced Friday its opposition to suitability and tax provisions of recently amended online poker legislation in California, a move that could prevent passage of an online poker bill this session.

Opposition to AB 2863 was stated in a June 10 letter to bill author Adam Gray, chairman of the Assembly Government Organization Committee, and signed by the tribal coalition headed by the Pechanga Band of Luiseño Indians and Agua Caliente Band of Cahuilla Indians.

Primary issues: tax and suitability

“We deeply appreciate your leadership in bringing stakeholders together to try to resolve the outstanding differences regarding Internet poker legislation,” tribes said in the letter.

“Although we have made some progress under your leadership, we regret that your amendments … related to suitability standards and taxation force us to oppose the bill.”

Anticipated opposition to the bill by the coalition – which includes the Viejas Band of Kumeyaay Indians, Barona Band of Mission Indians, Yocha Dehe Wintun Nation and Lytton Rancheria – was first reported Thursday by Online Poker Report.

“We heard some rumblings yesterday that they were not taking too kindly to the amendments,” Eric Johnson, chief consultant to Gray’s GO Committee, said Friday.

Johnson said the committee staff had not yet had time to digest the tribes’ recommendations.

Is progress possible with existing divisions?

Five other tribes – including a coalition of two tribes, three card rooms and international online giant PokerStarssupport AB 2863, although they are seeking modification of a graduated tax rate of 8.47 to 15 percent for websites generating $350 million a year.

“We applaud [Gray] for moving the ball forward on iPoker and addressing the final two key issues,” said the coalition of San Manuel and Morongo Indian bands, Hawaiian Gardens, Bicycle Club and Commerce Club and Amaya/PokerStars.

Sacramento insiders believe a consensus of all the tribes is necessary to get the political backing necessary to get a bill through the state Legislature.

But one Capital source noted that the Pechanga/Agua coalition has dwindled over the past few years from 11 to its current six tribes.

Macarro: It’s time for others “to make meaningful concessions”

Meanwhile, Pechanga Chairman Mark Macarro denied allegations by a number of potential stakeholders that the Pechanga/Agua coalition was acting as “obstructionists” to any online poker bill.

“We have made concessions. Racing has made concessions. It’s time for the other group to make meaningful concessions if they truly want iPoker legalized in California,” Macarro said in a prepared statement.

“If we wanted to stop iPoker we would not be dedicating the time, energy, and resources to shaping good public policy that will protect our rights now and for the decades to come.

“Our position is rooted in shaping policy that protects tribal rights, not give a boost to the stock prices of publicly traded companies desperate to get iPoker at any cost.”

Bad actor lines drawn more deeply in the sand

The Pechanga/Agua coalition is particularly perturbed with suitability or “bad actor” provisions that would allow the licensing of PokerStars, which was accused of accepting U.S. wagers in violation of the Unlawful Internet Gaming Enforcement Act (UIEGA) of 2006.

“At a time when California was making painful budget cuts to education, public safety and social services … offshore poker sites evaded paying tens of millions of dollars in California taxes while breaking the law by taking bets from California and the U.S.,” the tribal coalition said.

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

The logic behind that date has not been clarified by Gray, but some believe that the date is designed to correspond with the release of a Department of Justice 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 bill language “fails to provide any meaningful mechanism to assure that unsuitable entities are prevented from participating in the California market,” the Pechanga/Agua coalition letter said.

The tribes contend the 2011 cutoff date is five years after UIGEA was enacted and several months after the FBI shut down PokerStars, Absolute Poker and Full Tilt Poker websites.

“In our view, using such a recent date grants a free pass to the most egregious foreign offenders that continued accepting online U.S. bets illegally from offshore tax havens,” the tribes said.

Grey’s challenge was to draft suitability provisions that did not target PokerStars or violate constitutional provisions of the Commerce Act, leading to potential litigation that would preclude enacting online poker legislation.

“I think from day one Chairman Gray’s goal was to craft a bill that was good for California. He has been quoted as saying he would not pick winners and losers [but] lay out tough, stringent parameters in making a license suitability determination,” Johnson said.

The Pechanga/Agua coalition in its letter also questioned the effectiveness of the “tainted assets” provisions in the bill.

Finally, the coalition suggested lowering the tax rates.

The tribes will meet with Gray Monday in advance of Wednesday’s hearing before the Assembly Appropriations Committee, but it is not likely any significant changes will be made in suitability language.

Read the full letter here.

- 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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