The California State Assembly’s Appropriations Committee Has Approved an Online Poker Bill
A committee in the California State Assembly voted to approve an online poker bill last week. The Assembly Appropriations Committee approved AB 2863, which is a modification of earlier iPoker bills which failed to gain traction.
Previous bills had a controversial “bad actor” clause, which banned companies which continued to accept real money play from Americans in the wake of the Unlawful Internet Gambling Enforcement Act of 2006. The clause in previous bills largely was seen as an attempt to keep PokerStars out of California’s online poker industry, in order to protect California tribal operators.
Agua Caliente and Pechange Bands
The Agua Caliente Band of Cahuilla Indians and the Pechanga Band of Luiseno Indians have been staunch supporters of the bad actor clause, while the Morongo Indians have a deal in place to work with PokerStars, if California iPoker is approved.
Under AB 2863, bad actors would be able to operate in California, if they pay a $20 million fee in excess of the normal licensing fees. PokerStars once paid a $700+ million fine to the U.S. Department of Justice, so the world’s largest online poker site would be able to pay such a stiff fee.
$20 Million Bad Actor Fee
If the operator does not pay the additional $20 million fee, then it would have to wait an additional 5 years before entering the California online gaming market. That would present a major obstacle, because competitors would have 5 years head-start on building a brand and an online customer base.
Accrued Assets Banned
A second stipulation in the proposed bill would keep operators from using “accrued assets”, which suggests that player lists would not be legal. That might be an attempt to negate one of PokerStars’s biggest advantages — a player database of California customers.
In the years before Black Friday (pre-2011), PokerStars was the biggest online poker operator in California. It therefore has a huge database of potential customers. Card players loved the PokerStars interface, along with their huge guaranteed prizes, due to the large player liquidity. If PokerStars and its partners could use that database, the new site could build a huge advantage quickly. The clause seems to be against American business principles, so it is likely to be problematic in the upcoming negotiations.
$12.5 Million Deposit
Another stipulation is that online poker operators must pay a deposit of $12.5 million to get into the market. $6.3 million of that deposit would be offset in a reduction of taxes, until the amount is paid in taxes.
The tax rate on California online gambling would be $10 million. The money would be paid into the California General Fund. The payments are separated from stipulations involving the $60 million paid by the California horse racing industry, so the 10% would be paid to the General Fund under any circumstances.
How the Legislative Process Works
With the successful vote in the Assembly Appropriations Committee, Assembly Bill 2863 now goes to the floor of the California State Assembly for a full vote. That vote might not happen for a while. When it does, the measure will have to pass with a two-thirds majority in order to succeed.
If that were to happen, AB 2863 next would go to the California State Senate for a vote. Once again, the bill would face scrutiny among the Senate and require a two-thirds majority. If the bill was passed in the Senate, then it would go to the desk of California Governor Jerry Brown.
Rivalry between California’s Tribes
California has been rumored to be on the verge of passing an online poker bill for three or four years. A number of measures have been proposed by state senators and assemblymen. Each time, the legislature has failed to pass iPoker legislation, because the various political factions cannot agree on the best course.
The consensus opinion is California’s tribal gaming interests cannot agree on online poker and the politicians reflect the indecision of their supporters. The Pechanga and Agua Caliente bands, which are rich from land-based casinos and therefore influential, lead a majority of the Native American tribes in opposing powerful private interests like PokerStars. A minority of the tribes want to work with PokerStars, so they oppose any legislation which would ban the big private interests (bad actor clauses).
Whether AB 2863 ends the impasse is anyone’s guess. Given the high bar to pass the gaming legislation (67% of votes), the smart money is the impasse will not be broken.