Efforts to legalize and regulate online poker in California for 2016 officially died Wednesday with the tip of the state's legislative session. While legislation overcame one seemingly insurmountable roadblock to progress further than the problem had in eight previous years discussed within the state, it fizzled out in a perplexing way, leaving a sour aftertaste that might linger into next year.
As the bill came right down to the wire in August, seemingly the one issue standing within the way of its passage was what suitability standards to incorporate. A tribal coalition led by Pechanga and Agua Caliente wanted a steep 10-year ban against PokerStars and its parent company Amaya Gaming for previously operating within the state. PokerStars and its in-state partners that come with the Morongo and San Manuel tribes together with the Commerce, Bicycle and Hawaiian Gardens cardrooms, wanted suitability issues left as much as the regulators but were hesitantly willing to just accept a soft 5-year penalty which may be burnt up with a $20 million payment to the state to support passage within the Assembly.
That is where Assemblyman Adam Gray's bill stood after passing the Appropriations Committee in June, marking the furthest an absolutely fledged online poker bill had ever advanced in California. Then Gray flipped the script on Aug. 17, introducing amendments that will institute a five-year ban for corporations that took wagers within the U.S. after Dec. 31, 2006.
The Not-So-Great Compromise
The hard five-year ban was presented as a possible compromise, nevertheless it wasn't the results of negotiations between the 2 coalitions. The amendments weren't dropped at the PokerStars side for discussion or approval before being entered.
"To suggest that the amendments are the results of some form of compromise I DO NOT BELIEVE is accurate," said John Pappas, director of the Poker Players Alliance. "It was not the results of various stakeholders coming to the table with Assemblyman Gray, hashing out their differences and saying that is what I'm willing to present and that is what I'm willing to take."
Here's a dictionary definition of compromise: "An agreement or a settlement of a dispute that may be reached by all sides making concessions."
There was no agreement or settlement made here, though the Pechanga coalition did seemingly make a concession on its previous position of PokerStars never being allowed to take part in California. Even that may be in question.
The wording of the amendments created two unsuitable categories: "covered person" regarding someone who owned or has acquired an internet poker company that operated within the U.S. after Dec. 31, 2006, and "covered assets" as things utilized in reference to operating online poker sites within the U.S. within the same period. Those within the first category aren't eligible to be found suitable for a license until 2022, however there is not any date listed to raise the ban for those using covered assets.
Keith Sharp, a lawyer who represents the cardrooms within the PokerStars coalition, believes this was an intentional try to slip in an entire life ban under the radar. He noted that the language was lifted almost verbatim from Nevada's statute that put PokerStars in a five-year penalty box, but that the Nevada statute did specify an end to the ban to be used of covered assets.
"It's pretty clear to us that very craftily it has a ban on Amaya/PokerStars in perpetuity," Sharp said.
PokerNews attempted to invite a Pechanga representative if it meant to provide a five-year and never lifetime ban, but had not heard back at time of publication.
Why the Change?
For the former two years, Assemblyman Gray had spoken publicly at hearings indicating that suitability issues have to be left to regulators, that legislatively prohibiting one company could violate the constitution, and that the period between the passage of the Unlawful Internet Gambling Enforcement Act in October of 2006 and the dept of Justice decision in December of 2011 that allowed for states to manage online gaming was a grey period.
At an informational hearing in his Assembly Governmental Organization Committee last year, Gray said: "THIS IS NOT about creating competitive advantages. If our suitability standards in current law are inadequate, because of this individuals are running gaming establishments not of the top character, we have to strengthen those laws."
In June of this year, Gray added suitability language in an try to discover a compromise between the coalitions that will allow for a bill's passage. The proposal worked on with Appropriations Committee chair Lorena Gonzalez, created a five-year penalty for firms that operated within the U.S. between the tip of 2006 and end of 2011 that may be circumvented by paying a $20 million fee to the state.
Agua Caliente chairman Jeff Grubbe called the $20 million penalty a "get-out-of-jail-free card" at a committee hearing, though PokerStars hasn't ever been convicted of any wrongdoing.
Amaya/PokerStars also didn't just like the suitability language that used a date across the passage of UIGEA to create a penalty but was willing to support the bill within the Assembly and take a look at to deal with those issues within the Senate.
UIGEA in its opening lines states that the act doesn't establish what's or isn't illegal gambling. PokerStars' stance was that online poker was not illegal gambling, and there have been no state or federal statutes that covered online poker.
"This concept that UIGEA somehow changed the sport isn't true," said Eric Hollreiser, vp of corporate communications for Amaya/PokerStars. "TO MAKE USE OF that arbitrary date to mention anyone operating after it's acting illegally doesn't hold legal water. It isn't just legally faulty but unconstitutional as it provides penalty without due process and specifically targets one company."
At the June Appropriations Committee hearing, Gray recognized that argument: "WITHIN THE bill, as amended here in committee, any operator blatantly operating illegally is unsuitable. That may be post-2011 after we had absolute certainty. There has been a grey period between 2006 and 2011, and should you operated during that period that's where the possibility of a five-year penalty box or $20 million comes into play."
But in August he added an amendment that required a five-year ban for operating in what he had previously called a grey period.
"Quite frankly, I FEEL he sought to push the bill without the hard ban and wasn't getting any success, so he thought he'd attempt to push the bill with it, and clearly did not have any success," Pappas said. "I BELIEVE it leaves a miles larger philosophical question about what's doable in California. The newest episode showed that setting up a bad-actor provision doesn't help advance the bill, so the question everyone need to be concerned with is what would help advance the bill. It is a very open question that I DON'T BELIEVE may be answered anytime soon."
What if it had Passed?
If by some miracle the net poker bill as amended in August was glided by the Assembly, Senate and signed by the governor. Would we be playing online poker in California next year? Not likely.
"It has the entire classic earmarks of a bill of attainder, trial and conviction by legislation," Sharp said. "I FEEL it could was subject to challenge. Whether that challenge could be brought by our group or another person I WILL NOT say, nevertheless it would has been right to be challenged as unconstitutional."
With the slow pace at which complaints can move — USC fans know that former running backs coach Todd McNair's lawsuit against the NCAA regarding allegations made against him within the Reggie Bush investigation was ongoing for greater than five years — particularly in the case of problems with constitutionality, this would have delayed online poker in California for a very long time. Even supposing the decision came back upholding the five-year penalty, it might have already been 2022 by the point it was decided.
A bad-actor clause is nearly certainly going to legally delay online poker unless it's one the PokerStars coalition is willing to simply accept for business reasons.
However, a bill not containing a bad-actor's clause wouldn't mean that PokerStars would avoid penalty. Regulators could choose to ban PokerStars from participating in California for 5 years.
"I don't pretend to believe that a California casino commission will absolutely find us suitable, but that's who we want to spend the effort and time to analyze us instead of the legislature," Hollreiser said. "IT SORT OF FEELS to me in case you are really worried about bad actors, take the fight to where it should be, and that is the individuals who on a daily basis give you the chance and authority to make a decision that kind of thing. We've never said there should not be judgment made in California on who're suitable operators."
In Nevada, the five-year penalty was imposed by regulators, not the legislature. Other states which are currently taking a look at online poker, including Pennsylvania, The big apple and Michigan, haven't considered PokerStars' suitability to be a legislative issue. PokerStars is essentially the most licensed online poker room within the world.
"Where it's a subject matter is where you might have a politically entrenched competitor doing everything it may possibly to forestall you from coming into the market," Hollreiser said. "THE EXPLANATION WHY it is not a subject matter in most other states is that they take a look at the exhaustive investigation that the brand new Jersey Department of Gaming Enforcement went through, where we arguably paid a lovely heavy price that would has been fought, but there has been a choice made that with certain changes the brand new Jersey DGE found that we're suitable."
What's Next?
For much of the year, the PokerStars coalition was capable of call the Pechanga coalition obstructionists standing within the way of individuals in California getting consumer protections to play online poker. Within the last month, that was turned upside down.
Maybe that isn't this sort of bad thing. Each side have now shown that they have got the facility to dam a bill they do not like from passing, leaving compromise because the only option. And Assemblyman Gray has shown he's willing to take both sides to get a bill passed that does provide consumer protections and revenue for the state.
There was an important amount of progress made in 2016. Entering the year, the participation of the pony racing industry appeared like an excellent more insurmountable obstacle with the Pechanga coalition than suitability standards. Hostilities between the tribes and tracks dated back 15 years, but Gray introduced an annual stipend for horse racing to surrender its right for a license that was within the end-of-session bill that Pechanga supported.
And although the Pechanga and PokerStars coalitions remain far apart at the proposal of the five-year penalty, Pechanga took an important step toward compromise in moving clear of its demand for a life-time ban.
However, there has been also an unpleasant side to online poker discussions this year that would affect what happens going forward. In June when the Pechanga coalition was livid on the bill moving throughout the Appropriations Committee with the $20 million fee for PokerStars to be considered for a license right away, Gray brought a sergeant-at-arms to a gathering with the coalition and recited criminal codes coping with threatening a legislator.
In the time between when chief of staff Hager told the la Times on Aug. 17 that the amended bill should secure a two-thirds vote within the Assembly and when the vote was proposed to be hung on Aug. 22, there has been a report within the Times that Pechanga had recently hired the corporate of Gray's father-in-law, former Rep. Gary Condit, to lobby on another issue, along with an excessively personal allegation against Hager within the Los Cerritos News.
For all of the effort he installed to have a web-based gambling bill closer than ever before to getting an Assembly vote in California, making a strategy to one of the crucial two issues holding back passage, Gray was attacked from each side. He'll have a hard decision on whether it's well worth the hassle to continue fighting in this issue.
"I think Assemblyman Gray deserves numerous credit for carrying this issue so far as he did," Pappas said. "Ultimately, he was looking to get a bill passed and he bumped into two very dug-in factions that weren't going to provide ground. I HOPE that this entire episode hasn't soured him on supporting good policy at some point. I FEEL everyone will retreat, lick their wounds and notice what is sensible for 2017.
"Hopefully the opposing sides can really sit and hash out the problems to come back up with some type of agreement. Until that happens, I DO NOT see this happening in California, and from a client standpoint that is the biggest disappointment."
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