The PokerStars “Deal Breaker” for California Online Poker

Global leader PokerStars’ efforts to find a point of re-entry into the desirable United States online poker market keep running into the same wall — a fear by would-be future competitors of the serious market competition that Stars would offer, and outsized efforts by those competitors to find ways to bar PokerStars’ American return.

That’s what happened in New Jersey, where not one but two attempts by Stars to partner with casinos were stifled, and that’s what is happening again in California, where unification attempts by rival tribal factions attempting to forge consensus legislation for pro-online poker in the state have run aground, with PokerStars right in the middle.

PokerStarsThe two bills that were proposed earlier this month, by California State Sen. Lou Correa and State Rep. Reggie Jones-Sawyer, respectively, were soon followed by reports that the tribal factions supporting these somewhat competing bills were negotiating to find common ground on which to forge a compromise bill.

That’s now fallen apart, based on the reporting that the most prominent tribal nation and two large independent card rooms in the greater Los Angeles area had entered into software negotiations with PokerStars parent Rational Group.  Such a partnership, even if Stars’ vaunted name wasn’t on the sites themselves, would be welcomed by consumer, due to the PokerStars’ excellent consumer reputation and years of reliable software performance.

The tribes supporting the Jones-Sawyer measure, by far the most militant of any of the California intrastate online poker bills yet offered, said no in a very public way.  These 12 tribes that support the Jones-Sawyer bill (well, actually, they wrote it) issued a statement that the “bad actor” language inserted into Jones-Sawyer was non-negotiable, and that PokerStars in particular was not welcome in the Golden State.

The tribes tore a page right out of the American Gaming Association’s playbook, in how the AGA dealt with the possible PokerStars threat in New Jersey.  That page deals with portraying Stars’ previous US-facing history as negatively as possible.

Here’s the key paragraph from the tribes’ statement:

In 2011, three major online poker operators – Absolute Poker, Full Tilt Poker, and PokerStars – had their websites seized and shut down by federal authorities on allegations that, from at least November 2006 through March 2011, those operators and their identified owners and executive officers violated the UIGEA and the Illegal Gambling Business Act, and conspired to commit money laundering and bank and wire fraud.  Each of those firms continued to accept bets from US players after December 31, 2006, the effective date of the federal Unlawful Internet Gambling Enforcement Act (UIGEA). Criminal indictments were also handed down against some of the owners and senior officers.

That’s an amazing paragraph, starting with a fact but continuing with several different irrelevancies and half-truths, all designed to poison PokerStars’ admittedly slim California prospects.

Sure, Absolute Poker and Full Tilt were also targeted by the US feds, but no one had a web site seized or was shut down by the feds.  Domain-service was interrupted via the US-based ICANN registry, and that’s how the US feds have occasionally been able to exert their will over domains they wanted to see experience permanent disconnections.

The part about the UIGEA and IGBA and the continuing to operate post-UIGEA is all technically true, but it ignores one of the other truths in that story — PokerStars chose to settle, and admitted no guilt in doing so.  Also, PokerStars poker activities would likely have been judged legal under the Wire Act reinterpretation authored in late 2011 by US Attorney General Eric Holder, and there may have been a presumptive belief by PokerStars that the federal settlement would have automatically reopened the US market.  (That’s a bit sweet and innocent, of course; the US doesn’t work like that.)

Criminal indictments were indeed handed down against two PokerStars senior officers — founder Isai Scheinberg and senior finance executive Paul Tate, and those individual charges are still pending.  Both men have left Stars’ day-to-day operations, and Scheinberg reportedly gave up his ownership as well, even if there have been some strong indications that Isai is still, ahem… meddling… in PokerStars matters.

But that’s the closest the above paragraph comes to truth, and that’s not really what this California fight is about anyway.  It’s really about the prize plum, should online poker in California come to be — the greater Los Angeles market.

Those two “other” California card rooms have gone unnamed in most reports, but Gambling Compliance recently named them as the Commerce Casino and Hawaiian Gardens, in a full story freely swiped by the California Tribal Business Alliance.  Commerce is the world’s largest poker room, with over 200 tables, with action available 24/7.

Most of the tribes who crafted the Jones-Sawyer bill are in a wider ring encircling the greater Los Angeles metro area, where the suburbs end and the tribal reservations begin.  The Pechangas, primary crafters of the Jones-Sawyer bill, have their casino off I-15 between Riverside and Escondido, about in the middle of a triangle marked by San Diego, Palm Springs, and downtown LA.  The Palas, another backer of the Jones-Sawyer measure, are just a bit further south.

The powerful Agua Calientes, another of the bill’s drafters, have their casino essentially in Palm Springs.  Most of the casino for the other Jones-Sawyer backing tribes are similarly close to LA.

Thus, the deal breaker: No one’s going to play on (or whatever it would be) when they could be playing on a Commerce-branded site powered by PokerStars.

And, as GamblingCompliance noted, the vaunted common ground between the rival tribal factions has disappeared.  From GC: “‘This blows the whole deal,’ a high-ranking capital source who requested anonymity said of a Morongo/PokerStars partnership.”

Indeed.  And given the exclusivity the Pechanga-led group really wants, blocking even licensed California pari-mutuel outlets from being considered for licensing and the offering of online poker, some of those outlets may also now be considering the Morongo-backed, Correa-introduced bill.

The greater story is that PokerStars wouldn’t necessarily be approved anyway, even if they did a partnership with Morongo.  Stars signed a similar deal in New Jersey that resulted in a two-year suspension of their application in the hopes the company can resolve outstanding legal issues.  Similar might await Stars in California.

What the whole tale really shows the public is the greed of the various players involved, most particularly the Pechanga and Agua Caliente tribes, which have gone on a years-long path of alienating potential allies in hopes of having the entire segment (including that juicy LA market) for themselves.

And as a result, no one’s getting anything, most of all the players themselves.


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