Dry Lightning

California's "progress" on Internet poker.
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Martin Owens - Contributing Editor
"It rains on the just and the unjust alike...except in California."
Alan Moore


Philadelphia, PA (Sports Network) - Here in the Golden State, politics has come to resemble the weather. To be sure, there may be the occasional cloudy day or cold front, perhaps even a brief sprinkle or so. But we're in the middle of a drought and we're gonna stay there; at the end of the day, in other words, business as usual.

Which is why even a minor legislative miracle has raised very few eyebrows here in Sacramento. An Internet poker bill has not only made it out of the original committee it was introduced in (Government Operations) but also passed through the Finance Committee, and may be on its way to a floor vote. The reader has to understand: for California Internet poker bill, this is unheard of. Only once in the past seven years has such a bill even made it out of the G-O Committee, and never before has such a bill made all the way through Finance.

But the cheers, if any, are muted, and the parade banners remain furled.. Why? The bill in question, AB 431 by State Senator Hall, has gotten so far for two reasons. First, it enjoys the unqualified support of the chairmen of the Assembly GO committee, and secondly, legislators felt free to vote for it because it contained no objectionable measures or requirements that might upset their respective constituents. In other words the bill was what they call "a placeholder" containing few if any details about how Internet poker is to be licensed and run in California. The bill does not specify who gets what, or who is not entitled to something else.

Instead this proposed law, along with its twin in the California Senate, is a vague hurrah, a general statement that online poker must comply with applicable laws, protect the consumer, and be honestly run. All very nice, but these are not the issues that have kept an Internet poker law off California's books for the last seven years.

The Real Problems

California's main problem with authorizing Internet poker is that there are too many claimants. Under various licensing and supervision authorities, California now features about 90 municipal cardrooms, 70 Federally recognized tribes with the right to operate casino style gambling on their respective lands and reservations (with more lining up all the time; the Golden State is home to 110 of the 600+ recognized native nations in the USA), something like half a dozen horse tracks and a separate commission to run the state lottery. And almost every one of them would like to get in on online poker.

This makes 160 odd possible online poker sites. Even though California, at 38 million, is America's most populous state, there is just not enough action around to support all of them. And this has produced years of political infighting, with each faction striving, not to win the race, but to make sure the other guy doesn't run at all. In fact, the fighting has gone beyond factions. Not only are Indian tribes angling to make sure they're the only ones allowed Internet poker licenses, groups of tribes are trying to exclude each other from the online poker market. As usual, the political poison pills are marketed as measures to protect the public. But even a cursory examination shows that their real purpose is to throw up entry barriers. One Internet poker bill asks for $5 million upfront from all applicants (earlier bills had put the price tag as high as $30 million!). For the larger resorts and operations, this is doable, not so much for the smaller operators- the tribes and cardrooms which aren't located near big cities. Another seeks to prevent California licensees from partnering with so-called "bad actors" - mainly foreign I - poker operators like FullTilt, who took American action after the UIGEA was enacted in 2006. The real objection is not to their alleged lawbreaking, of course, but to the market advantage conferred by years of actual online experience.

And so it has gone for the last seven years. No one faction has the power to impose their will about online poker, but any one of them can block it. So even if AB 431 continues to advance, at some point the rubber has to meet the road- the good intentions and fine sentiments have to be converted into programs, standards, requirements, taxes and fees. It will take a lot of hard work and more than a little luck to pull it all together.

And there is a further detail which has been noticed by practically nobody. It won't be just a matter of passing a bill, however detailed. Procedures and regulations will have to be written by the California Department of Justice: written, approved, edited, and re-edited, put out for comments from anyone who might conceive themselves to be an interested party, then edited again. This is all legally required. The shortest estimate I ever received for promulgating these new regulations and procedures, for having actual, workable rules in place, is two more years, starting from the time the governor finally signs an online poker bill into law.

Oh, and one more thing: California's system of charging for poker doesn't fit with anybody else's. Most state or national governments who license poker allow the house to take a "rake"- that is a small commission off the top of each pot. Not California. In the Golden State, the house must content itself with a charge per seat or per game. This is no particular problem so long as all Internet poker is played within California itself. But sooner or later the call will come to allow interstate play. This must result in even further delay as California's rules are adjusted to fit in with the rest of what is, after all, a global market.

But at least as regards Internet poker, time is something California seems to have plenty of. As with the weather, we can predict clouds and thunder, even dry lightning here and there. But little if anything will reach the ground. All we have is the faith that the drought will break.

Eventually.

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. Comments and inquiries welcome at to mowens@trade-attorney.com.

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