NOTES FROM SACRAMENTO:
CALIFORNIA’s INTERNET POKER PROJECT



 1. Background

As most folks in the Internet gambling industry are aware, America’s Unlawful Internet Gambling Enforcement Act (UIGEA) allows individual state governments in the USA to license and regulate Internet gambling within their particular borders.  Attempts to legalize and license Internet gambling at the national level have so far not been successful, and quite honestly do not look like attracting enough political support to prosper, especially at a time when the Congress has much more pressing matters to engage its attention. So when you hear someone has been in communication with authoritative people in Washington, DC, that’s nice.  But the influence of Washington, DC lobbyists does not extend to Sacramento, California’s capital, except in so far as the California powers that be will allow it.

     Under the UIGEA , individual states have been able to legalize Internet gambling since 2006. As a practical matter, of course, the Bush administration had to leave town first .  That done,  we still needed something that would make them want to legalize it. This has now happened, with the world economic crisis.  Here in America, 46 of the 50 states are running deficits, and the federal government can’t offer much help, especially long-term. California is far and away the most chronically indebted, and disgusted voters have just turned down ballot issues that would have,  among other things,  raised taxes. There has been loose talk about a “financial emergency” for the past year or more.  But this time, there it is an actual, no-fooling financial crisis, and Internet poker is one of the less controversial things that the California Legislature is considering in its search for new revenue.

      The other things that make California a prime candidate for legalization of Internet gambling are its large population (37 million), which makes it a  prime market, and its existing regime of licensed card rooms and Indian gaming operations.  These number 91 and 58 respectively. The California Gambling Control Board has oversight (less so with the Indians).

    The operators (the card rooms and the Indians) were wary of Internet gambling for a long time.  They assumed it would cut into their customer base.  The card rooms were the first to take a serious look at Internet gaming,    especially poker.  This was because the new Indian facilities were drawing away lots of their customers.  Some of the smaller Indian tribes were interested as well, because there was little interest in building casinos in remote locations far away from major cities.   Up until this point, however, rivalry between the different factions had prevented state licensed Internet gambling from getting anywhere.

    But in 2008, an advocacy group called Poker Voters of America actually got a preliminary Internet poker bill through the lower house of the California Legislature, the Assembly.  Poker Voters is focused on state level action, and should not be confused with Poker Players of America, which is based in Washington, DC and concentrates its efforts on national law and licensing.  Jim Tabilio is the head of Poker Voters, and he performed the remarkable feat of convincing the various stakeholders to put aside their traditional jealousies and investigate the possibilities together. In fact he brought them all together in a seminar to explore the practical aspects of what to do and how to do it, for licensing Internet poker within the state. He is a lobbyist of twenty years’ experience nationwide, whose home base is here in CA.

More on poker voters at www.pokervoters.com





2. The proposed legislation

Last year the bill to authorize Internet poker in California passed all the way through the Assembly (California’s lower house) and was making its way through committees in the California Senate.  Unfortunately, the press of events- the election plus the financial crisis- took everyone’s attention, and the end of the session elapsed before there was time to pass this bill. The legislature now has many new faces, and so in many respects our work is all to do again.  This time, however, there is much stronger support for the notion of licensing Internet poker, because the revenue is so very badly needed.

California’s procedural rules did not allow holding over this bill until the following year.  In this session, two distinct bills- AB 293 in the Assembly and SB 827 in the Senate, have been designated as the vehicles for Internet poker. It is intended that they will be suitably modified as the situation progresses.

3. The timetable

Right now, since California is obviously on the lookout for new revenue, Internet poker is looking pretty good.  The Assembly Bill should come up for a vote in the June  timeframe. It’s supposed to be in the next few days but I have been told that may slip.  Any way, whether the final version is ( either the assembly bill AB 293 passed forward to them, or their own version SB 827) We believe it will be on the governor’s desk in about October. ( the schedules can slip a bit, so I ‘m not being too specific)


4. Meetings and conferences:

Jim has been meeting with interested parties practically nonstop for about the past two years now. This includes legislators, regulators, card room owners, gaming tribes, and some of the vendors of necessary services that an Internet poker system would need.


5.  The opportunity for non-American Internet gambling businesses


California has very good Internet infrastructure.  It also has an existing regime for licensing and administering gambling within the state borders. But California does not have many people who are actually experienced in running an Internet poker site as a business, day to day. Solid little was our friends overseas to keep in mind that once the land based card rooms and/or Indian casinos become eligible for Internet poker licenses, they will still need somebody to help them set up their web pages and service the customers.

The word right now is that California regulators do not want half a dozen different software systems or operator models offering Internet poker to the California gaming public. The regulators aren't very familiar with how Internet gambling is supposed to operate (how could they be?), and even if they were, they vastly prefer one approved software architecture, offered by a main licensee, who will then sublicense the individual Internet poker web pages. And that main licensee will be responsible for collecting the fees and taxes and handing them over to the state. Only parties already holding land based gaming licenses from the state of California will be considered as Web page operators for California Internet poker.


 Lastly, The state of Florida has passed a bill to study Internet poker through its own assembly and Senate; it awaits the governor’s signature and will probably get it. However, the logistical advantage still resides with California, because California already licenses private brick-and-mortar card rooms, as well as extensive Indian gaming . This means that the Board of Gambling Control already has a working system in place, and the plan is to draw the licensed Internet poker operators solely from card rooms and Indian reservations. This limits the potential online operators to people the state of California has already vetted and knows to be reliable and experienced. , there will be a stampede. But the first successful licensee will have an enormous advantage- he’s actually done it. And state governments in a hurry to cash in on the poker gold rush will not want to lose time, or take any risks with, unproven or theoretical systems.



Comments and further inquiries are welcome at mowens@trade-attorney.com