A fair model for California

Spring is a time for shaking off the dreariness of winter, embarking on new endeavours and completing those left over from the year before.

So it is with the march toward legalising internet poker here in California. Let’s recap what happened during the winter months.

In December Senator Lou Correa introduced a bill, SB 40 at the request of the California Online Poker Association (COPA) a coalition of California tribes and card rooms led by the Morongo Band of Mission Indians. This was an “internet poker only” bill and it provided for the establishment of only one site.

Senator Rod Wright, Chair of the Senate Governmental Organization Committee where this issue will be heard, then re-introduced his legislation from last year SB 1485 under a new bill number SB 45. His bill would legalize all online gaming. This is part of Senator Wright’s personal legislative package and was not the product of a request by any one entity.

Then in January Senator Wright told all interested parties that he wanted to take a measured approach to any legislation and would hold a series of informational hearings on the subject. Each hearing dealt with a different aspect of internet poker and internet gaming ranging from how many sites (hubs) there should be to who would be eligible to participate.

All potential California market participants who desired and many industry experts such as Malcolm Graham of PKR and Chairman of the United States Online Gaming Association (USONG) were invited to provide testimony. The Hearings were non-confrontational and allowed participants to share what they believed would be California’s best course of action with regards to internet gaming.

The purpose of the hearings was twofold.

First, educate members of the Legislature and second to come up with ideas to craft the best possible piece of legislation.

During this period new players came forward and expressed a keen interest in the legislation including other large tribes and card rooms, none of whom are members of COPA.

Then last week Senator Correa on behalf of COPA filed a series of amendments to his bill. Some of the amendments are very troubling and can be viewed as shortsighted.

The amendments would appear to give COPA special treatment and carve out for them a site. But it is unlikely that a bill with special treatment or contrived rules will garner any consensus.

When asked about his amendments by the Sacramento Bee newspaper Senator Correa said quite bluntly, “It’s their bill not mine”.

The new plan would establish five sites. The first three sites would go online immediately, and with a preference for COPA. After a period of three years the state would determine whether or not the market will bear two additional sites.

Senator Wright on the other hand isn’t carrying anyone’s water with SB 45. He took his hearings to heart, often enduring long hours of testimony as the sole representative of the Legislature on the dais, and premised on what he has learned through his own studied analysis and hearings has indicated that he is open to new ideas and proposals. He seems desirous of creating a system where there are no favored providers and all market participants have an equal chance at success, players are protected and the state can realize the maximum amount of revenue.

In conversation with interested parties and major players who are not members of COPA, USONG believes that a consensus is building on what the elements of a successful model should look like.

First it should be internet poker only.

As California gains experience and knowledge we can and should look at other revenue producing games as suggested by Senator Wright. But poker is the quickest way to generate revenue for the state and create jobs and economic activity.

Second, any legislation must establish an open market not a process of carving out a site for any one particular group.

All current California licensees, tribes and card rooms should be eligible to own sites if they so choose. The success or failure of any market participant can and should be determined by the market. This will obviate the need for any RFQ or RFP or bidding process or the state being responsible for picking winners and losers. Competition will breed success. It will also weed out those who might be favored by legislation but not be capable of creating an internet poker site that is both efficacious and fair to the consumer.

Third, during these tough economic times, any legislation should be revenue neutral so that the state incurs no cost in setting up the complex regulatory framework.

Fourth, potential market participants will need to establish their eligibility to operate a site.

This includes proof of financial viability, documented integrity and having an experienced legal operator capable of placing a site online. This is essential. Financial viability could be accomplished a number of ways. Perhaps, the best way is through a substantial performance bond. This would give the state a pre-payment to meet their budgetary needs and forces anyone who wants to participate to absolutely have skin in the game.

Fifth, any operator currently taking bets or offering on line poker for profit in California since the ban established in 2006 with Unlawful Internet Gambling Enforcement Act (UIGEA) will not be able to participate.

California should not reward those who have deliberately chosen to disregard the ban. Those that have not taken U.S. bets will form the operations backbone working in partnership with California’s current licensees.

While there are still some who oppose internet poker for a variety of reasons, there appears to be critical mass forming to get something done this year. Internet poker is an activity that is already supported, albeit illegally by our fellow Californians to a tune of almost $1 billion a year. Senator Wright said it best when he said pointedly that out of that pool of money California is presently getting “squat”.

Senator Correa and Senator Wright should both be commended for getting the discussion to this point. Ultimately, all of us need to work together, with other members of the Legislature and the Administration, to create an internet gambling program that is a hallmark of clarity, fairness, enforceability and profit to the people of our state.

As the old saying goes, where there’s a will there’s a way.