California Assembly Appropriations Committee passes online poker bill

California’s action on online poker

The committee approved AB 2863 on Wednesday.

A vote had been scheduled to take place last week, but that was delayed as amendments were added to the bill.

The amendments that were floated last week were inserted to the bill this week, and included:

- A “bad actor” clause that excludes online poker operators that accepted California players after the passage of the federal Unlawful Internet Gambling Enforcement Act of 2006. Sites that did so could pay an added $20 million fee or wait five years to apply for licensure. (Previously, the amendment’s line for bad actors was drawn in 2011.)

- The use of accrued assets — such as player lists — from such operators would be limited by regulators.
- Ten percent of all gaming revenue collected by the state would go to the state’s General Fund, regardless of whether a $60 million threshold for a subsidy to the horse racing industry is reached.

- Half of the $12.5 million deposit paid by licensees would be offset by reduced taxes on gaming revenues.

Still concerns, changes for iPoker

The committee expressed a common refrain that we heard in 2015, and earlier this year when the bill passed the Governmental Organization Committee this spring: The bill has been the product of a lot of effort by bill sponsor Adam Gray, but it needs more work.

Some of the concerns expressed on Wednesday included:

- The $20 million penalty for bad actors is not high enough.

- The use of old player lists at all could create an unfair advantage for some operators (i.e. PokerStars).
- Regulations are not spelled out enough.

No member of the committee expressed unequivocal support for the bill, as written.

In response to one lawmaker’s concerns, Gray expressed some level of frustration with the tepid nature of the committee’s support:

“This has probably been the most vetted bill this legislative session, we’ve had weekly stakeholder meetings, we’ve done a series of amendments,” Gray said.

“In fact if we held every bill in this process to the standard we’ve held this bill, we wouldn’t have any bills,” Gray continued.

Don’t get too excited for online poker, yet

An Appropriations Committee vote is also a hurdle that online poker regulation cleared last year. The bill never came up for a vote of the full Assembly in 2015.

The bill still faces uncertain prospects in the full chamber. It requires a two-thirds majority to pass, and a coalition led by the Pechanga and Agua Caliente tribes is still in vehement opposition to the bill as amended. Namely, the suitability/bad actor debate is still far from settled.

“Companies that have engaged in any form of unlawful or unauthorized internet gaming should be disqualified from licensure,” said Leland Kinter, chairman of the Yocha Dehe Wintun Nation.

That’s a sentiment on which the opposition continues to take a hard line. It appears that no amount of change to the bill — short of language that would exclude PokerStars from the California market entirely — will appease the coalition.

The opposition from those tribes could derail or defeat a vote in the full Assembly, although it does seem like the forces behind the bill could be willing to test that theory. Appropriations Chair Lorena Gonzalez intimated during the hearing that the bill, as currently situated, would likely be defeated there.

Increased lobbying efforts from both proponents and opponents — including a survey commissioned by the Pechanga coalition — indicate that the battle over online poker in the state could be reaching a head.

Jeff Grubbe, Agua Caliente chairman, foreshadowed the coming fight in testifying before the committee.

“We look forward to a robust discussion of this proposal on the Assembly floor,” Grubbe said.