Bad Actor Clause Absent from New California Online Poker Bill

sealofCaliforniaOn Thursday evening California Assemblyman Reginald Jones-Sawyer  introduced an online poker bill dubbed The Internet Poker Consumer Protection Act of 2015. The bill is a marked departure in several key areas from other recent efforts, including Jones-Sawyer’s 2014 iPoker legislation and Assemblyman Mike Gatto’s bill introduced in December.

In conjunction with the release of the bill draft, Assemblyman Jones-Sawyer’s office also released a statement, quoting the Los Angeles Assemblyman as saying:

“The reintroduction of this legislation comes on the heels of a very thoughtful and collaborative discussion process that included substantial input from both the state’s Department of Justice and Gambling Control Commission. It is absolutely essential that we have a proper regulatory structure in place that provides safe and compliant internet poker access.”

Most notably, the bill has no trace of a Bad Actor clause based on a UIGEA adoption point, leaving the task of determining suitability in the hands of the state’s regulatory bodies. The Jones-Sawyer bill would seem to allow PokerStars to apply for an online poker license in California.

Also of note is the bills allowance for racetracks. Under the Jones-Sawyer bill, licensed California racetracks would be capable of applying for an iPoker license and operate an online poker room in the state.

AB 167 is not more of the same, and with these two main sticking points addressed, it could be the bill that finally moves online poker forward in California.

The basics of AB 167

  • All players must be located within California’s borders and be 21 years of age.
  • Licensed operators would run player verification similar to other licensed locales, including disclosure of Social Security Numbers.
  • The bill calls for renewable four-year licensing terms with a $10 million fee. Each operator would be allowed to offer online poker on up to two websites.
  • The state would collect just 8.5% of the Gross Gaming Revenue of licensed operators, but as Chris Grove of OnlinePokerReport.com commented, the bill has a loose interpretation of GGR.
  • The bill has been tagged as an Emergency Statute, requiring a 2/3 majority in the legislature to pass. Regulators would then have 270 days to draw up regulations.

Regulators will determine suitability

There are two camps among the entities fighting for legalizing online poker in California.

On one side is a coalition of tribes who want legislation to expressly prohibit companies who operated in the United States following the passage of UIGEA in 2006. This coalition includes several powerful tribes who are pushing for strict Bad Actor/Tainted Asset language to be included in any bill. Among the 12 tribe coalition are the Agua Caliente Band of Cahuilla Indians, Barona Band of Mission Indians , Pala Band of Mission Indians, Pechanga Band of Luiseño Indians, and the Rincon Band of Luiseño Indians.

Unsurprisingly, Pechanga Chairman Mark Macarro released a statement condemning the bill:

“There is much for tribes to dislike about this bill. [AB 167]

“We are disappointed that the bill disregards important principles from a broad coalition of respected tribes and card rooms that help prevent corporations and entities that previously violated federal law from profiting from tainted software, brands, and databases derived from illegal activity.

“Tribes have been steadfast in the principle that online poker be consistent with California’s longstanding public policy of limited gaming, and that means keeping it to just tribes and card rooms.  California voters have always had the final say on gaming expansion and they have already rejected expansion of gaming for horse racing.”

On the other side is a coalition that has partnered with PokerStars (PokerStars would fall into the Bad Actor category  the opposition desires) who have called for lawmakers to let the regulators make suitability determinations. This coalition includes The Morongo Band of Mission Indians, the San Manuel Band of Mission Indians, Commerce Casino, Bicycle Casino, and Hawaiian Gardens Casino.

The PokerStars coalition has also issued a statement on the new bill:

“We applaud Assembly Member Jones-Sawyer for his thoughtful approach to iPoker legislation in California which takes into account many years of input from stakeholders on all sides, including the California Department of Justice. We are still looking at the fine details of AB 167, but we are encouraged that his approach will move the discussion of online poker forward in a positive direction. The bill seeks to establish a vibrant, competitive, fully inclusive marketplace with choices for consumers that enacts strong consumer protections; requires strict oversight and regulation of operators and licensees; and ensures a financial return for the state. 

“Our coalition strongly believes that – in order to be successful passing iPoker legislation that brings much-needed protection to consumers in a currently unregulated market – the various interests need to work together.  In place of previous attempts to use the legislative process to provide competitive advantages to a few operators, Assembly Member Jones-Sawyer’s bill brings parties with diverse interests together to move legislation forward.

“It’s time to move on, and move forward. We are pleased to see that Assembly Member Jones-Sawyer recognizes this. We applaud his efforts to shift the discussion in a new and hopefully more fruitful direction.”

The favorable view is unsurprising considering AB 167 takes a PokerStars friendly approach to licensing by removing the UIGEA demarcation point (usually set at December 31, 2006) that would prohibit online poker sites that operated in the U.S. beyond this point from applying for a license.

Instead AB 167 calls for the state’s gaming regulators to determine suitability, with only a handful of steadfast prohibitions, similar to those imposed on land-based gaming operators, outlined in the bill.

“The California Gambling Control Commission and the Department of Justice, in conjunction with other state agencies and tribal gaming regulatory authorities, have the expertise to issue licenses to conduct intrastate Internet poker to existing operators of regulated gaming. Further, strict suitability standards must be imposed on those persons and entities seeking to work for or provide services to licensed operators in order to ensure that the highest level of integrity is maintained.”

Racetracks can apply for a license

Recent bills in California have essentially said, “Racetracks need not apply,” and while Bad Actor clauses have received the lion’s share of attention, it was the exclusion of racetracks, with labor unions acting as their ally, that has stalled online poker legislation in the state.

The racing industry, citing their experience offering online wagering, has demanded they be allowed to apply for iPoker licenses in the state, and Governor Jerry Brown has indicated he would not sign an online poker bill that was not to the liking of the state’s racing industry.

The new Jones-Sawyer bill is very clear on this issue, allowing for any licensed racetrack or current gaming provider to apply for an iPoker license:

“This chapter will permit a qualified card room, horseracing association, or federally recognized California Indian tribe to obtain a license from the state to operate authorized poker games via the Internet for players within the jurisdiction of California.”

In the minutiae of the 83-page bill draft eligibility stretches to:

“A California-owned and operated horse racing association that is based in California… whose owner or owners have been authorized, subject to oversight by, and in good standing with, the applicable state regulatory authorities.”

In addition to allowing racetracks to apply for an online poker license, AB 167 doesn’t appear to restrict card rooms from licensure based on size or length of operation, which was yet another point of contention in other recent bills.

More interesting notes from AB 167

The bill references intrastate online poker but there doesn’t appear to be any language that expressly forbids California from entering into interstate compacts with other states.

Playing at unlicensed online poker sites could become a felony under Jones-Sawyer bill, as would the operation of unlicensed online poker rooms in California. To insure enforcement the Unlawful Internet Gambling fund would be created, funded by an unspecified percentage of the revenue from licensed operators.

In-person registration is optional, allowing players who prefer using cash or who are having difficulty with the verification process to create accounts.

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