Key online poker bill gets heavily amended

Amid parliamentary maneuvering over one of the most important issues of the year, online poker, dueling bills face a Senate committee showdown next week.

Sen. Lou Correa, D-Santa Ana, believes his online poker bill, SB 40, will make it through the Legislature even if he misses Friday’s policy committee deadline. That’s because back in May, Correa put an urgency clause on the bill, making it eligible to bypass some of the deadlines that can kill legislation – most of which have already passed. He also promised changes to make the bill what he described as more “consumer friendly.”

On Wednesday, he amended the bill again to open up the opportunity for more types of companies to offer poker, while more harshly punishing those who break the rules.
Both Correa’s bill and a competing online poker measure will be heard in the Senate Government Organization Committee on July 12. It will be an informational hearing, and neither bill is currently scheduled to come up for a vote.

The author of that rival bill is also the chair of the Committee — Sen. Rod Wright, D-Los Angeles. His bill, SB 45, hasn’t changed or moved since being introduced in December. But it carries the same urgency clause that could allow it to take effect more quickly after passage. As currently drafted, Wright’s bill has fewer specifics, focusing more on creating a framework for online poker.

Among the key new provisions in Correa’s SB 40 is a harsh new punishment for “operating or playing on an unauthorized website.” In addition to the $10,000 fine, violators would face “seizure and forfeiture of all personal and real property used in or derived from the operation of or play on an unauthorized website.” This raises the possibility that the authorities could come take your home computer if you’re caught playing on an illegal site.

The bill also appears to liberalize the eligibility to become a poker provider. SB 40 was limited to “up to 3” licenses. The revised bill removes this limit, while stating that there is “no requirement of membership in coalition, no preferences among eligible entities.” The amended bill opens up eligibility to current gaming tribes and card rooms.

Then there’s the matter of the state’s cut. One thing that is new is a $5 million, non-refundable application fee. If a bid is approved, much of that money would then count against later payouts to the state. But the high fee is designed to keep less prepared companies from attempting to enter the market.

The bill still calls for the state to get 10 percent of the take. But new provisions seek to frontload this revenue. Entities that apply to a license within 90 days of the bill going into effect would prepay $50 million to the state against their future revenues, while those applying after have to pay $250 million.

The amendments also seek to address some of the concerns that have been raised with allowing online poker in California. There is now a federal opt-out provision, allowing California to go their own way if the federal government comes up with its own online poker system – that is, if the feds let states opt out, which is not a given.

There is also a provision stating that online gaming would not violate the exclusivity clauses in gaming compacts. But it’s unclear if this is enforceable. Some tribes and gaming experts have said that because of the universal availability of online games, any state-sanctioned online gambling would violate exclusivity by its very existence, no matter what the bill says.

Correa’s decision to open up the eligibility of who can be a provider could remove some of the objections to the bill. SB 40 has been closely identified with one of its key supporters, the California Online Poker Association (COPA). COPA, in turn, is backed by the Morongo Band of Mission Indians, among other groups. A major casino gaming tribe, Morongo helped get the ball rolling back in 2008 when it backed an online poker bill by then-Assemblyman Lloyd Levine. Morongo spent much of 2008 and 2009 trying to gather tribes into a consortium – which later became COPA – to support the idea.

“Absolutely,” said COPA spokesman Ryan Hightower, when asked if his group was still behind the bill. “The entire set of amendments reflects a greater chance for California to earn more income.”

Hightower also sounded optimistic, despite a long history of inaction on the issue in the state Legislature.

“I think within the next 75 days we’re going to see some movement on the bill, and it’s still in a very good position to pass this year,” he said.

However, there have already been a half-dozen such information hearings, with over 15 hours of testimony. Back in March, Senate Pro Tem Darrell Steinberg, D-Sacramento, called for a working group to help bring SB 40 and SB 45 together, but those efforts don’t appear to have yielded a unified approach.

“We still oppose it,” said David Quintana, political director of the California Tribal Business Alliance, which has been working to block the legislation. He said the $50 million buy-in is another way to keep competitors out and leave the business to the card rooms and gaming tribes who have been behind the idea all along.

“They’ve already got their stuff dialed up,” Quintana said. “They want to keep it private. They keep trying to muscle their bill through when there is so much opposition.”