California Online Poker Committee Hearing Positive First Step

The California committee hearing for online poker was not about any specific bill.  It was an informative session that allowed more than 30 speakers to give input into how the California online poker industry might look.

The committee members that spoke all appeared to be neutral or supportive of regulating online poker in California.  Chairman Isadore Hall, III and Assemblyman Brian Nestande spoke like their votes are a sure thing.  Other members echoed that sentiment when they had the floor, albeit a bit more cautiously.  The common theme was that it looked like all sides were close to an agreement.

It was clear that the members of the committee had done their homework.  The questions and commentary made that clear.

Many invited speakers gave informative speeches about their organization’s involvement in the growth of online poker.  New Jersey operators and a former Chairman of the Nevada Gaming Control board gave testimony that showed that the process can be easy.  There were several recommendations about taxes, one key point being that taxes need to be reasonably low to compete with existing offshore sites.

Bad Actor Clause

Using my ability to read people, I suspect the bad actor clause is not going to make it into a final draft.  There is little support for it outside of the tribal representatives.

David Fried of the California Grand Casino also supports a bad actor clause for what he felt was a need for a full disclosure on which companies may enter the market.  He implied that a bad actor clause would encourage smaller operators to make the initial investments in licensing and product development.

Members of the committee did not seem to be sold on that, nor did California gaming regulators.  Assemblyman Nestande made it clear that he opposes any language that would take the licensing power out of the hands of regulators.  Those that would be tasked with finding licensing suitability also alluded to their opposition to bad actor clauses.

This may cause the majority of tribes to shy away from their support.  On the other hand, from reading this committee, an online poker bill with a bad actor clause may never make it to the California Assembly floor.

PokerStars

The competitor that bad actor proponents are trying to keep out of the market is PokerStars.  An announcement about a partnership between PokerStars and the Morongo Band of Mission Indians, the Commerce Club, the Hawaiian Gardens Casino, and the Bicycle Casino, hit the wire just as these groups took the podium at the hearing.

I believe in coincidences, but not this time.

Another interesting aspect of the hearing was that speakers did everything they could not to say the brand “PokerStars”.  Instead, speakers used a variety of phrases to describe the company.

Regulators

California regulators made it clear that their offices can handle the additional tasks related to online poker licensing.  The need for more funding for investigations is apparent.  Considering the cost of a license may run $5-$10 million, the department’s needs are certain to be met.

A member of the California Department of Justice commented that more funding will be needed to fight offshore sites that continue to do business in California.  It is hard to imagine that anyone would fight this considering several operators mentioned that illegal offshore sites are hurting the current regulated markets in other states.

Opposition

Three people spoke about problem gambling and other issues that should be considered.  Terri Sue Canale, Deputy Director of the California Office of Problem and Pathological Gambling, gave testimony that only 1 percent of California’s problem gamblers considered online gambling to be their primary choice of game.  Only 2 percent considered it secondary.  Her office does not take an official online poker position.

Andy Abboud of Las Vegas Sands made several points about his company’s opposition to online gambling.  A couple of interesting admissions came out of it.  From my point of view, Las Vegas Sands is not really against online poker. Abboud went so far as to say, “We never had a strong problem with it (poker)” and further expanded that statement, calling it a neutral stance.  The opposition appears to be to the gateway poker provides to the eventual legalization of casino games.

Chairman Hall took the chance to bring up that Venetian and Palazzo provide sports books that offer the Cantor Gaming mobile sports betting app.  Abboud seemed to imply mobile sports betting could only be “within the four walls” of the properties.  In fact, the mobile app works anywhere in Nevada.

Abboud made an interesting point using Boulder City, Nev. as an example.  Boulder City is a bedroom community located southeast of Las Vegas.  It was founded as a camp for the men that constructed Hoover Dam.  It was a federal company town during that time and had strict rules against booze and gambling.  The city was dry of alcohol until 1969. To this day, gambling is still illegal in Boulder City.  Nevada’s regulation of online poker preempted that ban to a certain extent as Boulder City residents may now play in their homes.

This is a good point about how online poker regulation could preempt local gambling ordinances.  One solution would be to blackout certain areas through geolocation.  Anna Sainsbury, CEO of GeoComply, made it clear that was possible.  She stated that her company’s geolocation systems could pinpoint exact addresses or areas, such as schools and government offices, and make those properties fail a location check.

Reverend James Butler was the last scheduled speaker.  He spoke about his opposition to online gambling and was eventually cutoff by Assemblyman Nestande, saying, the “Genie is out of the bottle”.   Nestande continued, “people have to take responsibility” for their actions.

This online poker committee hearing is only a small step in a massive process.  From this point of view, this committee can agree on a bill that does not include a bad actor clause.  While that would be a huge step for the online poker industry, it is nowhere near the ultimate victory of having a bill pass both chambers and get signed into law by Governor Jerry Brown.

The full details of the California online poker committee hearing may be found here.