Tribes at odds over online poker

by CalWatchdog Staff | February 11, 2010 10:34 am

Feb. 11, 2010


In an eight-hour session on Tuesday, a Senate committee considered the implications of legalizing online poker, which has been prohibited in the United States since 2006. The testimony split legalization proponents — legislators looking to accrue gaming tax revenues and tribes interested in exclusive poker operator rights — and opponents — other tribes who say an authorization scheme would violate current gaming agreements, and analysts who predict expensive legal proceedings and net losses in government revenue.

The legal status of online poker is complex. The 2006 passage of the Unlawful Internet Gambling Enforcement Act (UIGEA) banned U.S.-based online gambling operators from transacting with American financial institutions, forcing those operators to shutter and reopen offshore. Today, an estimated 15 million Americans — and 1 million Californians — continue to play online poker regularly using offshore sites.

In February 2008, then-Assemblyman Lloyd Levine, D-Van Nuys, introduced legislation aiming to restore online poker to California. AB 2026, which failed in the midst of the state budget crisis, would have permitted online poker for California players if provided by California-based sites. Legislators in Florida and New Jersey are currently debating similar intrastate authorization models, which would exempt the plans from UIGEA compliance.

Congressional lawmakers have also identified online gambling as a potential source of tax revenue. In May of last year, Rep. Barney Frank D-Mass., introduced a bill that would authorize the Treasury Department to regulate and license online gambling operations. Sen. Robert Menendez, D-N.J., followed with a bill in August specifically addressing Internet poker, and levying a 10 percent tax on all deposits made in online card rooms by American players. Neither have left committee.

Legalized online poker could increase state tax revenues using a similar per-deposit charge, but may also jeopardize more than $350 million in tribal gaming revenue for 2010-11, according to the Legislative Analyst’s Office.

Under current compacts, tribes are required to make annual payments to the state’s general fund in exchange for non-compete privileges for their casinos. A state-regulated online poker market, said one analyst from the LAO, could violate those privileges and prompt tribes to stop their payments to the state. Mark Macarro, chairman of the Pechanga Band of LuiseƱo Indians, affirmed this, saying he would consider withholding the more than $42.5 million his tribe contributes to the general fund every year.

The Morongo Band of Mission Indians was the only tribe to strongly disagree.

“We feel the games should be controlled by the tribes and the state — and taxed,” said chairman Robert Martin.

Published reports show that Martin has vied for exclusive tribal rights to online poker in California, and that the Morongo tribe is the biggest gambling lobby in the state.

While no bill is currently active on the issue, committee chairman Roderick Wright, D-Los Angeles, predicted that any solution would present a difficult legal situation.

“Clearly, whatever we do will end up in court,” he said.

Poker player groups, European regulators, Internet service providers and anti-gambling activists also testified. Experts note that civil libertarians, consumer-protection advocates and financial institutions that monitor customer gambling activity are also stakeholders, but were not represented in the speaker roster.

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