CA Online Poker Bill Could Move Forward As Soon As Next Week
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California Online Poker Bill Delayed, But Vote Could Still Happen This Month

California online poker
The California online poker bill suffered a bit of a setback on Wednesday, as a planned vote did not occur in the Assembly Appropriations Committee.

However, Appropriations Chair Lorena Gonzalez indicated the bill would be amended and voted on “within the next two weeks.”

The next planned hearing is June 29, but a hearing could be scheduled for June 22, according to discussion of the committee.

“Through good faith discussions with all stakeholders, I believe we are closer than ever to passing an iPoker bill,” bill sponsor Adam Gray said.

What happened in CA on iPoker

The bill was only discussed in front of the Appropriations committee, after being amended last week.

The bill from Assemblymember Adam GrayAB 2863  had passed the Governmental Organization Committee that he chairs in April.

The fact that the bill was not called for a vote likely indicates it would still have problems getting out of the committee — or at least passing the full Assembly — as written.

Gray admitted in presenting the bill that a consensus has not been reached among all stakeholders. Without mentioning it specifically, he is referring to the coalition led by Pechanga and Agua Caliente. That group sent a letter in opposition to the newly amended bill last week.

The growing coalition of tribes, cardrooms, horse tracks and unions that supports the bill was on display at the hearing, as many representatives of these groups appeared in front of the committee.

“There has never been this broad of support for this issue in the last decade,” Gray said.

After the hearing, the proposed (not actually introduced) amendments surfaced here.

Suitability, fiscal issues still a problem

The bill is definitely not still a finished product, as indicated by nearly everyone in the room.

Bad actor debate

From the tone of the hearing, the biggest issue is still the “bad actor” or suitability language in the bill, in who is allowed to operate iPoker in California.

That continues to center around PokerStars, whom the Pechanga coalition wants to keep out of California.

“The issue of who is suitable to be licensed and the tainted assets that illegal gaming operators accrued through unlawful gaming for five or more years are the matters that drive us to strongly oppose this measure,” said Jeff Grubbe, Chairman of Agua Caliente said during the hearing.

Grubbe was referring to the 2006-2011 operation of PokerStars and others in the U.S. in violation of the Unlawful Internet Gambling Enforcement Act.

Grubbe name-checked PokerStars and parent company Amaya a number of times and said “Troubles follow this company.”

“So why are we willing to work so hard to that one particular entity to can enter the market?” Grubbe asked later in his testimony.

Both Gray and Gonzalez, however, indicated that language would not be included to “exclude one company” — i.e. PokerStars.

The suitability amendments

After the hearing, proposed (not actually introduced) amendments, surfaced here.

There were two amendments on suitability. First:

A requirement that regulators impose limitations on the use of accrued assets. The Committee recommends that the CGCC impose limitations and conditions on how assets, such as customer lists, databases, or any other assets deemed to provide the applicant an unfair competitive advantage, are utilized.

This is aimed largely at PokerStars and its customer list, it appears, although that list is now five years old.

Second:

Delay when some service providers can be provided a license. The Committee recommends that service providers that operated in the period between January 1, 2006 and December 31, 2011 not be provided a license until January 1, 2021. This does not preclude the applicants from starting the process of applying prior to this date.

Alternatively, such applicants could pay a one-time fee of $20 million, to be deposited into the General Fund, to obtain a license before January 1, 2021.

Again, this is aimed at PokerStars, forcing them to pay their way into the California market immediately, or wait five years. It seems likely that the PokerStars coalition of tribes and cardrooms will be opposed to this measure.

In testimony, the Pechanga-AC coalition was apparently already aware of these proposals, and it rejected the idea of PokerStars being able to buy its way into California for $20 million.

In the hearing, Gray also indicated he would be trying to alter these proposals before they are formally put into the bill.

Fiscal issues still a concern, too

The issues on revenue around the bill are also still a problem — including a proposed $60 million subsidy for the horse-racing industry in exchange for it staying out of the online poker market.

Lawmakers voiced concerns that the state’s general fund might see no revenue out of the bill because of how revenue is earmarked. That is one of the amendments that Gonzalez said will be offered to the bill.

She also indicated that the bill would be amended with an offset of the initial fee with credit from taxes paid.

The fiscal amendments

The new proposed language dealing with revenue was also floated afterwards.

Because the bill, if enacted, may not actually generate $60 million for the horse racing industry, leaving nothing for the rest of the state. As such, this recommendation may be added to the bill:

…the Committee recommends an amendment that keeps 10% of tax revenue from gross gaming revenues in the General Fund, no matter what annual gross gaming revenues are in any given year. The remaining 90% will go to horseracing and fairs until the previously discussed $60 million is reached. After that, all revenue will go to the General Fund, similar to the provisions in the current version of the bill.

Second:

The Committee recommends that half of the $12.5 million deposit ($6.25 million) be offset by reduced taxes on gaming revenues. This would ensure that more operators are given the opportunity to participate in the market while still providing an upfront infusion of revenue as a result of new applicants joining the market.

Can everyone get on the same page, fiscally?

Previously, nearly everyone involved — including the opposed tribes — indicated that they believe the fiscal concerns can be overcome.

Whether the horse-racing industry believes that is an open question, as it has been supportive of the subsidy that has been added to the bill this year. Will it take less than $60 million, or is this a non-starter?

If taxation, fees and the subsidy are altered substantially, it could affect support for the bill in a meaningful way.

The takeaway: Online poker is still alive, at least

Far worse outcomes for online poker could have happened on Wednesday, than a delay of a vote. The bill could have been sidelined entirely, for instance.

One of the overwhelming themes of the hearing: How much time and effort has been put into the online poker issue, dating back almost a decade.

Gonzalez and Gray both mentioned how much time they had spent working on the legislation together; Gray continued to emphasize that he has worked tirelessly with stakeholders trying to reach a consensus this year.

The bottom line: The people involved in the issue, particularly the lawmakers, do not appear interested in throwing all that effort away. From their comments on Wednesday, they clearly want to move the bill forward, but with language that has as much support as possible.

It’s becoming clear that the Pechanga-AC coalition might never be brought on board. Will the bill eventually move forward without them, and can it?

For now, online poker’s future in California is still cloudy. If we actually see a vote in the Appropriations committee in the next week or two, we’ll have a better sense of its chances moving forward.

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Dustin Gouker
- Dustin Gouker has been a sports journalist for more than 15 years, working as a reporter, editor and designer -- including stops at The Washington Post and the D.C. Examiner. He has played poker recreationally for his entire adult life and has written about poker since 2008.