The Mouthpiece


By Martin Owens
Contributing Editor


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    Martin Owens

    Playing for Fun Becomes Serious:
    California Starts On Its I-Gaming Homework At Last

    "All genuine knowledge originates in direct experience"
    Mao Tse-tung


    The history books tell us that hundreds of thousands of fortune seekers swarmed into California in the Great Gold Rush of 1849. What isn't told is that many of the Forty-Niners had no idea what they were trying to do. Some even expected to find gold bars, refined and minted, waiting in stacks. Ruin was averted by experienced miners from Chile and Mexico, who taught the would-be millionaires how to dig and crush the ore, and by Chinese immigrants showing how to patiently wash the river gravel for gold dust. California later bestowed its gratitude by outlawing all such damn foreigners, and their nefarious schemes to get rich at our expense.

    Until just now, a different version of the same story was repeating itself in the all-hands political rodeo that represents California's attempt to expand licensed Internet gambling, particularly poker. All the so-called stakeholders- licensed poker rooms, Indian gaming tribes, legislators- knew just what they were going to do with the money once they got it. Trouble was, nobody had a clear idea of how to get it.

    As with the old Forty-Niners, most had (and still have, alas!) only the haziest idea of how the actual process works. Various online gaming operators abroad were contacted and consulted, but the record shows they were not listened to. Again and again, formal and informal proposals involved one party (us!) getting rich and all rivals (them other so-and-so's) banished. Of course this is a legal and political impossibility. All this grew from a faulty concept of operations: Internet gambling is a global market, but many legislators imagined (and still do) that California's I-gambling potential could be forever bottled up in two or three or five "hubs" or main licensees. But California contains about 67 Indian gambling operations and 91 licensed card rooms, each and every one of which is jealous to maintain its rights and its profit potential.

    All such efforts to cram a global market into a state-size straitjacket are, to put it mildly, counterproductive. California's vested gambling interests have only recently been weaned away from implacable, all-weather opposition to Internet gambling in any form. Only recently have they come to recognize it as the key to engaging the younger demographic groups- without which they will not thrive. Some of them, truth be told, won't survive unless they adapt to the new realities. Of course, this is true for all in the long run.

    Equally problematic was the demand, contained in at least one piece of prospective legislation, of advance payments of up to $100 million per licensee, depending on timing and other circumstances. Personally, I cannot help but wonder - in a time when we have entire governments unable to finance so much as a cheeseburger for half down, who's got $100 million in a desk drawer? My formidable mentor and colleague, Prof. Nelson Rose, avers that there are quite a few parties (ultra-large online operators, big Vegas operations, etc.) who could come through. He ought to know - he's America's senior authority on gambling law and the fun things that go with it. I still have to ask, though- what concessions would they demand for such heavy payments up front?

    In any case, it's a relief to report real progress at last. California's gaming tribes- some of them, at least- have begun to meaningfully engage with the realities of Internet gambling. Certain California Indian tribes are breaking out in front of the pack and offering Internet poker online. The lineup includes tribes who already have successful brick and mortar operations. The politically powerful Morongo and San Manuel tribes are fielding the Calshark site (www.calshark.com) In terms of professional design, layout and marketing savvy, it could stand comparison with any play-for-money operation. The Barona tribe's operation is also moving to offer poker-for-fun on its existing Web site.

    For their immediate purposes, it is an excellent way to build up a clientele, based on their existing customer lists. If and when (mostly when) California licenses Internet poker, those free -play sites will have served their purpose by creating a ready made market. In the meantime, their success offers additional political leverage toward pressuring the California state legislature to approve and license Internet gambling within its territory under the provisions of the UIGEA.

    But perhaps most important is actual hands on experience. They're finally educating themselves about how that peculiar critter called Internet gambling actually eats, sleeps, and moves, day to day and play to play. Not all of the skill sets of real-world gambling transfer to online operations. That can be a hard lesson to learn, especially if the brick an mortar operation is already a successful one.

    Nevertheless, the news is all positive on this one. California's legislature is scheduled to take up the expansion of Internet gambling beginning in January 2012. The more the audience and the stakeholders are composed of parties who have actually participated in I gaming at some level, the better the chances for quick passage of the licensing law, and a rational regime of regulation and supervision.

    Mr. Owens is a California attorney specializing in the law of Internet and interactive gaming since 1998. Co-author of INTERNET GAMING LAW with Professor Nelson Rose,( Mary Ann Liebert Publishers , 2nd ed 2009) ; Associate Editor , Gaming Law Review & Economics; Contributing Editor, TSN. Com Comments and inquiries welcome at to mowens@trade-attorney.com.

    Copyright 2011


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