For the tenth year, California lawmakers will attempt to legalize and regulate online poker. On February 17, Assemblyman Reginald Jones-Sawyer introduced AB.1677, the Internet Poker Consumer Protection Act. It is strikingly similar to legislation he introduced in previous years but with several key changes to reflect progress and compromises made in 2016.
The bill is now active but has yet to be referred to a committee in the California legislature.
Details of IPCPA
Jones-Sawyer wrote AB.1677 with a great amount of detail. The basics of online poker regulation include seven-year licenses for applying cardrooms and American Indian tribes that will cost $12.5 million each, credits for that amount against gross gaming revenue taxes, and a fluctuating tax rate based on gross gaming revenues calculated annually.
Per the deal reached in 2016 between Assemblyman Adam Gray and the California horse racing industry, the bill specifies that tracks will receive annual compensation for not directly participating in the online poker business of nearly $60 million. Tracks will be able to act as service providers – not online poker operators – but with some strict stipulations.
The bad actor language is in limbo this time. Since this is the one topic that has created the most animosity among the tribes in previous years, Jones-Sawyer decided to leave the final decision to the California gambling regulator.
CA online poker bill includes racing compromise forged last year but suitability (left to regulators) will still be a sticking point— Steve Ruddock (@SteveRuddock) February 20, 2017
Bad Actor Debate to Dominate
The bad actor issue mainly pertains to PokerStars. It is the language in legislation that allows or prohibits the participation of any online poker operators who served United States players after the Unlawful Internet Gambling Enforcement Act passed in 2016. And the only operator that is currently in play that fits into that category is PokerStars.
Some tribes and cardrooms in California partnered with PokerStars to fight against a bad actor clause in any bill, or at least requested the ability to pay a fee (or fine) to be let into the industry. Other prominent tribes, upon whom passage of any bill is reliant, stand firm that there must be a bad actor clause that prohibits PokerStars from entering the market for quite a few years if not permanently. This stance was taken for many reasons but primarily due to PokerStars’ domination in the world market and its name recognition that would give it an unfair advantage over other online poker offerings.
This debate will undoubtedly be at the heart of all discussions regarding AB.1677 and any other legislation brought to the table in 2017.
Your Move, PokerStars
In its current state, the bill is not viable. Neither side of the bad actor issue will allow the bill to move forward without strict bad actor language in the body of the legislation. Leaving it up to the regulators is too risky for both sides, and there can be no progress as the bill is currently written.
In order to make progress, there are only two options.
- Opposing tribes suddenly accept PokerStars as a player in the game and agree to allow them to apply for a license in California. This would mean a total and complete resignation from its staunch opposition to PokerStars, its history in the US market, and its likely control of the new state market. Considering their strong position last year and the ability to stop any legislation from moving forward, these tribes are unlikely to move.
- PokerStars withdraws from the debate and agrees to stay away from a new California online poker industry for at least five or ten years. This is unlikely due to PokerStars’ strong interest in an emerging US industry and its already substantial investments in its participation in said market.
However, there is one way to make the second option more likely. The Poker Players Alliance must distance itself from PokerStars, which will be difficult due to the company’s longtime and substantial support of the PPA. But if the PPA would break away from that allegiance and lobby hard for online poker in California without PokerStars, passage of the bill would become significantly more likely.
Of course, the PPA could expand its efforts to bridge the divide between the differing tribes, but that would again require that the PPA be open to parting ways with PokerStars. And again, past actions have shown that to be unlikely.
California online poker is firmly in the hands of PokerStars and the PPA. The next move must be theirs if there is to be any chance of positive movement for legislation in the Golden State in 2017.