Tribes, card clubs looking to offer Internet poker in California

As the countdown to the 2009 legislative session begins, a consortium of Indian tribes and card clubs hope to offer online poker– a move that rivals say could jeopardize tribal gambling in California.

The Legislature returns to action next week after a three-week recess, and the push for Internet poker has emerged as one of several last-minute proposals that interest groups will try to jam through before the end of the legislative year in September.

The push pits one tribe – the Morongo Band of Mission Indians, against a group of other tribes, including members of the California Tribal Business Alliance (CTBA).

Morongo has joined forces with some card clubs to form a new group—the “California Tribal Intrastate Internet Poker Consortium LLC,” according to a draft agreement circulating among tribes. Other members of the limited liability corporation (LLC) formed to back the deal include the Commerce Club, a Los Angeles-based card room that has sometimes been at loggerheads with tribes over gaming regulations in California, as well as numerous other tribes.

“The effort is still coming together,” said Patrick Dorinson, an outside spokesman for the Morongo Tribe. “There is no author for any bill yet. There is no official legislation. There’s a lot of drafts floating around.”

Dorinson said the group had met with the administration and “legislative leadership,” but declined to say if any particular legislators were interested in carrying the bill. He did confirm that George Forman, the attorney for the Morongo Tribe, wrote some of the draft language.

Forman and Morongo councilman Damon Sandoval led a conference call for other members of the California Association of Tribal Governments on Monday.

The five-page bill draft cites the estimated $4 billion in annual revenue of “off-shore, non-United States Internet gambling Web sites” and the more than one million Californians who already play Internet poker. It goes on to note that while the federal Unlawful Internet Gambling Enforcement Act of 2006 (UIEGA) bans the use of credit cards and fund transfers for Internet gambling, there is an exception for “intrastate” Internet gaming.

Dorinson said the bill would offer a cleaner, safer version of what is now a business run by unregulated foreign operators.

“Because of technology, you can identify your players” he said. “Right now, there are a lot of Californians playing Internet poker, but without consumer protection.”

However, the idea is already garnering opposition from gaming critics and even from other tribal gaming interests. According to Allison Harvey, the executive director of the California Tribal Business Alliance (CTBA), the way the bill is currently written could jeopardize the future of tribal gaming in California.

For one thing, Harvey said, by bringing in card clubs, the Consortium could violate the exclusivity clause within gaming compacts that allows tribes the sole right to offer casino gaming in California. Once this exclusivity is breached, she said, any law giving exclusive rights to conduct online poker in California would likely be challenged in court by other players wanting in on the market.  

“How can you just say these groups and nobody else can get into this business?” Harvey said. “You could end up with a situation where people sue and in the end, everybody except tribes can offer this activity.”

The CTBA sent an opposition letter to members of the Legislature on Tuesday, noting “We are particularly concerned with the concept of moving tribal government gaming off tribal reservations and outside the framework of federal law and tribal-state gaming compacts.”
Cheryl Schmit, with the tribal gaming watchdog group Stand Up for California, said the language as currently written is so vague that it could allow the consortium to offer not only poker but paigow and other gambling card games.

She also noted that the bill has language that seeks to get online poker around the legal restrictions on what types of games Indian tribes are allowed to offer. A section near the end of the draft states that “Personal, networked, or server computers are not included within the term ‘slot machine’ or ‘gambling device.’” This clause, Schmit said, seeks to get the plan around state case law the outlaws computerized poker machines.  

“What they’re trying to do here is fishy,” Schmit said. “They think by changing the definition, they’re going to get around the legality of it. They can’t.”

Schmit and Harvey both also took issue with the structure of the consortium. According to a draft agreement, the LLC would be headquartered in Delaware. “I’m going to guess that’s to avoid income tax,” Schmit said.

They also noted the central role Morongo would play in the LLC. It would have the ability to appoint one member of the three person management committee, with the other two being elected by the rest of the membership. The tribe would have the central role in administrating the operation.

“They’re setting themselves up to be the consortium in control of this branch of Internet gambling,” Schmit said. “If you want to participate, you’ve gotta go to them. They must be thinking they’re going to make more money out of this project than their casino slot machines. They may be right.”

“Morongo is certainly in a leadership role, but many other tribes and tribal attorneys participated,” Dorinson said. He declined to say how many total tribes were involved so far.

He also would not say if outside groups might be brought in to consult or otherwise help operate online gaming. One group that has been rumored to be involved is the Morris Mohawk Gaming Group, headquartered in Quebec, Canada. Affiliated with the Mohawk Nation in both the U.S. and Canada, it operates a popular online gaming site called Bodog.com.

This effort follows a bill submitted last year by Assemblyman Lloyd Levine, who has since termed out. His AB 2026 called for a study of whether the state could offer online poker in a way that would not conflict with the federal ban on Internet poker.

In February, U.S. Rep. Barney Frank (D-MA) reintroduced a bill to allow online gambling. His H.R. 2267 would set up a legal and tax framework for poker and other games on the Internet. On August 6, Sen. Robert Menendez (D-NJ) introduced S. 1597, a companion Senate version of the legislation.