AB 1667 Meant As Starting, Not Ending, Point For 2017
Online Poker Report

New California Online Poker Bill Keeps Debate Alive, But Stops Short Of Solutions To Suitability Stalemate

Sacramento airport
Online poker legislation filed last week by California Assemblyman Reginald Jones-Sawyer could bring stakeholders to the table for discussions, but American Indian tribes remain sharply divided over the licensing suitability of international online giant Amaya/PokerStars.

Bill positioned to continue the debate

The Internet Poker Consumer Protection Act (AB 1677) is not being promoted by any of about 16 politically powerful tribes actively lobbying the issue.

Sources said it is intended to encourage debate on a volatile issue which has been argued in Sacramento for almost a decade.

“Reggie’s heart is in the right place,” tribal lobbyist David Quintana said. “He’s trying to move this along. I feel good that he’s not taking one side or the other. It’s an intellectual journey he wants to pursue to see if he can bring things together.”

Key points of AB 1667

AB 1677 would allow tribes with casinos and cardrooms to operate poker websites, requiring them to pay $12.5 million for a seven-year license along with a graduated 8.87 to 15 percent tax based on annual revenues.

The bill draft includes no penalties for companies taking wagers in violation of the Unlawful Internet Gambling Enforcement Act. A provision in last year’s draft would have required PokerStars to wait five years before seeking a license.

The Morongo and San Manuel Indians bands and three Los Angeles area card rooms are seeking joint licensing for a poker website in partnership with PokerStars, which has been plagued by regulatory issues and accusations of insider trading.

Bill intended as starting, not ending, point

Sources said the assemblyman filed the draft to make a legislative deadline and was looking to use the bill as a vehicle to resume negotiations with tribes, cardrooms, the racing industry and other stakeholders.

“What you’re seeing in print is nothing more than a start. He (Jones-Sawyer) is not wedded to anything that’s now in print,” Quintana said.

“He believes it’s a discussion that is worth continuing. In my talks with him, he agrees it’s going to be a difficult discussion – probably a long discussion – but one that needs to keep going.”

Thoroughbred racing lobbyist Robyn Black said it made sense for Jones-Sawyer to drop a bill that was not being promoted by one of the many stakeholders in an effort to continue negotiations over what has been a contentious issue.

“I do applaud him for introducing it,” Black said of AB 1677. “I applaud him for introducing it without a sponsor. That’s the best way to generate real dialogue.

“It’s a good thing we’re going to keep the dialogue going. We’ll see what happens.”

The racing industry agreed to cede its eligibility to operate a poker website in exchange for a $60 million annual subsidy. The racing industry currently is the only entity engaged in online wagering.

No clear path to an approach that pleases all

The Morongo/PokerStars coalition is likely pleased with the absence of “bad actor” provisions in the Jones-Sawyer draft, which leaves license suitability to be determined by state regulators.

But Morongo Chairman Robert Martin on Thursday stopped short of endorsing the bill and said tentative moves by the Department of Justice to revisit a 2011 opinion that the Wire Act only applies to sports betting may turn the issue of online poker on its head.

“We have not yet had the opportunity to review AB 1677,” Martin said. “Recently, however, Attorney General Jeff Sessions stated that he was going to reevaluate the 2011 Department of Justice opinion that the Wire Act applies only to sports betting.

“So it appears that California like other states will have to wait and see if the federal government will reinterpret the Wire Act to ban online gaming and internet poker.”

Lessening suitability provisions will not go over well with a coalition of about eight tribes led by the Pechanga Band of Luiseño Indians of Temecula and Agua Caliente Band of Cahuilla Indians of Palm Springs.

“That would make it a problem for a number of tribes throughout the state,” said Jacob Mejia, Pechanga’s vice president of public affairs.

Steve Stallings, chairman of the California Nations Indian Gaming Association (CNIGA), a group of 31 gaming and non-gaming tribes, said there have been no recent efforts by tribes to mediate their differences on iPoker.

“I don’t think anyone is pushing consensus right now,” Stallings said, adding that it was up to those tribes strongly divided on the suitability of PokerStars to settle their differences “before we jump on board.”

“At least somebody is getting out in front of the issue,” Stallings said of the Jones-Sawyer bill draft. “We’ll see what happens.”

Jones-Sawyer and his staff did not respond to requests for interviews.

Tribal positioning on issue complex and dynamic

Sacramento insiders contend a poker bill requiring the support of two-thirds of legislators will not make it to the governor’s desk without consensus from the 16 politically powerful tribes. California has 111 federally recognized tribes, about 60 of which operate casinos generating $8 billion a year in gross revenues.

The online poker debate among the state’s indigenous governments is heavily nuanced.

CNIGA and several prominent casino tribes are not opposed to licensing PokerStars.

The dispute over bill language has largely pitted the Pechanga/Agua coalition against the Morongo/PokerStars partnership.

“With Agua Caliente, Pechanga, Barona (Band of Mission Indians), we don’t seem to agree a lot,” Chairman Martin said in a recent interview.

Martin said he was not aware of speculation PokerStars would soon abandon the US market.

“That’s news to me,” he said in an email.

Coalition members believe opposition tribes fear PokerStars’ expertise and resources will dominate a statewide online poker market that some economists believe could reach $400 million a year.

Meanwhile, the Pechanga/Agua Caliente coalition has dug in its heels in opposition to PokerStars’ involvement in California, noting recent regulatory issues, including a $25,000 fine in New Jersey for geolocation violations.

“What we know for certain is that PokerStars/Amaya is even more of a sewer swamp than we originally thought, hence the need to keep strong on bad actor language,” Pechanga Chairman Mark Macarro said earlier this year.

Political backdrop may diminish priority for poker

It remains unclear if legislators confronted with federal immigration policies, flooding, and threats of Trump Administration funding cuts have the patience to deal with gambling issues.

“A lot of the tribes have taken a wait-and-see approach to see who would be the champion this session and how the politics would play out,” Mejia said.

“It’s too early to tell if there will be any legislative appetite for gaming policy this session.”

“There are so many more important things going on right now,” Quintana said. “This is really not a priority. I’ve had more discussions about honey badgers than I’ve had about internet poker.

“Since the bill dropped when I approach somebody the response is not, ‘Okay, let’s roll our sleeves up and get to work.’ The response is a rolling of the eyes and an exhalation of breath.”

Wave of online wagering options may sweep poker in its wake

Advancing technology, social gaming, and new internet gambling markets such as daily fantasy sports and esports – combined with moves to legalize traditional sports wagering – have surpassed iPoker as an industry topic du jour.

“iPoker is like haggling over the price of a box of cassette tapes,” Quintana said.

But it’s generally agreed that California tribes seeking to embrace gambling technology and emerging internet markets first need to come to grips with online poker.

“I don’t think tribes are going to support any legalized betting in California that doesn’t take this step first,” Stallings said of iPoker legalization. “I believe that would be the position of CNIGA tribes.

“You incrementally get to other forms of online betting through poker. The gambling industry in California is predominately controlled by the tribes and any expansion in gaming is going to take support from the tribes.”

The Pechanga Band in November launched the social gaming mobile app BestBetCasino.com, an investment Chairman Macarro called the first step in a “long-term initiative.”

“We see the greater use of iPhones and smart phones and mobile gaming,” Mejia said. “We see the trends and directions technology is taking. Pechanga has made a conscious decision to embrace technology and try to harness it.

“We want to be very good in the digital space; as good as we are in the brick-and-mortar space.”

The tribe, he said, has taken a hard line on the suitability of PokerStars and the licensing eligibility of the racing industry because it believes strict regulations and adherence to public policy on iPoker is necessary in future online ventures.

“We view online poker as the first step, which means we have to get this first step right,” Mejia said. “If we fail to get the first step right, we jeopardize the entire system.”

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Dave Palermo
- 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.