PokerStars Plans To Legally Challenge Unfair Amendments to AB 2863

Lawmakers Seeking Pound Of Flesh From PokerStars For Entry Into California Online Poker Market

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California lawmakers appear intent on extracting a pound of flesh from international online gambling giant Amaya/PokerStars as legislation to tax and regulate online poker makes its way to the state Assembly floor for a vote, perhaps this summer.

AB 2863 powers through Appropriations, but suitability issue remains

License suitability provisions in AB 2863, the Internet Poker Consumer Protection Act, sponsored by Assemblyman Adam Gray (D-Merced), again took center stage Wednesday as the Assembly Appropriations Committee approved finance components of the bill.

The committee overwhelmingly approved AB 2863 by a 14-1 margin with one absentee and four members declining to vote.

But several members strongly recommended tightening “bad actor” language that would permit, with conditions, the licensing of companies accused of taking U.S. wagers in apparent violation of the Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006.

The committee’s concern about one of the companies – PokerStars, purchased in 2014 by Amaya Gaming – is prompting skepticism the bill will generate the votes needed to get through the legislature. The tax measure will require a two-thirds vote for approval.

Meanwhile, a politically powerful coalition of seven tribes led by the Pechanga Band of Luiseño Indians and Agua Caliente Band of Cahuilla Indians continues to oppose licensing Amaya/PokerStars, which also threatens passage of the bill.

The coalition contends it would be bad public policy to license PokerStars and other companies that accumulated resources and valuable player data by violating the law.

“Companies that have engaged in any form of unlawful or unauthorized internet gaming should be disqualified from licensure,” Leland Kinter, chairman of the Yocha Dehe Wintun Nation, a coalition member, told the committee.

“These bad actors should not be rewarded with the opportunity to offer internet poker websites. The same is true for companies that purchased the ‘tainted assets’ with the hope of profiting from the ill-gotten gains,” Kinter said of Amaya Gaming.

A rival coalition of tribes, card rooms, the racing industry and organized labor supportive of AB 2863 claims the Pechanga/Agua group opposes the bill out of fear its tribes would not be able to compete with Amaya/PokerStars, which would likely grab a huge share of a California market.

The pro-AB 2863 coalition is hopeful it can overcome the political clout of the Pechanga/Agua group, which recently grew to seven tribes with the addition of Table Mountain Rancheria.

“This bill continues to be an example of how to do things right, in terms of moving a complicated issue forward,” said Barry Broad, lobbyist for the Teamsters and Jockey’s Guild.

“We are now at a point where the horse racing industry is supportive of the bill, a vast majority of Indian tribes are in support of this bill, the card industry is in [support of] this bill, the online poker folks are in support of this bill and we are moving toward resolution of all the issues.”

AB 2863 unlikely to pass without further reform

Appropriations Chairwoman Lorena Gonzalez (D-Chula Vista) expressed some skepticism.

“I think there are very real concerns,” Gonzalez said of the likelihood AB 2863 will make it to the governor’s desk without revision of license suitability provisions.

“There is a … market share component that needs to be addressed. I believe there is a question – a legal question – about activity between 2006 and 2011.

“I hope we can resolve some of this before this comes to a vote on the floor because … it will, I think, prevent a vote from being successful on the floor. It will require two-thirds vote.”

Gray has worded the bill to make it difficult for companies accused of violating UIGEA from getting regulatory approval to operate poker websites in California. The bill requires companies taking U.S. wagers from 2006-2011 to either wait five years before applying for a license or pay a $20 million fee.

There are also provisions limiting the use of “tainted assets” such as player lists, market data and other resources accumulated from 2006 to 2011, when the U.S. Department of Justice shut down PokerStars, Full Tilt and Absolute Poker on suspicion of violating UIGEA.

The provisions apparently do not appease committee members who believe the online giant would largely benefit from its brand and platform, which is popular with players worldwide, rather than outdated player lists Gray said have already been sold to at least three companies

“I think the largest tainted asset here is the PokerStars name,” Bill Quirk (D-Union City) said.

“When it comes to those that were operating illegally in the state I really do have a concern, just overall, when it comes to just allowing them, period, to even being in the state,” said Majority Floor Leader Ian Calderon (D-Whittier), who suggested $20 million wasn’t a sufficient penalty.

“Suitability language needs to be worked on,” said James Gallagher (R-Yuba City). “We need to continually look at that and make sure … the highest level of integrity is kept in gaming in California.”

“I understand the effort to fix the suitability problem,” said Donald Wager (R-Tustin), annoyed over the use of tainted assets. “I don’t know that [the bill] truly addresses the opposition’s concerns.”

Amaya/PokerStars did not respond to a request for comment.

Gray: AB 2863 “most vetted bill this legislative session”

Gray expressed frustration over the decade-long effort to get online poker legislation enacted in California, a process highlighted by several committee hearings and an inability of stakeholders – particularly tribes – to reach consensus on bill language.

“This has probably been the most vetted bill this legislative session,” Gray told the committee. “If we held every bill … to the standard we’ve held this bill we wouldn’t have any bills.”

He pledged to continue working with stakeholders and legislators on bill provisions, particularly those dealing with license suitability and tainted assets.

“I certainly will strive to certainly revise the bill, to make it stronger,” Gray said. “As it stands today it is undoubtedly the strongest [online poker] bill in the country. And it should be. That’s the kind of work we want to do in this legislation.”

He predicted the bill will be amended numerous times as it winds its way through the Assembly and Senate.

Amaya remains focused on California

Amaya/PokerStars has a business partnership with the San Manuel and Morongo bands of mission Indians and three Los Angeles-area card rooms: The Bicycle Club, Commerce Club and Hawaiian Gardens.

Morongo Chairman Robert Martin said the coalition will legally challenge any legislation that unfairly penalizes PokerStars. Legal experts contend legislation singling out PokerStars can be vulnerable to constitutional challenges.

Eric Hollreiser, Vice President of Corporate Communications for Amaya/PokerStars, denied in a prior interview that the company’s legal problems were fractioning the coalition.

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

The Rincon Band of Luiseno Indians, whose casino is managed by Caesars Entertainment, the Pala Band of Mission Indians, owner of Pala Interactive, and United Auburn Indian Community, partners with Bwin.Party Ltd., also support AB 2863.

“Assemblyman Gray brought together an unprecedented group of tribal governments, card rooms, horse racing industry and labor groups to support internet poker legislation,” Rincon Chairman Bo Mazzetti said in a statement. “AB 2863 establishes a safe and secure environment for Californians to use today’s technology to play poker.

“The bill establishes a tiered tax rate that lets the state receive its fair share of revenue and adjust the rate to ensure that the industry can develop and grow,” he said of the bill’s graduated tax rate of 8.47 to 15 percent. The legislation also calls for a $12.5 million license fee.

“We look forward to the Assembly floor vote in the coming days and the very real possibility of an Internet poker bill passing this year,” Mazzetti said.

Racing interests may tip balance

Some political insiders believe the diversified pari-mutuel industry will generate much political support for the legislation. The industry earlier this year conceded its eligibility to operate a poker website in exchange for a $60 million annual subsidy.

Ironically, it was Pechanga Chairman Mark Macarro who suggested the industry get a payment in lieu of licensure. The tribe felt letting race tracks into the online poker business would be an expansion of gambling in violation of voter-approved public policy.

Labor leader Broad and others characterize the Pechanga/Agua tribes as obstructionists and political bullies in Sacramento, an attitude they contend is wearing thin with legislators.

Leaders of the Pechanga / Agua coalition don’t appreciate being portrayed as obstructionists, contending they reject bill language they suspect is the result of influence by the gambling industry.

Often lost in the political machinations is the lack of consumer protection for the approximately 1 million California citizens playing poker online.

“There is obviously a black market out there,” Assemblyman Gallagher said. “There [are] customers out there playing internet poker and they don’t have any protections. We have to work on something.”

- 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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