For online gaming, Obama administration leaves uncertainty in California

Around the nation, a recent U.S. Department of Justice memo is viewed as giving a green light for the future of online gambling. But in California, many close to the high-stakes issue say the battle is far from over.

The document clarifies a federal law, the 1961 Wire Act, which has a prohibition against online gaming that applies only to bets on sporting events. Many are interpreting that position as opening the legal floodgates for the acceptance of other forms of Internet gambling, including poker.

“I think most of us assumed that the Wire Act did not apply to intrastate Internet gaming, but this confirms it,” said Sacramento attorney Howard Dickstein, a specialist on tribal gaming and jurisdictional issues.

“And it also provides California with the opportunity apart from what the federal government decides to do with Internet gaming to enter into agreements with other states to increase the market, the liquidity, and viability of state authorized Internet gaming,“ Dickstein said.

But while the memo does clarify the formerly ambiguous legal status of intra- and interstate online gaming, states must pass the legislative licensing framework, which has been California’s challenge for the past few years.

And the federal stance on the legality of online gaming is far from the most pressing issue when it comes to the political workings behind the future of California gaming.

“In three years of discussing Internet gaming in California this issue has come up maybe once or twice,” said David Quintana with the California Tribal Business Alliance.

“Clarifying this issue and its effect on the ability of [a] bill getting passed or not is the equivalent of saying whether a race car that has leather or vinyl seats is going to win the race.”
With both of last year’s contentious online gambling bills SB 40 and SB 45 set to expire, a new bill  under the supervision of Senate Leader Darrel Steinberg of Sacramento is in the works.  

Quintana said the fate of the online gaming legislation has much to do with Capitol politics surrounding three major issues:

Who gets to operate the online gambling sites? Tribes only? Tribes, card rooms, and race tracks? Tribes, card rooms, race tracks and advance deposit-wagering companies?
Every one of those players has a vested interest to either widen or narrow ownership.

Then, once the configuration is decided, how will it be financed?

Do the participants put up 100 percent of the money to operate that site or 51 percent? Because the smaller the need to put up (money) to operate the site, the more you are allowing out-of-state non-gaming people to come in, like big vendors from overseas or venture capitalists funds, to get behind some of these players.

What’s the scope of gaming going to be? Is it just poker, is it poker plus some smaller games?

According to Quintana, the more games you allow, the less likely you are to have tribes who agree to that legislation because that’s going to affect  brick and mortar facilities.

“Those are really going to be what the fights are going to be about in the legislative trenches, this [clarification] is a spelling error, that’s all,“ said Quintana.

Though framework for the new bill is still being developed, Dickstein says the bill will probably be more market-oriented, not making arbitrary choices amongst operators and allowing market forces to play a more significant role in deciding which companies and operators are successful.