By Martin Owens
A new strategy for California?
Bills for online poker and sports betting may work in tandem
"In strategy the longest way round is often the shortest way there .
B.H. Liddell Hart
In California, as across America, the expansion of licensed gambling, particularly online, is at the mercy of the state- level political process, and will be for some time to come. Since about 2007, mutual distrust between the licensed Golden State gambling interests - mainly between the gaming tribes and the municipal card rooms- has been a roadblock to anything like real progress. This is especially true as regards Internet poker. Since about 2007, most of the online poker bills introduced in Sacramento have not even made it out of committee.
So you would think that a bill embracing a more controversial and complicated form of gambling- sports betting, whose expansion is forbidden by Federal law - would have even less chance of approval. Ah, but this is California, contrary and full of surprises. On April 23, SB 190, the bill to allow existing state gambling licensees to handle sports betting, too, passed out of committee almost unanimously , headed for further approvals.
SB 190 - the indirect approach
It is also almost certainly headed for court. Like New Jersey's sports betting law, SB190 contradicts the Professional and Amateur Sports Protection Act (PASPA) which forbids state and tribal authorities from authorizing anymore sports betting than existed in 1992. Nevada, of course, was "grandfathered" in. This law, among other things, allows the professional sports leagues to sue any state which tries to buck the system- New Jersey is already appealing a lower court decision which went against it. This controversy is almost certain to wind up in the Supreme Court, and by the same token almost certain to take years to resolve.
What, then, was the big idea? The bill was authored by state Senator Rod Wright, one of the few state legislators in the nation who knows what he's talking about on the subject of Internet gambling in general and Internet poker in particular . Despite the fact that California, with its large, liberal, tech savvy population would seem to be a natural for Internet gambling of all kinds, mistrust and enmity between the California's vested gambling interests - the tribes and the poker rooms in particular - has stalled progress time after time. It is estimated that California
could have taken in $1 billion from Internet poker alone in the last five years. Instead, the deadlock has continued.
In order to get the factions to work together, they needed a common goal. SB 190 neatly accomplishes that by opening sports betting to all current brick-and-mortar licensees in the state.
Because while some stakeholders may cling to the belief that Internet poker will poach their customers, sports betting, online or off, unquestionably means more money because nobody in California has been allowed to offer it up to now. The measure passed out of committee almost without opposition.
Now, however, comes the tricky part. Having convinced the rival factions to get on the same side for sports betting, the aim is to keep them there to finally get California its Internet poker.
The online poker bills
This may not be so easy. Currently there are two online poker bills in play: SB 51,also by Senator Wright, and SB 678 by Senator Correa.
SB 51 is somewhat lengthy, but that is understandable, given the many obstacles and misunderstandings that Senator Wright has encountered over the years. Online poker licenses will only be available to current holders of land-based California gambling licenses or gambling compacts. In addition to comprehensive background checks of all owners, directors, and key personnel, (gaming tribes apply will have to wave their "tribal sovereignty" in this regard) prospective licensees must also demonstrate the financial capacity to meet their obligations.
The software for an online poker operation must provide virus and malware protection, reliable RNG generation ( that is, the dealing of the online "cards" must be genuinely random), and safeguard sensitive information for each player's account. At the same time, all these records and processes must be available for inspection by state authorities.
Each player will have a registered account - apparently one player may have accounts at multiple poker sites, for no centralized registry is mentioned. No one will be allowed to offer unauthorized online gambling to Californians, and Californians will not be allowed to play. Fortunately both offenses will be misdemeanors, rather than felonies. Even registered players will not be able to participate if they are outside the California state borders.
There is an interesting twist in the language of this bill - the "authorized games" will not be limited to poker - i.e., other games may be authorized later on, so long as California's Gambling Control Commission approves, subject to the conditions above. This may lead to opposition by the gambling tribes, who currently enjoy a statewide monopoly on casino style table games and slot machines. Any attempt to authorize such offerings online would likely be opposed. Fiercely.
The initial version of SB 51 requires successful licensees to deposit $30 million, to offset charges, fees, and a tax of 10% on the monthly gross. This is probably the biggest single drawback; even in a slightly improving economy, very few potential licensees can come up with a lump sum of that size. Furthermore, the ones that can are very likely to demand more favorable terms as a precondition of handing it over.
The remaining bill, SB 678, employs the old-fashioned approach. It simply allows the licensing of online poker generally - that's poker and nothing else. It leaves all the details to the
Gambling Control Commission, charges and fees included. In the long run, given the rapid development and acceleration of Internet and social gaming technology, this may be the wiser course. It is impossible to specify every detail in advance, and in any case each question answered generates two new ones. Perhaps it would be best to leave it to the regulators after all.
California has lost the race to be first into action with online poker. Ultimate Poker, licensed in Nevada, opened its doors at noon GMT on April 30. New Jersey and Delaware look to open up formally in the fall of this year. Nevertheless, California remains a very strong potential market. It seems inevitable that Internet casino style gambling as well as poker will be licensed there at some point. Perhaps this year will be the charm.
Mr. Owens is a California attorney specializing in the law of Internet and interactive gaming since 1998. Co-author of INTERNET GAMING LAW with Professor Nelson Rose, (Mary Ann Liebert Publishers, 2nd ed 2009) ; Associate Editor , Gaming Law Review & Economics; Contributing Editor, TSN. Com
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