Is Online Poker Coming to California?

In what looks like a significant breakthrough for US based poker players, this Wednesday saw the successful passage of a political bill through the Assembly Governmental Organisation Committee in California. The bill was the latest attempt to find agreement with the powers that be for a solution to finally regulate online poker in the state nearly ten years after the controversial UIGEA came into effect in 2006.

In what was only the second time we had seen voting in the Golden State to legislate online poker, California online poker bill AB 2863 passed with unanimous support by an 18-0 margin. This is only a stepping stone on the road to full legalization and regulation, however, but it's still an important landmark considering just how complicated the whole process has been for almost a decade.

Assemblyman Adam Gray who was the bill sponsor gave a short statement after the vote was completed.

Gray was also the architect of an earlier version of this bill which passed through the same committee successfully exactly a year ago. Starting life as just a shell the intention was to add clauses and build it into something productive with substance as time goes on.

At the turn of the year one of my colleagues wrote about his prediction that three US states would finally legalise online poker, if things carry on moving along at this pace then he may just turn out to be right.

The Main Players and Sticking Points

As is the norm with political process, it's almost always impossible to find a perfect solution which keeps everybody involved happy.

These negotiations have largely been dominated by disagreements between the interested parties, rather than the lawmakers themselves.

Let's take a look at who is involved.

At the forefront of a coalition dedicated to pushing through the legislation stands Amaya Inc, the owners of Pokerstars and Full Tilt Poker. As you will see, this itself is a problem that could still potentially derail the entire effort.

In support of Amaya is the Californian horse racing industry, labour groups, and several native Indian tribes.

Opposing the coalition is a group of more native Indian tribes led by the Pechanga Band of Luiseño Indians. Their main points of objection have been two fold:

• They want Amaya removed as the figurehead of the drive for regulated poker in the state of California.
• A decent deal needs to be put together for the horse racing industry as currently they have exclusive rights for all online wagering in California, but it would not be acceptable in any form that they be allowed to provide online poker.

On the second point, it looks as though an offer of a $60 million kickback annually from the legislation has smoothed things over dramatically, helped along with permission given for racetrack owners to function as affiliates to the poker providers as well as not being precluded from new forms of online gambling approved in the future.

The Bad Actor Clause

You may have heard of this clause when Nevada completed their regulation of online poker. The point is that any company who continued to provide online gaming post UIGEA will be excluded from obtaining a license under the new regulations for a predetermined time period.

So while Pokerstars is setup comfortably in New Jersey the debate continues on whether or not we will see them in California. It's far from clear what the odds are on either outcome, but you can be assured that in a market estimated to be worth over $400 million all parties concerned will be fighting tooth and nail to support their best interests.

The opposing tribal casino groups are never going to back down in the face of the most successful online poker provider vying for position in their home territory. In the neighbouring state of Nevada a five year ban was worded into the legislation. Why shouldn't that be the case in California they argue.

It's hard not to see their point. When the UIGEA came into law Pokerstars and Full Tilt Poker continued to build their brand and customer base while operating in a more than grey area legally, why should they be allowed to see the fruits of that labour at the expense of those who stayed above the law?

It isn't so clear though. Let's not forget that without Pokerstars takeover of Full Tilt Poker, many players defrauded of their deposited funds would never have seen the return of their money. Pokerstars also paid out more than $700 million to the US government in an out of court settlement to avoid any future legal issues over the Black Friday scandal. They certainly see their debt as more than paid on the issue.

Is it not embarrassing to some degree that Pokerstars was of good enough character to operate in New Jersey but not Nevada?, and in California they're not sure yet. I understand that the states have different laws, but for something like this surely it should be a little more black and white. Maybe as a Brit I'm being naïve about how these matters normally work, but it's strange to see.

Another connected point is the recent arrest on insider trading charges of Amaya CEO David Baazov. If this leads to a conviction then it's going to make life very difficult for Amaya in their crusade to return online poker to California.

So What Next?

Adam Gray explained that this suitability clause will need to be worded into the final bill before it comes up for debate and a vote in the Full Assembly. This isn't as simple as it might appear.

Amaya isn't going to support a clause which excludes them from a piece of this pie. So to maintain the high level of support that the bill currently has, the ongoing discussions will probably be focused on how to get around this. One idea being that Amaya would be forbidden to use it's customer base built up before Black Friday. It would be forced to start from scratch exactly the same as its new competitors.

There has also been argument on exactly who should decide on suitability standards.

Robert Martin from the Morongo tribe, siding with Amaya, told how he thought it was important that outside regulators should be taking care of this because that's how it's done for brick and mortar card rooms in California. Any attempt to conduct this through the legislative assembly will likely lead to long and costly legal challenges.

As you might expect, Mark Macarro from the Pechanga tribe took the opposite stance and said

Adam Gray has pointed out that online poker was not actually illegal in California post UIGEA, it was just a grey area that needed tidying up. Daily Fantasy Sports is going through the same process in California right now. In other words, it just depends who you ask!

Finally

So the process is moving along much better than we probably thought it would last year.

One positive change for the players if this finally gets the go ahead is that the operators finally have somebody to answer to. The days of fly by night business people draining the kitty and letting everything go down the pan might soon be over. New players coming into the game for the first time will be able to have a confidence that their money is safe. There have been too many poker websites that have shut down without honoring withdrawals over the last twenty or so years.

Hopefully this is the end of the “wild west” days and this new American model can help to finally put the pieces back together of what we had back in 2006. There has been chatter about the possibility in the future of “rest of the world” players being allowed to play on US regulated platforms. I certainly hope so, it would be great for the online game.