Internet poker stymied in Capitol

Internet gambling, an illustration. (Photo: Pedro Sala)

Legalized internet poker – a fruitless effort in California that has spanned seven years, a dozen major bills and hundreds of hours of tense talks – was headed for defeat again in the Capitol, following opposition from a key Senate committee leader.

Casino-owning tribes, card clubs and the horse racing industry were unable to agree on a formula that would allow them to share in the online gaming market, potentially worth hundreds of millions of dollars. Of the four bills targeting internet poker, one was on the inactive file in the Assembly, another was held in its own committee in the Senate and two others showed little movement.

Negotiations over authorizing internet poker in California have been going on at least since 2008 as new legislation is proposed each session, but deep divisions remain.

The inability to hammer out a compromise prompted Sen. Isadore Hall, D-Compton, the chair of the Senate Government Organization Committee, to not hold hearings on online gaming legislation. Hall’s panel has jurisdiction over gambling, alcohol and horse-racing, among other issues. To emerge from the Legislature, any online gaming bill would have to pass through his committee. He also was not likely to participate in an upcoming joint hearing on the issue with an Assembly committee.

“He said he will not be setting or hearing any internet poker bills this year,” said attorney and lobbyist David Quintana, who represents the California Tribal Business Alliance, which has been active in the internet poker negotiations.

Quintana was one of several people who said they spoke with Hall on Thursday and Friday about Hall’s position.

“Online poker is dead,” said another person familiar with the issue. “There was no momentum. He’s not going to hear the bills.”

There was no immediate comment from Hall or his office.

“This is a two-thirds vote bill and we can take it up any time we want,” Gray said.

Four bills targeting internet poker were proposed this year; none have cleared its house of origin.

The bill that has moved furthest through the Legislature is AB 431 by Assemblyman Adam Gray, D-Merced, the chair of the Assembly Governmental Organization Committee. Gray’s bill, a “shell” or “spot” bill now on the Assembly floor, has been viewed as a likely conduit for the main legislation if a compromise can be reached. Gray’s measure is on the Assembly’s inactive file.

Friday was the deadline for bills to move out of their house of origin, but the cutoff doesn’t apply to the internet poker legislation, which require two-thirds votes. The Legislature adjourns for the year on Sept. 11, although the gaming legislation could be made into two-year bills and considered next year.

“This is a two-thirds vote bill and we can take it up any time we want,” Gray said, adding that the bill remains the subject of negotiations.

“This issue is alive – very much so,” Gray said. “We’re in the process of holding stakeholder meetings. Do we want to establish a framework for internet poker or do we want to do nothing?” he added. “Those are the only two choices.”

Negotiations over authorizing internet poker in California have been going on at least since 2008 as new legislation is proposed each session, but deep divisions remain between the various interests and among the tribes themselves on how to best authorize gaming.

Assemblyman Mike Gatto, D-Glendale, authored AB 9, one of the four gaming bills, and thought an accord was within reach and that an agreement was still an option.

“Now, perhaps it seems a little idealistic,” he said. “Online poker has proven difficult.”

Key sticking points include opposition from powerful gaming tribes to allowing the horse-racing tracks to have their own poker sites and the dispute over whether major, out-of-state online gambling companies, such as PokerStars, should participate in California.

Estimates of the size of California’s potential online gaming market vary wildly.

For example, Morgan Stanley, in a 2013 report, estimated that the California market would generate $435 million the first year and nearly $1.2 billion at maturity. Deutsche Bank put the annual revenue at $373 million at maturity, while Academicon offered a lower estimate of $217 million initially rising eventually to a high of $263 million.

A communications and financial research firm, Capitol Matrix, estimated the market the first year at $729 million, rising to $1.3 billion – which appeared to be the highest estimate of those who surveyed the potential California market in the last four years. A study commissioned by several casino-owning tribes says online gaming could result in $845 million in revenue and more than 2,600 new jobs by 2020.

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