Lou Correa Chairs the Committee Which Oversees Gaming Legislation in the State Senate
California State Senator Lou Correa has shelved his legislation that would legalize online gambling in his state in 2014. Senator Correa said there was not enough time left in the legislative calendar to refine the bill for a vote.
Correa, the chairman of the Senate Governmental Organization Committee, was the author of SB 1366, which would have created licensed and regulated online poker in California. Correa, who is a Democrat from Santa Ana, therefore controls the committee which screens all gambling legislation in the state. His support was seen as a key factor in the possible passage of iGaming in California, so the shelving of SB 1366 is seen as a major blow for California online gambling.
California at a Crossroads
In many ways, California has been a leader in the Internet gambling debate. The California State Senate has debated the advantages and disadvantages of Internet gaming for the past 5 years, even before the 2011 opinion by the U.S. Department of Justice which opened the door to licensed online casinos and poker rooms. On the other hand, states like Nevada, Delaware, and New Jersey have pass i-gaming laws, while California’s gaming interest cannot seem to agree on a framework for such a system.
In particular, the tribal gaming interests of the state have not been able to agree on details. All three U.S. states which have legalized online gambling did not want to undermine their native land-based casino industries. In order to enhance and not undercut those interests, the states made the possession of a brick-and-mortar casino license a prerequisite for receiving an online gaming license.
That means the Indian tribes who own casinos have a direct interest in the legislation, besides the indirect interest one would have if the lawmakers were introducing new competition. Such decisions should mean that established gaming entities would want to support any such legislation, but the reality is a little more complicated than that.
Tribal Gaming Interests Cannot Agree
At least two major groups represent different thought processes towards legalized iGaming, while a third group prefers to stay away from the process altogether. That latter group of Native American tribes prefer to focus on their brick-and-mortar operations, seeing online gambling as a sideshow, and a potentially dangerous one–because it introduces competition in a new form. These tribes would prefer to see any online gambling bills squelched.
Morongo Tribe and PokerStars
The two factions in favor of regulated online gambling have made the headlines, though. One of them is led by the Morongo Band of Mission Indians, who own a large land-based casino northwest of Palm Springs. The Morongo Tribe has in place deals for online gambling, if a law should be passed. These deals include partnerships with the Bicycle Club, Commerce Club, and Hawaiian Gardens, which private-owned card clubs of Los Angeles.
The Morongo Tribe also has a deal in place with PokerStars, the largest online poker site in the world. PokerStars has been the unchallenged leader of Internet poker for most of the last decade, but it also has a history of trouble with the U.S. federal authorities. PokerStars continued to accept US players after the 2006 UIGEA law was passed. Worse, PokerStars is accused of making deals with American banks that would allow the Isle of Man based company to accept US players, without it appearing to be about gambling. This led to the 2010 Black Friday scandal, where a U.S. federal court seized the domains for PokerStars and Full Tilt Poker, and produced indictments for executives at those companies.
PokerStars paid the U.S. government over $700 million in 2012 to settle most of those issues, but the executives in charge never had their indictments dropped. This led the Division of Gaming Enforcement of New Jersey to suspend the license process for PokerStars, when it had a deal in place with Resorts Casino in Atlantic City. Nevada used a “bad actor” law to ban PokerStars from their state, while Pennsylvania is debating an even more stringent bad actor law, specifically designed to bar PokerStars from their state (if ever Pennsylvania legalizes online gaming).
What Is a “Bad Actor” Law?
The “bad actor” clauses in the SB 1366–and similar legislation in the Assembly introduced by Assemblyman Reggie Jones-Sawyer–is at the heart of the dispute among California’s gaming tribes. In a bad actor law, any companies which have acted on bad faith in the past would be barred from licensing. This could mean that those companies with outstanding legal issues might be barred (the Nevada law), or those which accepted American real money players after the UIGEA in 2006 would be banned (the Pennsylvania law). In either case, PokerStars would have trouble getting a license.
The Morongo Tribe wants PokerStars to be given a license and be able to go along with its business, like any other company. Such a decision would give the Morongo Tribe a major advantage, because PokerStars has a bigger playing community, larger prize pools, and a more popular software interface. Morongo Online likely would become the number one online poker site in California.
Pechanga, San Manuel, and Agua Caliente
Several other tribes are in full support of the bad actor clauses in a possible California online gaming law. The tribe championing such clauses are the Pechanga Band of Luiseno Indians, the owners of the largest casino in the state. The San Manuel Band of Mission Indians, the Agua Caliente tribe, and the Pala are other tribes vocally in support of a bad actor clause in the legislation.
The discussion has been contentious along the way. Robert Martin, chairman of the Morongo Tribe, recently said the bad actor law being discussed is “just a smoke screen…to give a competitive advantage to others.” Everyone aware of the debate knew that Martin was talking about the Pechanga Tribe and its supporters.
It is easy to look at the Pechanga, San Manuel, and Agua Caliente tribes and see their stance as self-serving. At the same time, they can offer legitimate arguments for why PokerStars should not be allowed to profit off of the Interent gambling industry of California. They ask why a company that made money the wrong way should be allowed to make more money the right way. Every other state which has passed igaming laws have also taken the same stance with PokerStars, so they ask why California should be any different.
Morongo’s Chairman: “Just a Smokescreen”
PokerStars recently was purchased for $4.9 billion (along with Full Tilt) by Amaya Gaming Group, a Canadian online gaming software company. With Amaya Inc. now in control, PokerStars is likely to be licensed by New Jersey soon, perhaps by October. With such news, the Morongo Tribe would have had an argument on behalf of their partner’s exclusion.Thus, the decision by Lou Correa to drop the legislation with one month left in the session is a major disappointment.
It could also come as a disappointment to the Pechanga and their allies, because they stand to lose revenues if legalized online gambling never happens in California. Senator Correa seems to assume the Morongo and Pechanga have no chance of agreeing on the issues in the intervening month.
