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Tuesday, October 15, 2013

California Inches Closer to Approving Internet Poker

By Glenn M. Feldman

For the third year in a row, the California Legislature has adjourned without acting on Internet gaming legislation. But there are indicators that the situation may change in 2014.

With over 38 million residents, California has a population that could provide a robust intrastate Internet gaming market. And Californians know how to gamble. In 1987, the U.S. Supreme Court noted that “California permits a substantial amount of gambling activity…” Today, it is estimated that lawful gaming in California – through tribal casinos, commercial card rooms, racetracks, and the lottery – generates over $10 billion in gross gambling revenue.

At the time the Legislature adjourned on September 13, three separate Internet poker proposals were under consideration at the Capitol. The first, SB 51, had been introduced early in the year by Senator Roderick Wright, the Chairman of the Senate Governmental Organization Committee. Senator Wright had introduced I-gaming legislation in previous sessions of the Legislature, but none had ever made it out of his Committee. A second bill, SB 678, authored by Senator Lou Correa, reflects the views of a coalition of about fifteen California Indian tribes headed by the San Manuel Band of Serrano Mission Indians. And in May, draft legislation proposed by a second tribal coalition, including the Pechanga Band of LuiseƱo Indians, began circulating.

While all three proposals would permit only Internet poker, the substantive differences among the proposals on other issues have prevented the sponsors from reaching agreement on a single bill that all can support. Among the areas of major disagreement are the following:

  • License Fee – The amount that an operator would pay the State for an Internet gaming license varies widely: $15 million under SB 51, $10 million under Senator Correa’s bill, and $5 million under the Pechanga proposal.
  • License Eligibility – Significant debate still swirls around the question of what entities would be eligible for operator licenses. The two tribally-backed proposals would limit eligibility to Indian tribes and licensed card rooms. Senator Wright, on the other hand, has been adamant that racetracks and advance deposit wagering operators must be included on the list.
  • “Bad Actor” Prohibitions – All of the proposals prohibit the licensing of entities that accepted unlawful Internet wagers in the past. The scope of those provisions differs, however. The Wright and Correa bills would bar operators who accepted bets from players in the United States, but only for bets placed after December 31, 2006. The Pechanga proposal applies to the acceptance of a wager from a player in California at any time prior to the enactment of California I-gaming legislation. This broader ban would permanently bar several major Internet gaming operators from the California market, which has generated substantial controversy.
  • Tribal Regulatory Involvement – While all of the proposals establish a California regulatory structure for the online gaming, they differ markedly in the extent to which existing tribal regulatory bodies can play a role in that process. Not surprisingly, the tribal proposals offer more opportunities for tribal participation than does Senator Wright’s bill.

These and a host of more minor differences kept the parties from agreeing on a unified approach to Internet poker before the Legislature adjourned for the year. But, while significant differences between the proposals remain, there are at least indications that these differences could be bridged – and legislation enacted – in 2014.

To read the complete article in Dickinson Wright’s Gaming Legal News, please click here.