New California Online Poker Bill Still Prohibits PokerStars

sealofCaliforniaOn December 1, California Assemblyman Mike Gatto (D-Los Angeles) introduced an online poker bill, AB 9, otherwise known as the Internet Poker Consumer Protection Act of 2015.  AB 9 was sent to the Committee on Appropriations, and since it was marked as an “Urgency” measure it would need a 2/3 vote in both the Assembly and Senate – assuming it ever gets that far.

The California State Assembly will reconvene for the 2015 session on January 6th, giving us a month to dissect the bill.

Gatto is a relatively new face in Sacramento, assuming office in 2010. The introduction of AB 9 came as a bit of surprise, as Assemblyman Reginald Jones-Sawyer (the California Assembly’s online poker champion in 2014) had indicated he would be introducing an online poker bill in December as well.

It will be interesting to see if Jones-Sawyer introduces his own legislation or if he throws his support behind Gatto’s bill. And of course there will likely another online poker bill introduced in the State Senate at some point as well.

As with past legislative efforts in California, AB 9 would legalize intrastate online poker in California.

As Chris Grove noted on Twitter, AB 9 bears a strong resemblance to the draft of an online poker bill introduced this past summer by the coalition of 13 tribes led by Pechanga – one of which, San Manuel, has since defected to the other side.

Bad Actor/Tainted Assets clause

The Bad Actor/Tainted Assets clauses have not only returned, but they are as strong as ever, appearing in two separate sections, and blanketing anything to do with PokerStars from their trademarks to the data:

“… the Legislature finds that licenses should not be granted to those entities and persons who knowingly engaged in unlawful Internet gaming after December 31, 2006. In addition, the Legislature finds that the use for intrastate Internet poker of brand names, trademarks, customer lists, software, and other data associated with, or developed or used in connection with, unlawful Internet gaming after December 31, 2006…”

However, AB 9 goes even further than previous Bad Actor/Tainted Asset language by highlighting purchases, such as Amaya’s purchase of PokerStars:

“In the Legislature’s judgment, a knowing decision to purchase or otherwise acquire that data for use in connection with Internet poker in the state bears directly on the applicant’s suitability and must be considered in any determination whether to license that applicant under this chapter.”

It should be noted that the way this passage is written it would not  necessarily be grounds for exclusion.

However, later in the text another passage covering the same topic  is more strongly worded, and would be a non-starter, as it denies a license to any “person or entity” that:

“Has purchased or acquired the covered assets of any entity described in paragraph (8) or (9), and will use any of those assets in connection with Internet poker in the state.”

What’s in the bill

  • Licensing terms would be 10 years with auto-renewals and require a one-time fee of $5 million, as well as undisclosed annual fees
  • Offering or playing online poker at an unlicensed site would be punishable by law
  • Deposits would have to be made in-person (yeah, you read that right, online purchases made at brick & mortar locations) either at the home casino or at a “Satellite Service Center” – It would be surprising if this remains in a final bill
  • Only qualified card rooms or federally recognized California Indian tribe will be able to obtain a license from the state to operate poker games via the Internet
  • Furthermore, the bill prohibits anyone that accepts bets from players in California, who are not physically present on Indian lands when making those bets from obtaining a license – hello Santa Ysabel tribe
  • The bill creates the “Internet Poker Fund” where California’s cut of the revenue will be held and later divvied out to problem gambling initiatives and other earmarked measures

What’s not in the bill

Horse-racing remains the elephant in the room for California online poker.

There is only a single mention of horse-racing in the entire 60+ page draft, and that mention is only in reference to horse racing having a UIGEA exemption.

Bad Actors and the steep licensing fee (which essentially shuts out all smaller card rooms and tribes) will certainly be hotly debated, but I still feel the racing industry is the biggest roadblock to an online poker bill becoming law in California, especially with the bill needing a 2/3 vote to pass.

There are three potential resolutions to this:

  1. Loosen the licensing requirements to make racetracks eligible;
  2. Try to push the bill through without the support of the racing industry;
  3. Offer the racing industry a stipend (perhaps out of the Internet Poker Fund) similar to the payments made to small and non-gaming tribes in the state.
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