California Hearing On Legal Online Poker
Thursday April 24 ,2014 : DIVERSE OPINIONS HEARD AT CALIFORNIA HOUSE HEARING ON LEGALISED ONLINE POKER (Update)
Most followers of the online poker legalization debate will be familiar with these submissions.
Spokesmen for a variety of interests for and against the legalization of online gambling in California presented their arguments to the state's Assembly Governmental Organization Committee hearing Wednesday, with testimony from 33 witnesses heard over a marathon more than five hour session in the state capital.
Chaired by Rep. Isadore Hall, the committee listened and asked questions on a diversity of views that covered most aspects of online poker and experiences both within and outside the United States.
Analysts and operators, lobbyists and union officials, along with other interested parties presented information – much of it now familiar to industry observers – and opinion for the edification of the political establishment, with the following presentations particularly noteworthy:
Former Nevada Gaming Control Board chairman Mark Lipparelli opined that online operators who had exited the US market once the UIGEA had passed should be regarded as responsible and proper entities worthy of a licence, perhaps implying that those who did not might be classed as "bad actors."
Lipparelli urged legislators to go after unlicensed operators when and if online poker made legal in California, and gave his views on the threat of money laundering in the online poker context, observing that this was hardly the most effective way to launder money.
He was also supportive of a properly regulated and constituted online poker industry, pointing out that the advanced tracking and other technologies used by leading online gambling companies was in most cases superior to those deployed by land casinos.
The former NGCB chairman recommended that taxes should not be above single digit levels as this could discourage operators and ultimately result in players going to illegal sites.
Implementing online poker had not resulted in excessively additional expense for the state of Nevada, Lipparelli said, noting that the Nevada legalization allowed for all forms of online gambling, but that poker had been the priority in launching the genre.
The respected online gambling analyst Chris Krafchik's statistical information added value to the committee hearing, revealing that the US online poker market delivered an estimated $920 million back in 2005, and despite the damage caused by Black Friday revenues could be expected to reach $50 million this year from Delaware, Nevada and New Jersey – the three states that have so far legalised.
The analyst's estimate that an intrastate California online poker market could generate up to $317 million in the first year of operations and subsequently rise over the following four years to $597 million will have encouraged the lawmakers.
Tom Ballance from the Borgata repeated his much-publicised view that legalised online gambling in New Jersey had not cannibalised the land casino business, and then went on to describe the teething problems operators in the New Jersey online gambling market had experienced and how these might be avoided, with payment processing hassles the most difficult to overcome.
Another New Jersey operator, Ultimate Gaming's Tobin Prior, said that the proven operational verification and geo-location technologies in use by operators worked well, and he took an oblique swipe at critics with their own agendas who tried to obscure this fact by making confusing claims to the contrary.
He reiterated the Lipparelli view that tracking and other technologies used by online operators were superior to those available to land-based owners.
The tribal contribution was always going to be interesting for the committee, and Mark Macarro of the Pechanga lived up to expectations, saying the tribes he represented supported legalization because it was a better option to help design the bus rather than getting run over by it. The Pechanga support one of the bills – the Jones-Sawyer AB 2291 – currently before the California legislature.
Bo Mazzetti, a spokesman for the Rincon – another tribal group – felt that operators who had wilfully flouted US laws post-UIGEA ought to be excluded from licensing, a viewpoint that was supported by the Pala tribe representative, Robert Smith, and by a spokesperson for the San Manual tribes, Lynn Valbuena.
Protectionism appeared to be the aim of the Agua Caliente tribe, whose spokesman Jeff Grubbe not only called for a ban on "bad actors" and online poker through race tracks, but also wanted restrictions on website numbers to preclude tribes partnering with undesirable entities and letting them get a foot in the door.
Gene Whitehouse from the United Auburn tribes tempted legislators with his estimate that exclusive tribal online poker could deliver tax revenues of up to $800 million over the first five years through a tax regime that would include taxing the profits of players.
Robert Martin of the Morongo, a band that had that day confirmed its coalition with Pokerstars and three major Californian card clubs , perhaps predictably spoke against "bad actor" clauses based on the UIGEA, which he said were thinly disguised attempts to exclude leading international operators from the Californian market in order to create an unfair anti-competitive advantage for certain groups. His suggestion was that licensing should be more broadly based on integrity, merit and capability.
The committee's vice chairman, Brian Nestande, appeared to support that view in his questioning, noting that actual criminal convictions were a more focused element that ought to be considered by regulators.
Other Pokerstars allies – the three major Californian card clubs – voiced their views to the committee, with Ron Sarabi reminding lawmakers that his Hawaiian Gardens firm was a major generator of tax revenues, and that internet poker was both inevitable and promising as a channel through which more revenues could be generated.
His colleague from the Bicycle Casino, Keith Sharp, presented financial statistics to show how important the tax contribution of the cardrooms has been historically, and voiced support for legalization provided the process was fair, strict, competitive and excluded criminal elements.
Sharp made the important point that provision already exists in California gambling regulations for the exclusion of applicants who have a conviction for a felony, and he therefore questioned the repeated calls for "bad actor" provisions.
Regulators were experienced and unbiased, and should be left to make the appropriate decisions on licensing, he remarked. In this he was strongly supported by Sarabi.
888 Holdings CEO Brian Mattingley used the opportunity to blow his company's horn as a post-UIGEA departer and a corporate currently involved in the Nevada and New Jersey online gambling markets, and predictably supported legalization, although he said he would prefer a single federal framework instead of expensive piecemeal state legalization requirements.
John Hindman from Betfair similarly applauded his company's post-UIGEA virtue and drew the committee's attention to the fact that there had been no evidence of underage gambling and money laundering in Nevada, Delaware and New Jersey despite the dire predictions of critics with their own agendas.
The testimony of California Gambling Control Commission chairman Richard Lopes was much anticipated in these proceedings, and did not disappoint from an interest and information perspective.
He made pragmatic assumptions on the mechanics of getting a legalised poker regulatory regime running (over 6 months to put together regulations) and the likely staff requirements in the initial stages. He identified intrastate regulatory priorities as geolocation, ID and age verification, operator suitability and responsible gambling provisions.
Taking the practical needs further was Wayne Quint of the state Department of Justice Gambling Control, who emphasised the need for stringent vetting of operator and owner applicants, and the additional workload that this will entail for enforcers conducting the necessary checks.
He suggested that if time was an issue it may be possible for interim licenses to be issued to applicants who passed the first screening, enabling them to start setting up whilst in-depth investigations confirmed their suitability.
A series of technology company spokespersons followed, underlining the merits of the various technologies deployed by online poker operators in ID and age verification, geolocation, payment processing and responsible gambling tracking…all generally positive and showcasing the progress that these systems have made in recent times.
The shadow of anti-online gambling land casino mogul Sheldon Adelson was always going to be present at this committee hearing, and towards the end of the proceedings his lieutenant Andy Abboud stepped up to deliver the well-worn talking points of the aging billionaire's crusade against all online gambling.
They were all there, from the "casino in your pocket" claim to allegations that the technology supporting online gambling was not of a sufficiently high standard and that compulsive and underage gambling, criminal involvement and money laundering were real and present dangers.
Abboud seemed offended at the information delivered earlier in the day by former Nevada Gaming Control Board chairman Mark Lipparelli, who had said that Nevada legalization covered all aspects of online gambling. Abboud tried to portray this as a deliberate attempt to lull Nevada lawmakers into passing the necessary legalization, but there was little evidence to suggest he succeeded.
In fact Abboud was placed in a difficult situation when he was asked why his company so vehemently opposed online gambling when it participated in online sportsbetting; and why his company had not been up in arms when online gambling legalization had first taken place.
In his rather unconvincing response, Abboud said that Adelson was prepared to ditch online sports betting; that in Nevada he had not wanted to offend fellow operators supporting legalization; and that he had only become morally offended when it was apparent that state-by-state legalization was a growing trend.
One of the last presenters of the day, James Butler of the appropriately named California Coalition Against Gambling, perhaps voiced the view of many of those tuned in to the hearing when he acknowledged that the general tone had been positive toward online poker legalization, a pastime he accused of being potentially responsible for a slew of general evils that included family breakups, job losses and financial disasters.
Butler urged the committee to slow down the drive toward legalization, a suggestion that did not appear to have the committee's support.
In an interesting postscript to the hearing, Sen. Kevin de Léon, the incoming senate president pro tem, told the Sacramento Bee that it was “quite plausible” that there would be an Internet poker deal by the end of this session in August, so long as there is sufficient money for the state and taxpayers get “the most bang for the buck.”