The Mouthpiece

By Martin Owens
Contributing Editor

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    Martin Owens

    Backward steps in California

    Internet gaming loses powerful friends

    "There is no gambling like politics."
    Benjamin Disreali

    Was it only a year or so ago that California was a strong candidate to lead the other states toward legalizing Internet gaming? After all, the Golden State seemed the most natural choice. It has a big enough population to guarantee liquidity, a liberal, tolerant attitude toward adult pastimes, great online infrastructure and innovative digital industries directly linked to a vibrant entertainment complex. How could it miss? But not only has California lost the race to be first, as New Jersey, Nevada, and Delaware open up licensed I gaming, it increasingly looks like the state may no longer be in the online race at all.

    The End of Rod Wright

    Looking around today, we see that California has not only failed to progress in this direction, but has even taken steps backward. At the end of January, state Senator Rod Wright, a longtime champion of expanding licensed Internet gambling, was effectively removed from play by a criminal trial which he lost. The charges were perjury and voter fraud, based on his supposed misrepresentation that he lived in the Inglewood district he represented, whereas he actually resided elsewhere. At bottom, this was probably no more than an administrative error, but it's just the sort of thing that politicians use to make mountains out of mole hills and bedevil each other. Watergate this was not. Inasmuch as other California candidates and officeholders have been revealed as doing the same with no prosecution in sight, Sen. Wright's real offense seems to have been annoying the Los Angeles Democratic establishment.

    It is a very real loss for licensed Internet gambling in California, however. Rod Wright is one of the very few California lawmakers who has taken the trouble to educate himself on the realities of Internet and interactive gaming. As chair of the committee overseeing gambling operations, he took his responsibilities quite seriously. For years, it was he who went to the tradeshows, talked to the operators and vendors, held informational hearings for all interested parties in the Capitol, and worked to overcome the mutual animosity between potential stakeholders in the future Internet gaming. He had a sense of what is possible- not a perfect sense, but a very good one. Session after session, he would field bills to make Internet gambling licensed, legal, and supervised in California.

    Well, that's all gone now. Even if Sen. Wright can get his conviction overturned on appeal, he has lost his committee chairmanships, and isn't likely to get them back..

    Taking Off the Debt Spurs

    Another friend of the I-gaming push has also suddenly been taken out. California's massive and ongoing deficit is no longer headline news. And one of the big selling points for legalized Internet gaming has always been the increased tax revenue. But now a combination of tax increases, cuts and accounting "adjustments" has resulted in a small surplus - on paper, anyway. Which takes off the pressure to find new sources of revenue. Gambling taxes would still be nice to have, but the argument that California can't turn down anything which might bring in a little more money has now been spiked. The spurs have been taken off.

    What's Left

    What will remain after Wright's departure and loss of the budget lever is gloomy enough. To begin with, 2014 is an election year, and anyone familiar with the politics of gambling knows what that means. Heads down until the crusade passes by. You can pass laws legalizing marijuana, polygamy, and the constitutional right of boys to use the girls' bathroom if they feel like it. But for heaven's sake don't get involved with gambling. That's immoral. A single I-gaming bill is before the Senate (no hearing scheduled) and another measure may be introduced in the Assembly. But most observers feel that, barring a long shot, it will be 2015 at least before California seriously considers expanding licensed Internet gambling beyond the horse racing that is already there.

    After this year, there remains the problem of distrust Several Indian tribes who have signed compacts with the state of California for class III (slots) gaming remain very wary of any move to license online gaming statewide. They are concerned that this will take away their existing clientele, and even more concerned that participating on an equal footing with municipal card rooms will erode their tribal sovereignty rights.

    Unluckily, the "solution" proposed by a bloc of the more prosperous and influential California tribes will probably serve only to increase mutual suspicion in every direction. Their answer to the I gaming problem? Limit it to poker only, and then limit the poker only to those top few tribes, and perhaps one or two of the richer card rooms in LA. Though their "proposed legislation" does not say so directly, that would be the inevitable effect of the financing requirement, which demands that any potential licensee "pay upfront fees and establish online poker business based on its own creditworthiness and assets" and be" prohibited from borrowing from any of its online vendors". This would mean that most of California's Indian tribes and almost all the card rooms would be completely shut out.

    Worse, the persistence of the "it's all mine, the hell with you" philosophy demonstrates that for the most part the vested interests of California gambling do not understand that they are now in a global market, like it or not. It cannot be turned it back into a walled garden. You cannot have access to global instantaneous movement of ideas, content and money one moment, and the next moment declare Fortress California. That decision - and it is an irrevocable one-was made long ago. But too many stakeholders won't see this.

    The one bright spot on the horizon is that the California Senate has passed a measure commissioning the study of online gambling and its potential effects. Since online gambling has been a working reality since 1995, it's probably time. Perhaps this time the information will get through.

    Copyright 2014

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