More California Scheming: PokerStars Pushes Back in Online Poker Skirmish

More California Scheming: PokerStars Pushes Back in Online Poker Skirmish

The brewing legislative battle over the possible future of intrastate online poker in California continues to see a consortium of the state’s tribal nations making a concerted effort to block the possibility of former US-facing online poker giant PokerStars returning to the state, as a software provider to rival gaming entities preparing for the possible regulation of online poker in California.

The last time we checked in on the California situation, a collective of 12 California tribal nations which, in general, support an online poker bill recently introduced by State Rep. Reggie Jones-Sawyer, launched a very public statement supporting the insertion of a provision to block supposed “bad actors” from taking part in any future California i-poker universe.

PokerStarsThat group is led by the Pechanga and Agua Caliente tribal nations, and the joint statement published at Pechanga.net called PokerStars “unscrupulous” and “nefarious” in the clustering of a handful of partial truths and misstatements lobbed at PokerStars.

Soon after, the California Tribal Business Alliance issued a similar statement, though it left out the colorful adjectives.  Here’s that statement, in its entirety:

Recent accounts in the media indicate that PokerStars is in partnership negotiations with the Morongo Band of Mission Indians and three large Southern California Card Clubs to offer online poker in California.

The news accounts come at a particularly opportunistic time, when the California State Legislature will be debating two measures that will authorize the play of online poker within California’s borders.

One of the most significant issues in the legislative discussions is who will be allowed to offer online poker in California. From the California Tribal Business Alliance’s (CTBA) perspective, only entities that adhere to the highest regulatory standards, such as those used in the regulation of Indian gaming, should be licensed to provide online play.

Following the enactment of the 2006 Unlawful Internet Gambling Enforcement Act (UIGEA) making online gambling illegal, PokerStars refused to shutter its site. In 2011, the Department of Justice issued orders mandating the site close down, filed a civil action to seize the company’s assets acquired post-UIGEA, and threatened imprisonment alleging, among other things, Conspiracy, Money Laundering, Bank Fraud and violations of the Wire Act. In settlement, they paid a $731 million fine, but admitted no wrongdoing.

In light of the partnership negotiations among PokerStars, Morongo, and the three card clubs, the Member Tribes of CTBA will continue to work diligently to ensure any online poker authorization bill will impose strong controls, mandate disclosures, and promote the highest standards of integrity in the gaming industry. Therefore we will strongly oppose any legislation which allows PokerStars to participate.

There’s plenty of misstatements and stretched facts in that statement, and the three tribes that comprise the CTBA, the Pala, Paskenta and Viejas nations, were already among the 12 tribes listed as signatories of the Pechanga-led attack.

If there was anything worthy in the CTBA statement, it was the public confirmation that Stars had entered preliminary software talks with three major LA-area cardrooms in addition to the Morongo tribal band.  Stars had already been tied to Commerce and Hawaiian Gardens in media reports, but has now been tied to LA’s Bicycle Casino as well.

PokerStars quickly responded in the form of a statement from Eric Hollreiser, head of corporate communication for PokerStars’ parent, The Rational Group, which correctly notes that the tribal statements, in a manner similar to the attacks launched against PokerStars last year by the American Gaming Association in New Jersey, are nothing more than thinly disguised protectionism.

Hollreiser’s statement has appeared elsewhere, and he also provided a copy to FlushDraw:

PokerStars shares the belief that a future licensing framework for online poker in California should be based upon the highest standards of suitability that maximize consumer protection and consumer choice. We have consistently met those standards in jurisdictions around the world, where we hold 11 licenses – more than any other company, including licenses in leading European jurisdictions such as Italy, France and Spain. 

PokerStars has not, will not and need not request any changes to the California gaming regulations. Most regulatory frameworks around the world leave the assessment of suitability to qualified expert regulators. The same position has been taken by the legislators in New Jersey. The California Gambling Control Commission has a 15-year history of successful consumer protection and is more than qualified to continue to determine suitability.

The only parties seeking to change this are certain groups who want to use the Legislature to gain a competitive market advantage and to limit competition. Their efforts are not in the best interest of consumer choice or consumer protection.

These groups are misrepresenting the Unlawful Internet Enforcement Gambling Act (UIGEA) and PokerStars’ past U.S. operations serving only to exclude PokerStars from the market in order to avoid what should be fair competition. The fact is that UIGEA did not make illegal any gaming that was not already illegal before its passage. This has been confirmed by the U.S. Third Circuit Court of Appeals and by the U.S. Department of Justice (**see below). PokerStars operated under legal opinion that its offering of online poker did not violate U.S. law before 2006 and maintained that opinion following the passage of UIGEA. 

PokerStars looks forward to demonstrating our suitability to the regulator just like any other company seeking to operate in California and investing in a fair and well-regulated market. 

** 1) Brian Benczowski, Principal Deputy Assistant Attorney General (Justice Department), wrote in a letter to Rep. John Conyers, Chairman, House Committee on the Judiciary on July 23, 2007 – “[T]he UIGEA itself does not make any type of gambling legal or illegal; rather, the statute is focused on regulating the methods of payment for already-illegal gambling.”

2) The United States Court of Appeals for the Third Circuit held that the UIGEA “does not itself outlaw any gambling activity, but rather incorporates other Federal or State law related to gambling.” Interactive Media Entertainment & Gaming Ass’n v. Attorney General, 580 F.3d 113, 116 (3d Cir. 2009).

Indeed, the misrepresentation of the UIGEA is intentional, and is not why PokerStars and two of its executives encountered difficulties with US authorities.  Since the core activity behind the Black Friday case — online poker — was later affirmed as being legal in the late 2011 opinion by US Attorney General Eric Holder, the alleged miscoding and mislabeling of banking transactions, which was the core of the Black Friday case, is more accurately depicted as over-aggressive blocking by US banks than an actual violation of US gaming law.  PokerStars also willfully left the Washington State gaming market in 2008 following that state’s passage of a law making the playing of online poker a felony for Washingtonians.

As I’ve noted before, it’s the hardcore Pechanga-led coalition that’s really trying to stack the deck in this particular legal game.  Many of the issues regarding possible California online poker are inextricably tied to larger casino and tribal-gaming issues, an issue we’ll return to in our next look at the California online-poker situation.

One of the more interesting recent takes on the California / PokerStars situation is an editorial by Steve Ruddock at 4Flush (a site at which my work also occasionally appears).  Titled “Is PokerStars Using a Scorched Earth Approach in the US?”, the piece essentially says that Stars is being too greedy in even attempting to be a part of the California online-poker market.

In a nutshell, I don’t agree with that editorial.  PokerStars has every legal right to attempt to pursue an entry into an envisioned California online-poker market, and they’re not the ones showing the excessive greed in trying to exclude others from the future online pie.  The Pechanga-led faction is systematically trying to squeeze out all possible competitors from the future online-poker space, and PokerStars just happens to be a very visible target in that regard.

The Jones-Sawyer bill is remarkable in that it’s trying to establish a new market and be protectionist all at the same time.  That’s an interesting concept, but not a worthy one; this remains a lousy bill, complete with its preemptive ban on PokerStars and potential criminal sanctions against players, another ridiculous protectionist ploy.  California’s poker players deserve better, much better than this.

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