Stars, stakeholders not yet aligned for California online poker

Whatever Happened To Online Poker In California?

California online poker

California has been working to legalize online poker for more than a decade without much progress to show for it. Disparate factions in the Golden State just can’t get their act together long enough to pass a bill.

Instead of getting better, the situation has devolved to the point that 2018 has been a “reset year.” California has turned into the online poker version of Lucy holding the football for Charlie Brown, repeatedly raising supporters’ hopes only to break their spirits.

What exactly has happened to online poker in California? It depends on who you ask.

Online Poker Report reached out to several key stakeholders to collect their thoughts, and the responses run the gamut.

First, though, we should understand why the state is so important and what structural problems online poker faces in California.

California too big for its own good

California has officially achieved “white whale” status.

Its population of nearly 40 million makes it three times larger than the combined population of the states with legal online poker — New JerseyDelaware and Nevada. California is bigger and more densely populated than most countries. It is one of the only US states that is large enough to have a viable online poker industry.

But its size also works against it. The California gaming industry simply has too many cooks in the kitchen.

In addition to crafting a bill that fulfills the state’s interests, online poker legislation would have to appease dozens of tribal casinos, roughly 100 card rooms, and a politically powerful horse racing industry.

To further complicate matters, California legislative rules require bills with tax implications to pass with a two-thirds majority. Online poker bills fall into that category.

Not surprisingly, a relevant bill has yet to clear either chamber of the California legislature. The closest it came was a couple of years ago, and it wasn’t all that close. The state has been quiet about online poker since a 2016 effort ended in ugliness.

Why?

‘Conflicting self-interests’ in a tribal community

The tribes are the linchpin for any legislation. Kyle Kirkland, the president of the California Gaming Association, offered the following statement to OPR:

“California is home to more online poker players than anywhere in the world and was offered an opportunity to generate safe, legal online entertainment and needed tax dollars for its residents.

“Unfortunately, some tribal gaming advocates could not reach agreement on how online poker would be administered and regulated. As a result, legislators moved on to focus on other priorities.

“In effect, these conflicting self-interests in California’s tribal gaming community resulted in the loss of safe, regulated entertainment, well-paying jobs, and millions in tax revenue that would have benefited all Californians.”

Look no further than PokerStars

Victor Rocha, tribal strategist and editor of Pechanga.net, sees things very differently. In discussion with OPR, Rocha places the blame squarely on the shoulders of PokerStars:

“The arrogance and ignorance of PokerStars f—ed it up,” he said.

“They thought they could drive a wedge between the tribes and slide right in. They underestimated Pechanga tribal chairman Mark Macarro’s resolve. He never changed his message; PokerStars was a bad actor, and bad actors are not welcome in California.

“The Chairman stopped the process long enough for PokerStars’ BS to catch up with them. He was right all along.

“Now, looking back with everything we know about online poker [revenue promises that have never materialized in New Jersey], the tribes saved themselves a lot of money by not investing in the financial death spiral we now call online poker.”

Lawyers, lobbyists and legislators sold false hopes

Richard Schuetz was a member of the California Gambling Control Commission and the industry expert for the Governor’s Office during many of the online poker years.

Schuetz disclosed that these roles could have conflicted, “in that [he] could work to draft a bill and later be working to assist in the veto message.” He identified two main reasons California online poker has failed to materialize:

  • Special interests monetizing the issue
  • Disparate goals of stakeholders

“There were three main beneficiaries in Sacramento that were pushing for iGaming and iPoker,” Schuetz said, “these being the lawyers, lobbyists and legislators. All three could monetize this space by convincing the operators that there was a potential of iGaming or iPoker becoming a reality — and they did. I still believe that it was all a myth.”

And, of course, there are the industry stakeholders themselves.

“In California, there are three gaming interests (outside of the lottery, which is state-run). These are the tracks, the card rooms and the tribal casino interests. Any of these groups can slow down or stop a gaming initiative.”

Schuetz sheds some light

Here’s the rest from Schuetz:

“Many of the powerful tribes — those that had their casinos located in or near metropolitan areas — had no interest in iGaming or iPoker, for it ran the risk of depreciating the advantage of their location. These tribes are also powerful because of their locations, which means they generated strong revenues and could contribute materially to the legislative process.

“Moreover, the tribes have no interest in sharing with the tracks or card rooms, and they feel a strong animosity toward the card rooms, in particular. The point is, they killed it. 

“While such language as bad actors and the like was thrown about, at the end of the day it was about casino profits, locational advantage, and not wanting to benefit the card rooms, and a segment of the powerful tribes thought there was risk with iGaming and iPoker to their profits and their locational advantage. 

“Through back channels it was made to be dead and buried.

“I actually believed at the beginning of the process that iGaming and iPoker was possible, for I listened to what people were saying, and I was working my butt off in assisting in it becoming a reality. I then got a wakeup call and quit listening and started watching.

“It was clear after a while that this train was not leaving the station.

“It was all about the legislators, lawyers and lobbyists making money by leading people to believe that train could leave the station. [Legislation] had no chance… period.

“The tribes were not comfortable with the risk, and absolutely did not want to card rooms to benefit.”

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PokerStars coalition: Tribal politics

An individual involved in the PokerStars coalition in California who spoke anonymously agreed with parts of Schuetz’s assessment:

“I suppose it’s overly simplistic — yet true — to sum it up in one word: politics. But one could expand to two words and say “tribal politics.”

“Poker is small potatoes in the realm of gaming revs for California, and as such, not worth the effort for tribes. Conversely, it is deeply important to the card rooms, thus making it important for the tribes to simply make it more difficult for them for purely competitive reasons.”

Is online poker dead in California?

If any one of those three factions has the power to scuttle a bill, online poker has little chance of becoming legal in California.

Setting aside PokerStars’ role, there’s not enough money in online poker to pique the interest of the large tribal casinos. The last thing they want to do is throw a bone to smaller competitors who could materially benefit from online poker — particularly the card rooms.

There is, however, one mitigating factor that might bring about that elusive compromise: sports betting.

If the tribes want exclusive rights to CA sports betting, legislative efforts will likely be thwarted by the card rooms and the racing industry. But a combination of online poker and sports betting may bring everyone onto the same page. There exists a plausible scenario in which the tribes end their opposition to online poker in exchange for sports betting exclusivity.

That assumes that the tribes want sports betting at all, of course, and that they’d be willing to bargain with other gaming interests. It also assumes that the card rooms and racing industry would be OK with ceding sports betting to the tribes.

California online poker players can dream, can’t they?

Steve Ruddock
- Steve covers nearly every angle of online poker in his job as a full-time freelance poker writer. His primary focus for OPR is the developing legal and legislative picture for regulated US online poker and gambling.