Assembly Bill 2863, introduced by Assemblyman Adam Gray, D-Merced, would make California the fourth state after New Jersey, Nevada and Delaware to legalize some Internet poker websites. The measure, which passed the Assembly Governmental Organization Committee on a 19-0 vote last week, says the sites can only be operated by Indian tribes that already have casinos in California.

The connection between the financial struggles of California horse-racing tracks and online poker is based on track owners’ arguments that they have been financially devastated by the rise of legal online horse betting and by the proliferation of Indian casinos in the Golden State since 2000. That’s when voters approved a state constitutional amendment making it much easier for tribes to get casinos approved. While the racing industry is declining in California, it still has some pull in the Legislature.

But there is a split in the media over how much of a breakthrough online poker advocates truly achieved last week. Coverage in the niche media that specialize in gambling was less likely to see the committee vote as a huge step toward online poker’s legalization than the mainstream media.

OnlinePoker.Report.com challenged the description of some of California’s wealthiest tribes as being “neutral” on AB2863 simply because they had not taken an unequivocal public stand on the measure. In particular, OPR reported, Agua Caliente and Pechanga representatives privately express broad skepticism about Gray’s bill. 

Some CA tribes want to block online juggernaut

Their biggest objection involves what in the online poker world is known as the “bad actor” debate: whether online poker sites with questionable histories should be firmly banned from partnering with casinos in setting up new state-specific online sites.

PokerStars is the site most consistently depicted as a villain, which led to clauses in a Nevada law meant to keep it out of state-approved online poker sites. Founded in 2001, the world’s largest online poker site was the biggest fish targeted in the U.S. government’s 2011 crackdown on online betting. The next year, it settled its legal fight with the Justice Department by paying $700 million without admitting wrongdoing.

Now PokerStars has quickly established itself as a juggernaut in New Jersey with its pokerstarsnj.com site. In 2014, it lined up partners in California: the Morongo Tribe and the San Manuel Band of Mission Indians.

Unless other tribes get language in AB2863 that provides hard protections against a PokerStars-Morongo-San Manuel partnership, the legislation may end up being opposed by most of California’s richest tribes, whose generous campaign donations have given them considerable clout in Sacramento.

There is again a gap between mainstream and niche media coverage of this issue. Instead of being about keeping “bad actors” out of states, gambling news sites depict “bad actor” clauses as being about market protectionism.

One of the world’s best known law professors, Harvard’s Lawrence Tribe, agrees with that description and could work as a lobbyist for and counsel to PokerStars if a state law attempts to keep PokerStars from partnering with California tribes.

Four pieces of legislation have been put into play: AB9, AB167, and two identical bills, AB431 and SB278. Of these, AB9 and AB167 have attracted the most attention.

Lawmakers have hesitated to act boldly, unsure which constituencies should be treated most favorably. But after so much wrangling, some kind of consensus has seemed inevitable: as analysts have agreed, the money in online gambling is too big to ignore.

Tough choices

The market for Internet poker has grown large enough that its would-be masters haven’t hesitated to push and pull for influence in Sacramento. As U-T San Diego reported, legislators still disagree strongly, however, about how to choose among “card clubs, Indian tribes, race tracks and out-of-state gaming companies,” all of which want to play a leading role:

“Lawmakers and these groups have failed for nearly a decade to craft rules for who should control state-regulated poker sites and how much they should pay to do so. During this time, thousands of California poker players have migrated to playing online through unauthorized, often untrustworthy sites based overseas, letting industry and tax money slip away.”

Much of the uncertainty in the Legislature revolved around the way the law should treat California’s Indian tribes, some of which have proven especially eager to get in on the action. That question, in turn, has long been tangled up with controversies over federal policy.

Attention has focused around America’s biggest online poker website, an out-of-state business called Pokerstars. Because it has been working with California’s Morongo Band of Mission Indians and San Manuel Band of Mission Indians, Pokerstars has a vested interest in taking a robust share of the online poker business under a new regulatory regime.

But as the Sacramento Business Journal noted, a rival group of Indian interests, including the Pechanga Band of Luiseno Indians and the Agua Caliente Band of Cahuilla Indians, has accused Pokerstars of raking in illegal profits between 2006 and 2011, when Congress briefly had outlawed online poker as a matter of federal law.

Rival tribes, rival bills

As a result, divisions on legislation have gathered around the battle lines set by the tribes. Pechanga and Agua Caliente have sided with AB9 — authored by Assemblyman Mike Gatto, D-Glendale — because it contains a so-called “bad actor” clause, barring Pokerstars from entering California’s online gambling market.

Morongo and San Manuel, meanwhile, have rallied around AB167, introduced by Assemblyman Reggie Jones-Sawyer, D-Los Angeles. In lieu of a bad actor clause, that bill would punt to the state Department of Justice on which companies could and couldn’t participate.

In an effort to break the impasse, yet another alternative was recently introduced by State Sen. Isadore Hall, D-South Bay, and Assemblyman Adam Gray, D-Merced. Their identical bills are AB 431 and SB 278.

In a statement, the two allies played up their potential to reach a consensus through their legislative authority:

“Hall and Gray serve as Chairmen of each legislative house’s policy committee that oversees gaming within the state and are best positioned to lead a productive dialogue on an iPoker regulatory framework. By working together, their legislation seeks to build consensus on a public policy matter that has eluded California for years.”

Persistent challenges

Despite the substantial market, the lack of movement on online gambling has been attributed to several stubborn factors. As Gatto explained at the recent iGaming Legislative Symposium, legislators have proven risk-averse, and Californians haven’t exactly pushed them to action:

“If we pass a great bill, this isn’t going to make my career in terms of the voting public, and if we don’t pass a bill it’s not going to break anyone’s career. If you went to the average person on the street, I don’t think they’d even have an opinion on this and they would just want to know am I going to see some tax dollars go to my school and my neighborhood.”

Last year, Gatto noted, no more than five constituent emails out of 57,263 sent to him concerned online poker.

The tiny Manzanita Band of Mission Indians proposes to build a ginormous “casino facility” on a 61-acre parcel of land.

The tribe’s tricked-out casino will boast 2,000 slot machines and 45 gaming tables. It also will have a 200-room hotel, a banquet/meeting hall, three guest restaurants, a swimming pool and a 6,000-space parking structure.

There’s just one small problem: The Manzanitas’ reservation is in southeastern San Diego County, near the town of Boulevard. They propose to build their gambling hall 50 miles east of their reservation, in the Imperial County town of Calexico.

There’s would be the first off-reservation casino in Southern California.

Imperial County officials recently approved the proposed Manzanita casino, desperate for the $112 million a year in commerce and 2,400 full-time jobs the tribe promises.

They expect to receive long-awaited approval this year from the U.S. Bureau of Indian Affairs. Then it will be left to Gov. Jerry Brown for his consideration.

I have previously supported Indian gaming.

Partly in recognition of the way Native Americans have been treated in this nation and this state. And partly because I thought it a preferable, albeit imperfect, alternative to tribal reliance on government welfare.

But I draw the line at off-reservation gaming — like 72 percent of Californians, according to the Sacramento polling firm J. Moore Methods.

If tribes are free to build casinos anywhere and everywhere they choose, it will accelerate the proliferation of gaming throughout the state. California will transmogrify from the Golden State into the Gambling State.

As it is, California already is one the nation’s biggest gambling states. We’ve got nearly 60 tribal casinos. We’ve got more than 90 non-tribal card clubs. We’ve got horse racing. We’ve got off-track satellite wagering. And, of course, we’ve got the California Lottery.

Cash Cow

Time was when the gambling industry had “dis-favored” status in the eyes of the state government (kind of like the tobacco industry today). That was because of the problems that go along with gambling, not the least of which is heightened criminal activity.

But then the state government itself developed an addiction to gambling. So, while state officials may consider it less than desirable that hundreds of thousands of residents are regularly depositing their hard-earned money at blackjack tables, betting the ponies or buying SuperLotto tickets, they can’t get enough of  the tax revenue the state’s more than $13 billion-a-year gambling industry generates.

Yes, the lottery helps to pay for schools. And tribal casinos — such as the off-reservation facility the Manzanita Band proposes — create jobs and stimulate local economies.

But as Aldous Huxley, author of “Brave New World,” famously stated, “We know the pursuit of good ends does not justify the employment of bad means.”

– Joseph Perkins

By ELISE VIEBECK

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 Luiseño 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.