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Testimony at California Poker hearings

2/10/10 - The 1.2 million member strong Poker Players Alliance was a prominent testifier at Tuesday's California Senate Governmental Organization Committee hearings, suggesting to state officials that without the buy-in from the online poker community, efforts to regulate the game will be futile.
 
The committee heard a wide range of evidence both for and against the legalisation of online poker to raise additional tax revenues in the cash-strapped state.
 
PPA executive director John Pappas told the hearing that online poker can and should be effectively regulated in the West Coast state.
 
"The PPA respects the due-diligence of the Committee to investigate "if" online poker can be regulated, and we stand here to tell you that it unquestionably can be regulated, and in fact, already is being regulated, very effectively, across the globe in well-respected jurisdictions," said Pappas, who testified along with PPA's California State Director Steven J. Miller.
 
"The U.S. Congress is debating federal bills that would establish a licensed and regulated online poker marketplace, which the PPA strongly supports."
 
"Given California's love affair with poker, the PPA and our members feel strongly that if the state decides to go down the path of intra-state licensed and regulated Internet poker it must do it with the long-term needs of the consumer and of the State and California Tribes in mind," testified Miller.
 
Pappas advised the hearings to respect the consumer in mking their recommendations, because without the buy-in of the poker community
efforts to regulate the game will be futile.
 
He urged them to ensure competition, saying: "The true opportunity for California is to capitalise and regulate the current market, add new entrants, and provide the poker player with expanded choice and consumer safeguards at the same time. Limiting the marketplace to one online poker provider, as has been discussed, will create a monopoly, turn away consumers, and stifle innovation. In short, it will not work."
 
Other recommendations were that access to the global marketplace be protected
 
"Protect access to the global poker marketplace," said Pappas. "PPA members and poker players in California are concerned that intrastate licensing and regulation will limit their play to other California players only. This not only hurts the consumers, but it hurts the tax revenue potential for the state of California. If a player can't find a game online that they want to play, they will simply not play and that means that an opportunity to generate tax revenue is lost.
 
"A conservative strategy is the favored approach when considering the future of online poker regulation in California. It would be unwise to push "all-in" on an intra-state monopoly that favors a consortium of interests when it is the consumers who ultimately hold the best hand," Pappas concluded.
 
Robert Martin, chairman of the Marongo Band of Mission Indians that has controversially attempted to acquire exclusivity in a legalised state online poker environment, along with commercial card room partners, said: "We feel the games should be controlled by the tribes and the state - and taxed."
 
However, this position was opposed by another wealthy tribe, which vociferously fought the proposal.
 
"We simply do not agree with the consequences of authorising intrastate Internet poker," said Mark Macarro, chairman of the Pechanga Band of Luiseno Indians. Earlier nine other tribes has submitted a letter of objection to the committee.
 
Arguing that the games violate the tribes' gambling agreements with California, Macarro said his tribe may withhold more than $42.5 million in annual casino revenue-sharing payments to the state if California approves online poker.
 
State Sen. Roderick Wright, chair of the committee, wryly observed that: "Clearly, whatever we do will end up in court.''
 
The hearing was the first of ten panels slated for the day-long hearing in Sacramento to weigh the issues of intra-state Internet poker in California, and was followed in some detail by The Desert Sun newspaper.
 
Drew Soderborg, fiscal and policy analyst with the Legislative Analyst Office, said the legalisation of online poker puts the current gaming revenue stream at risk. Compacts ratified after 2003 require tribes to make annual payments to the state, and, as such, it is assumed the general fund will gain $365 million in revenue in 2010-11.
 
Because those compacts contain provisions that limit the state's ability to compete against these tribal bricks-and-mortar casinos, Soderborg said, it is possible that tribes would be allowed to stop making payments to the general fund.
 
"There could be legal challenges if online poker were approved,'' he said. "If such challenges were upheld, the state could lose hundreds of millions of dollars in revenue annually."
 
The Desert Sun also reported the testimony of William Eadington, professor of economics and director of the Institute for the Study of Gambling and Commercial Gaming with the University of Nevada, Reno, who said the tax revenue Internet poker would generate would be "somewhat limited" due to the global nature of this $10 billion to $15 billion industry. He additionally pointed out that online companies did not need to invest in the extensive brick and mortar facilities of more traditional gambling companies, thus denying the state the capital investment attendant on such major enterprises.
 
"[Land] Casinos generate hundreds of millions of dollars of capital investment, through economic spinoffs that occur,'' Eadington said. "With Internet gaming, we would not have any of these in significant (forms), so with the value that accrues, there is not likely to be much left over for the state."
 
Senator Leland Yee, a San Francisco Democrat, wanted to know if Internet poker would violate tribal compacts, whilst Sanford Millar, a certified specialist in taxation law and a general counsel for Centaurus Games LLC, said he believes the "exclusivity clause is at serious risk" and contentions would be filed by tribes operating Indian gaming casinos under the more recent state-tribal compacts.
 
Frank Catania, an online gambling regulatory expert and president of the Catania Consulting Group said that tribal compacts to one side, a well-regulated online gaming industry results in private investment and highly skilled jobs. He pointed out that California is not alone in considering legalisation and used New Jersey and Florida as examples.
 
"If we don't get involved in this, we could lose those resources,'' Catania said. "The better solution relies in strictly regulated environment."
 
Robert Stocker, an educator in gaming law and regulatory expert, said the Internet gaming train left the station long ago, and is picking up speed. It was a $15 billion industry supported by over 15 million Internet poker players, many of them in the United States, he said.
 
"They'll play it tomorrow, next month, next year, "notwithstanding the UIGEA,'' he said, adding that whether or not the state of California opts for legalising and regulating it or not, "the train is going to keep on chugging along."
 
Expert testimony from a UK researcher which continuously tracks Internet gambling was that online gambling in total is now a global market worth some $22.6 billion, and of that some $4.9 billion flows from Internet poker, with California-based players representing a quarter of the market.



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