A bill to allow California businesses to operate online poker gambling has made for strange bedfellows and split traditional alliances as some Indian tribes have allied in support of the bill with card-room owners, often their political foes, against other tribes.
A million Californians per week already play online poker on sites that are operated overseas or may be run illegally, says state Sen. Lou Correa, D-Santa Ana. The sites operate despite a 2006 federal law that bars gambling businesses from taking and paying out money online, unless the bets are made and paid within a state that has laws regulating it. No state currently does.
A pending, bipartisan House bill would end that federal ban and set up an interstate licensing program giving states authority to run online sites; U.S. Senate Majority Leader Harry Reid has pledged cooperation.
And Reid's home state of Nevada, where gaming is king, is straining at the bit to see the ban overturned: Gov. Brian Sandoval signed a law in June requiring his state to adopt its own online poker regulations by January.
California could be left behind if it doesn't do the same, Correa said, as Nevada and other states stand to cut into approximately $7.5 billion in annual revenues now earned by California's brick-and-mortar card rooms and tribal casinos. He said his SB 40 instead could bring California 1,300 new jobs and -- with a 10 percent take from all online poker fees -- $1.4 billion in revenue for state coffers in the next decade.
As introduced in December, the bill would have allowed only a handful of licensed online poker sites; Correa amended it in early July so every California tribe and card room eventually could operate one.
"Eventually" is the rub. Correa's amendments sweetened the pot for the state by requiring that licensees each ante up $50 million in upfront fees before their sites open, no later than July 1, 2011; if there aren't least five such licensees, however many there are would make additional payments so the state pockets $250 million this fiscal year.
But if that happens, no more licenses would be issued until 2016, in order to give those initial few operators time to recoup their investment. As in a poker tournament, operators would either have a big buy-in up front or wait years to get a piece of the action.
Correa's bill is backed by the California Online Poker Association, a coalition of 29 tribes and 30 card rooms, including Lucky Chances in Colma; Livermore Casino; the Comstock Card Room in Tracy; the Ocean View Card Room in Santa Cruz; and Club San Rafael. It has created a website -- AllInForCalifornia.org -- to build public support, and COPA card rooms in June contributed $18,200 to Correa's 2018 attorney general campaign committee. COPA in June even picked a provider to design and operate its game, signing a licensing agreement for software and related technology.
COPA spokesman Ryan Hightower said his group is confident Gov. Jerry Brown and lawmakers have "no desire to see billions of dollars and thousands of jobs shipped out of state to Nevada or D.C." COPA members don't see themselves as particularly strange bedfellows, he said, "since the card room operators have agreed to provide funding to protect tribal sovereignty in future legal and political initiatives. The beauty of SB 40 is that tribes don't have to partner with card rooms for a license if they don't want to."
But they will, opponents believe.
SB 40 is opposed by the California Tribal Business Alliance, which includes the Lytton Band of Pomo Indians, owners of the San Pablo Lytton Casino; the Pala Band of Mission Indians, with a northern San Diego County casino resort; and the Paskenta Band of Nomlaki Indians, who have the Rolling Hills Casino just off Interstate 5 in Tehama County. Palm Springs' Agua Caliente Band of Cahuilla Indians, another gaming tribe, also opposes it.
"We think that the bill is tailored to benefit COPA," alliance Executive Director Chris Lindstrom said. "We want it to be an open, fair process -- we'll compete against anyone if and when it comes to that, but we don't believe preferential treatment should be given to any particular group."
Lindstrom and his clients believe the bill unfairly benefits COPA because dozens of tribes and card rooms together can more easily raise the $50 million "buy-in" than can individual tribes, thus winning a crucial few years of monopoly in the fledgling industry.
Hightower said the alliance should think twice before accusing COPA of being the side seeking a monopoly.
"Every tribe and card room in California was invited to join COPA for the whopping fee of one dollar," he said, also noting many COPA members are small tribes without casinos. "Without COPA they would have been locked out of the market. This is precisely why some tribes didn't want to join COPA -- they didn't want to share the profits with the smaller, less fortunate tribes."
The $50 million figure isn't a "magic formula" and is up to the Legislature, Hightower said, while "nothing prevents other tribes or card rooms from pooling their resources either."
Correa said his door is open; he's willing to hear any proposed amendments so long as the bill advances soon. "Come talk to me, if we sit down and talk we can come up with a win-win solution."
The state Justice Department has said it needs 18 to 24 months to implement a regulatory system for online poker, but Lindstrom noted SB 40 gives the state just 90 days to adopt regulations and review license applications. "This is going to be a significant expansion of gaming "... so this is not something you want to put on a fast track -- you need to make sure all the due diligence is done."
"California is still a can-do state," Correa replied, and is capable of acting fast to land an extra quarter-billion in revenues this year.
Hightower agreed: "If the political will is there, then there will be a way."
The state Senate Governmental Organization Committee, to which Lindstrom is a former consultant, held an informational hearing about online poker July 12. Committee Chairman Sen. Rod Wright, D-Inglewood, in December had introduced a much broader bill, SB 45, to establish all kinds of online gambling including poker, but that bill hasn't been amended or moved since and the hearing focused more on Correa's bill.
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deal 'em in
The game: Online poker, as envisioned by Senate Bill 40
The players: Author state Sen. Lou Correa, D-Santa Ana; the California Online Poker Association, a group of about 60 tribes and card rooms supporting the bill; the California Tribal Business Alliance, a group of three gaming tribes opposing the bill; and the Agua Caliente Band of Cahuilla Indians, also opposed.
The ante: SB 40 would require five or fewer online poker licensees to front $250 million in license fees before launching their sites.
The stakes: Correa says the state stands to gain 1,300 jobs and $1.4 billion over a decade, while licensees cut into the state's roughly $7.5 billion per year in brick-and-mortar gaming.