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Wednesday July 13, 2011 : Rival bills discussed before Senate Governmental Organization Committee
Two rival online poker legalisation bills were discussed without voting before the California Senate Governmental Organization Committee this week, with the California Online Poker Association - a coalition of Indian tribes and land card rooms – reiterating its backing for SB40, and the Agua Caliente Band of Cahuilla Indians saying the project should not be rushed, although it supports the concept.
Sen. Lou Correa, the author of SB40, said California needs to act quickly or it will be beaten to the punch.
“Time is not on our side,” Correa said in the final informational hearing in Sacramento prior to the summer break.
The Santa Ana Democrat said his measure would provide the state with $1.4 billion in revenue over 10 years and create 1,300 new jobs.
“I suggest we keep California as a can-do state, and move forward this year,” he said.
Jim Wise, a federal online gaming advocate, reminded members of the committee that Nevada Governor Brian Sandoval signed a new law last month requiring his state to adopt regulations for Internet gambling by January.
“This is further evidence that Congress is ready to move,” Wise said.
However, the Agua Caliente Band of Cahuilla Indians held a different view, with Jeff Grubbe, vice-chairman of the tribe, observing that his organisation would like to see California act on intrastate gambling before the federal government does, but it doesn't need to be rushed.
“We foresee no successful action on this front in either 2011 or 2012,” Grubbe said. “We believe you have the time to carefully construct a proposal. We urge you to take the time to get it right.”
Industry observers told the Desert Sun newspaper that they interpreted Grubbe's statement as a shift from the tribe's long-held “neutral” stance on online gambling.
The Agua Caliente will oppose Senate Bill 40, as well as the competing SB45 Internet gambling bill by Senator Rod Wright, until six provisions are met, Grubbe said at Tuesday's hearing.
“Number one: it must be limited to online poker. Going beyond that would threaten exclusivity provisions of the state,” Grubbe said, noting that even then, it might trigger a challenge that could have serious implications for the state's general fund and the $346 million the state gets annually from compact tribes.
Then, the Agua Caliente want the law to be open to all entities — from card clubs to brick-and- mortar casinos - a departure from Correa’s proposal which favours the COPA coalition in the eyes of many.
“No one should be allowed to have an artificial monopoly,” Grubbe said, either through a hub limit or licensing fees.
The tribe also stipulated that offshore or international entities should be allowed to enter the state only if they partner with state-licensed online gambling providers.
“No silent partnerships should be allowed,” Grubbe said.
Last, the tribe said the revenues required of Internet poker should not exceed levels needed to set up a credible, safe alternative to illegal offshore gaming sites…and state lawmakers must clearly state the intention of the state to opt out of any federal Internet gaming legislation.
The California Tribal Business Alliance also testified against Correa's COPA-supported SB 40.
“It is still crafted to benefit a select group,” said Leslie Lohse, vice-chairwoman of CTBA, who was also critical of the upfront and expensive licensing fees envisaged, which reward early-bird operators.
Those who spend $5 million for a licence within 90 days after the bill takes effect could pay $50 million to the state against future revenues. After 90 days, the pre-pay fee rises to $250 million.
Tribes don't have that kind of money, Lohse said. “We believe it will do irreparable harm to our economies,” she said. “It would undermine our tribal agreements.”
Lohse claimed that land gambling businesses have reported a 15 percent spike in poker and tournament play since “Black Friday's” federal shutdown of illegal offshore operators.
“Internet gaming is like the rush for gold,” she opined. “Are we so far removed we forget what the gold rush did for our people?”
Sen. Correa told the committee:  “As a state, we cannot continue to make painful cutbacks in education law enforcement and healthcare and social services, not when there are more than $1.4 billion in new state revenues at stake and as well as more than 1,300 new California jobs through SB 40.”
He said that his bill was based on several points, namely:
•The need for new revenue in California this year, in order to prevent triggers in the state budget that will require further, massive cuts to education.
•The need to protect consumers from fraud and theft which he claimed currently go unchecked at illegal, offshore online gambling Web sites.
•The need to pass online poker legislation before dangerous federal proposals are able to pass Congress, stripping California of potential jobs and revenue.
“What our state needs right now is revenue. SB 40 will allow California to generate $250 million this fiscal year, money that will help us meet the revenues projected in this (year’s) budget but not identified. SB 40 will help avoid the triggers that will result in deeper cuts to education and other public services,” Sen. Correa said before the committee.
Experts in attendance who supported Sen. Correa’s position on passing SB 40 this year included:
• Former Speaker of the State Assembly and Mayor of San Francisco Willie Brown, who described the need for state regulation of online poker and the benefits of using the state’s trusted gaming partners — California Indian tribes and licensed card rooms — to operate online poker in California.
• Former State Finance Director, Tim Gage, who analysed the revenue potential of online poker in California. Gage testified that by authorising online poker, California can generate more than $1.4 billion in new revenue over the next ten years and 1,300 new jobs.
• Rick Weil, CEO of Sciplay, a worldwide leader in Internet gaming technology, who testified that current technology allows online gaming operators, if required, to prevent minors from being able to login and play poker online through age verification software. He also described the ability to help identify problem gambling and help protect players from fraud and theft.
• Jim Wise, federal advocate and Congressional expert, who described the threat posed to California from dangerous federal legislation that threatens to ship California’s revenue to Nevada and Washington, D.C.
“We have an opportunity to generate 1,300 new California jobs and $1.4 billion in new state revenues instead of watching those jobs and revenues be exported to Nevada or DC through federal legislation,” Correa said. “We can’t afford to do nothing. We can’t delay. If we do, the revenue will be lost, the jobs will be lost and the opportunity will be lost.”
Sen. Wright, who is chairman of the committee as well as being the author of rival bill SB45, said Tuesday that headway is being made despite the discourse.
At first, everyone was opposed, he said. “At least now, we're hearing discussion.”

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