The California Online Poker Faux Consensus Proposal

More political shuckery is in the news today regarding online poker, this time from the state of California, where a dozen of that state’s pro-online poker tribal nations have announced a “consensus” agreement regarding future intrastate online poker in the Golden State.

The announcement of this pseudo-consensus deal also includes the release of a new draft measure pitched as being the “unified” version of the two bills seeking to legalize online poker in the state, both of which were initially crafted with the prominent backing of the very same group of California tribes.

CaliforniaWhat the proposed draft measure does is strip away distinctive elements that were added by the sponsors of the current bills — State Sen. Lou Correa’s SB 1366 and State Rep. Reggie Jones-Sawyer’s AB 2291 — and adds even more extreme and pro-tribal prerequisites on this presumed legislative process, to the point of perhaps creating a proposal that cannot be supported by a majority of California politicians.  The draft proposal’s extreme inclusions and preemptive blocking of what would otherwise be possible supporters makes it somewhat less likely that true common language can be found for a bill that would pass in California in the current year’s legislative session.

The proposal was signed by heads of 13 of the 62 California tribal nations that already operate land-based casinos in the state.  The tribes signing off on the unified proposal are, in large part, the same tribes already identified as being financial backers of the Correa and Jones-Sawyer bills being merged here.

The list of tribes supporting the engineered compromise: Agua Caliente Band of Cahuilla Indians, Barona Band of Mission Indians, Cachil Dehe Band of Wintun Indians, Lytton Band of Pomo Indians, Pala Band of Mission Indians, Paskenta Band of Nomlaki Indians, Pechanga Band of Luiseño Indians, Rincon Band of Luiseño Indians, San Manuel Band of Mission Indians, Sycuan Band of Kumeyaay Indians, United Auburn Indian Community, Viejas Band of Kumeyaay Indians and the Yocha Dehe Wintun Nation.

As expected, the compromise does not include the Morongo Band of Mission Indians, whose contractual partnership with PokerStars for online poker software would be voided should the “bad actor” clause still present in this compromise proposal be enacted.  The Morongos and three major LA-area cardrooms — Commerce, Hawaiian Gardens, and Bicycle — plan to use a version of the PokerStars software platform should the state go ahead with  regulation in the near future.

This latest “unified” proposal, issued in the form of a public letter to Correa and Jones-Sawyer, the earlier bills’ sponsors, contains a large number of extreme and controversial inclusions.  Among them:

  • The retention of the “bad actor” clause, based on a date of December, 2006, that would preemptively ban PokerStars from offering its software for sale to interested California parties.  The clause would effectively strip from the state’s gaming regulators the opportunity to examine a PokerStars application on its own merits;
  • The introduction of a “poison pill” clause designed to prevent PokerStars from seeking due process and challenging the proposal, if it was to be enacted as law.  The poison pill would declare the online-poker regulation itself null if PokerStars or a similarly defined “bad actor” was to successfully challenge a passed bill on legal merits:

(b) The provisions of this act that are not severable are those (1) establishing internet poker as the only permissible internet gambling game, (2) prohibiting persons or entities who have knowingly and intentionally engaged in internet gambling or related financial transactions in violation of federal or state law from being licensed under this act or selling their assets used in unlawful internet gambling for reuse by entities licensed under this act, or (3) limiting the entities eligible for an operator license. If any of the listed provisions or the application thereof to any person or circumstances is held invalid, the entire act shall be invalid.

  •  A reduction from 10% to 5% in the gross gaming revenue (GGR) tax due to the state from online-poker operations.   This would take the form of a $5 million application deposit against future gaming revenue, with the license itself running for ten (10) years with automatic renewal.  Tribal corporation profits are also untaxed, although the few California card rooms that would be allowed under the proposal would still have profits taxed at standard California corporate rates.  The reduction from 10% to 5% in the GGR would create an even larger net operating-revenue advantage for the tribes, relative to card rooms such as Commerce or Hawaiian Gardens, than as described in existing versions of the bill;
  • The lack of any specific consumer protection measures, rather unfathomable in a proposal which bills itself as “The Internet Poker Consumer Protection Act of 2014.”  No conflict-resolution structure for the benefit of consumers is present;
  • A continued insistence that only a limited waiver of claimed sovereign immunity applies, for the purpose of the application and revenue agreement with the state and for pooling agreements with other tribes.  As written, the proposal (and the existing Correa and Jones-Sawyer bills), attempt to extend the tribes’ claimed sovereignty into consumers’ homes, which makes it far more difficult for consumers to seek civil redress in cases of perceived fraud or other consumer complaints.  Further, the stance runs counter to the point-of-wager consensus common to other regulated jurisdictions that the online wagering act takes place at the bettor’s location.  An adjunct to this is that off-reservation tribal casinos are possible only through land concessions which expand tribal rights to those locations; the proposal as written would automatically extend the sovereign claims regarding online gaming throughout California;
  • A continued blockout of other would-be offerers of online poker within California, such as racetracks and other pari-mutuel outlets;
  • An increasing scale of civil penalties for California players who would participate on unregulated sites, effectively creating a new class of criminal actions, since playing online poker is not presently illegal under California or US federal law.  The proposal includes a sliding scale of increasing fines for the first five (5) playing offenses:

(f) The department may assess civil penalties against a person who violates this section, whether a licensed operator, owner, service provider, or player, according to the following schedule:

(1) Not less than one thousand dollars ($1,000) and not more than two thousand dollars ($2,000) for the first violation.

(2) Not less than two thousand five hundred dollars ($2,500) and not more than three thousand five hundred dollars ($3,500) for the second violation.

(3) Not less than four thousand dollars ($4,000) and not more than five thousand dollars ($5,000) for the third violation.

(4) Not less than five thousand five hundred dollars ($5,500) and not more than six thousand five hundred dollars ($6,500) for the fourth violation.

(5) Ten thousand dollars ($10,000) for a fifth or subsequent violation.

Reaction to the proposal has been mixed.  Morongo officials, who would see their PokerStars deal voided by the proposal issued a quote to the LA Times protesting the draft measure.  “Efforts by a select few interests to rewrite longstanding and effective policy in order to gain a competitive market advantage or to lock out specific companies is not in the best interests of consumers or the state and will be vigorously opposed by our coalition, online poker players and many others,” reads the quote.



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