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Assemblyman Gatto Announces Proposed Amendments to California Gaming Bill

In December, California Assemblyman Mike Gatto (D – Glendale) introduced Assembly Bill 9, the Internet Poker Consumer Protection Act of 2015, which would legalize and regulate poker in the state. Last week, he announced the first proposed amendments to the bill; one loosens some of its restrictions while the other is an attempt to further protect licensed operators and California residents.

The first has to do with one of the more controversial aspects of AB 9, the requirement that all players sign up for an online poker account in person at a brick-and-mortar location. Those locations might be the licensed operator’s live casino or cardroom, or possibly a satellite location associated with that casino but established in a more remote area. Gatto explained some of his reasoning for the stipulation in an interview with Marco Valerio on OnlinePokerReport.com, saying:

First of all, if you’re showing up to a casino floor, you’re going to be on camera. If you’re showing up with suitcases full of 500-Euro notes and a foreign passport, maybe you’re a money launderer. But the point here is, everybody would have to show up with two forms of identification, in person. Security teams would be trained to recognize signs of money laundering and very carefully screen minors from getting in the system.

He added that this requirement would also bring foot traffic to casinos and that those players coming in to register an account would obviously be completely interested in playing poker. Thus, there would certainly be a realistic chance that they would stick around and gamble.

The rule to make people sign up and make their first deposit in person has been widely criticized as unnecessary and a possible deterrent to people actually creating accounts. Gatto has heard those opinions and has decided to no longer make it mandatory for the initial deposit to be made in person. Instead, the bill will be amended to make it optional.

In a press release, Assemblyman Gatto wrote:

After meeting with security experts and hearing from poker players and industry professionals, I have concluded that online poker would be best served by making in-person registration an option rather than a requirement. State of the art technology currently used by operators in other states when registering players accesses many of the same databases used by financial institutions to verify the identity of registrants and prevent fraud.

Gatto still believes some people will want to register in person, so he feels foot traffic to casinos could benefit, but he is brainstorming other ideas to get players into the brick-and-mortar establishments, such as special tournaments. Clearly, he is nervous about the possibility of brick-and-mortar traffic cannibalization by the online poker rooms.

AB 9 also says that some larger withdrawals (dollar amount unspecified) would need to be made in person, but Gatto did not address that in his statement.

California Assemblyman Mike Gatto Image credit: www.asm.ca.gov/gatto

California Assemblyman Mike Gatto Image credit: www.asm.ca.gov/gatto

The other amendment brought up in the statement would inflict harsher penalties on operators who offer online gambling to California residents without acquiring the required license. Gatto wants to see this become a felony and wants to provide the state’s Attorney General more resources to go after illegal operators.

One of the other controversial parts of AB 9 that Gatto has not addressed with any amendments is its “bad actor” clause, which would prohibit any operator who offered internet gambling in the United States after December 31st, 2006 from applying for an interactive gaming license in California. That in and of itself is not unusual; bad actor clauses are quite common. Gatto took it further, though, adding that a company’s “covered assets” also cannot be used if those assets were used to offer internet gambling after the previously mentioned date. That even counts assets that were used by a previous owner, even if the current owner would not be considered a bad actor.

PokerStars is clearly the target of this part of the legislation, as while it would have been labelled a bad actor because it kept operating in the U.S. after the UIGEA was passed.  PokerStars is now owned by Amaya Gaming, a company that did not operate in the US post-UIGEA. In fact, Amaya Gaming is licensed in New Jersey. But because PokerStars would be considered a “covered asset” of Amaya, it would be ineligible to be licensed according to the bill.

There is language in the bill, though, that would give PokerStars the opportunity to apply for a license, provided it jumps through enough hoops.

Gatto told Valerio that he included that clause because, “We want to make sure that groups who are authorized to participate in online poker all have the same chance, particularly those who were very careful to do everything right and who were very careful to adhere to every policy that existed before.”

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