Will California Legalize Internet Poker?

Magic was in the air last week when the Assembly Governmental Organization Committee held a hearing on legalizing Internet poker in California.

by Timm Herdt, McClatchy News Service / April 30, 2014

It is an axiom in Sacramento that well-heeled interest groups can bottle up any proposed legislation. But when those interest groups come together, magic can happen.

That magic was in the air last week when the Assembly Governmental Organization Committee held a hearing on legalizing Internet poker in California. The issue had been a nonstarter for five years because of disagreement among the state’s influential gaming tribes, which were divided on the question of whether legal Internet poker would be a threat to their casinos or a potential business opportunity.

But then New Jersey and Nevada took the leap, creating a new market for casinos in their states.

Now a critical mass of California tribes has come to agreement. One by one, the chairs of seven of the state’s most influential tribes — the operators of its largest casinos — testified that the tribes are approaching a consensus. Their key condition is that only institutions now licensed to conduct gambling in California be eligible to purchase a license to conduct online poker.

Gaming tribes are among the most generous contributors to political campaigns in California. They give to elected officials of both parties, and they have a singular policy focus: protecting the constitutional monopoly on casino gambling that voters gave them.

When they speak with one voice on any gambling issue, Sacramento pays attention. So, there is now a chance — not as good a chance as California Chrome has of winning the Kentucky Derby on Saturday, perhaps, but no longer a long shot — that an Internet poker bill will emerge from the Legislature this year.

Some Democrats and Republicans on the panel were virtually tripping over themselves last week to get onboard. Others were marginally less enthusiastic. GOP Assemblyman Scott Wilk, who represents Simi Valley, told me he’s open to the idea, but suggested it might be best to wait a year.

Wilk said he’s open-minded because he’s heard from friends the same key point made by the bill’s advocates — that thousands of Californians are already playing poker online illegally, in an unregulated, untaxed environment. “They tell me, ‘Scott, you’d be shocked at how many people play Internet poker and who they are.’”

Some obstacles remain, none bigger than the question of whether PokerStars — the gorilla of online poker companies — should be allowed to contract with one or more of the in-state gambling institutions. The Morongo Band of Mission Indians, in partnership with three large card clubs, has announced an agreement with PokerStars.

Other tribes object, asserting that PokerStars, which was shut down by the Justice Department in 2011 and accused of illegally operating in the United States, should be excluded from California. The case has been settled, with PokerStars admitting no guilt and agreeing to pay the government $547 million.

Other tribes insist on a “bad actor” clause that would bar PokerStars from California. It’s not clear, however, whether the concern is entirely based on legitimate concerns or on fear of a competitive disadvantage. Most observers believe that any licensee contracting with the industry’s most prominent name brand would quickly dominate the California market.

Another major potential roadblock is opposition from Las Vegas billionaire Sheldon Adelson, who showed during the 2012 presidential election he will spare no expense in exerting political influence. Adelson has decided iPoker in California would be bad for his casino business, and has hired top-flight Sacramento lobbyists to try to block the legalization.

Still, there remain three compelling arguments for legalizing iPoker. It would generate significant revenues for the state, create thousands of jobs, and acknowledge the reality that illegal play will grow and thrive even if California does nothing.

State Gambling Control Commissioner Richard Shuetz, a former Las Vegas casino executive, was quietly tasked by Gov. Jerry Brown’s administration in 2011 to lead an effort to educate state regulators on the issue. He and others have met extensively with U.S. and international regulators and technical experts.

Schuetz told me this week that he is convinced that with proper regulation the industry can do what it says it can: limit games to only players who are in California, prevent teens from participating and track every dollar.

Internet poker is legal in most of the Western world, including the two other U.S. states with the largest gambling industries. The technology has been perfected and major problems resolved. The California tribal casino operators are on board. Now the only question lawmakers must answer is the one they’re paid to address: Is it a good deal for the people they represent?

©2014 Ventura County Star (Camarillo, Calif.)