All eyes were on California in late June as the Senate Governmental Organization Committee held a hearing on S.B. 1485. The bill, authored by Sen. Roderick Wright (D–District 25), would legalize intrastate online gambling in California. What happened at the hearing surprised even some opponents of the bill who, in a way, got what they wanted.
Days before the hearing, the Tribal Alliance of Sovereign Indian Nations (TASIN), the California Nations Indian Gaming Association (CNIGA) and the Indian Business Alliance sent letters to Wright, stating their opposition to the bill's presentation. At the hearing, Wright did not call for a vote, essentially putting the bill to rest for this legislative session. Instead, legislators in California will likely spend the rest of their session cutting services and raising taxes to deal with the state’s unprecedented budget deficit. The complicated issue of i-gaming, it appears, will have to wait while technology and the industry continue to speed ahead.
However, efforts to legalize intrastate i-gaming in California are far from over. In a way, they’ve only just begun. There are lessons to be learned from Wright’s attempt to create rules everyone can live with. Michael Lombardi, a tribal gaming regulator for the Augustine Band in California which is a TASIN member, says Wright’s bill really should serve as a model moving forward.
A United Tribal Front
Wright’s bill has done something tribal gaming leaders in California have not seen since Proposition 1A, regarding gambling on tribal lands, in 2000. S.B. 1485 brought California’s tribes together, in agreement that the bill was not in the best interest of California's tribal nations. “Those groups are now going to continue to have dialogue, discussion and talk,” Lombardi says.
He also says some compromises will have to happen among the tribes in the coming months. CNIGA Chairman Daniel Tucker says his organization is gaining members as more tribes are looking to work and stick together. “I think if we just sit down at the table and put our heads together we’ll come up with something. I think tribes in California realize that we’re in this for the long haul because this is an important part of what we do. And to be part of this with California, I think it’s a good thing.”
When it comes to i-gaming in California, everyone wants to be dealt into the game. Casino operators, card clubs, racetracks and out-of-state and offshore operators all want to play. Various reports will give you different numbers regarding the economic potential of Californians wagering legally online. As Lombardi says: “The numbers are a mystery; all we have is estimates. But it must have validity because all of the overseas operators have lobbyists and want to be in the game. Internet poker will be gold in California.”
California tribes also see other tribes in the United States as potential competition in this arena. “Most importantly, we need to protect ourselves against the legalization of Internet gaming throughout the United States,” Lombardi explains. “That is the main objective that all tribes agree on. We don’t need to be allowing casinos in Connecticut, Missouri or New Jersey to be taking bets from people in California. That would be bad for all of us. Everybody wants to tip their beak in California, the biggest
i-gaming market in the world.”
Wright also mentioned the urgency to beat the federal government at this race at his hearing, noting, “It’s important that we advance something before the federal government occupies the field.”
Tucker adds: “It’s not just any tribe can get in on the Internet, anybody could. California is huge. We’ve still got to protect what we have, and I think tribes understand that.”
Tucker says CNIGA is watching federal legislation, such as the bill being proposed by Congressman Barney Frank (D–Mass.), as well. “We’re against those right now,” he notes. “We have to study it a lot more. It’s a threat to us. We’ve got to find out what those threats actually are and go down every single aspect of those bills to see whether it takes our exclusivity away, all those kinds of things.”
Work Ahead
There are many reasons parties like the idea of intrastate i-gaming in California. Most of them trace back to dollars. As Wright pointed out at the hearing, his bill is also about providing consumer protections for an activity that is already happening in California. People are already playing with their money online, and Wright wants to give those players the option of putting that money into California’s coffers. Hence his sense of urgency. “The longer we wait, the more difficult it will come to get that business back,” he says.
Tucker says CNIGA members know California is hurting economically and that the tribes would give a share of i-poker profits to the state.
At this point, it seems the only thing all parties agree on is that Wright’s bill, in his own words, “needs a great deal of work.” Wright explained that every detail one group hated in the bill, another group loved.
Just what types of gambling would be allowed online is a main point of contention. Wright’s bill did not limit i-gaming to poker, as many tribes would like. “You’re dang straight we want an iron-clad definition,” says Lombardi.
Wright told the hearing audience that he does not want the law to limit i-gaming to poker, citing the state lottery as a reason. He says the state lottery is under performing because the law stops it from using certain types of games. Lombardi, however, says that is wrong. He belives the lottery is underperforming because of a low payback percentage and not enough sales terminals.
Lombardi says language similar to the Morongo Band of Mission Indians’ definition of games would need to be added to Wright’s model in order to gain tribal support. “That definition was crafted so as to avoid a violation of our exclusive right to operate house-banked card games and slot machines,” he explains.
The other problem California tribes have with Wright’s bill is who it would allow to operate online gaming. Currently it would not prevent offshore companies or companies from Nevada from bidding on one of the i-gaming hubs. There are also politicians in California who want to keep i-gaming from businesses outside of the state. At the hearing, Wright explained that he believes it could be illegal to grant preferences to Indian tribes or card rooms. To that, Lombardi says: “You know what? I don’t understand that because we are talking about a gaming license. A gaming license in California is a privilege, not a right, and the state has a right to limit ownership, which they do today.”
Lombardi believes the best way to handle this would be to limit hub operation for five years to entities that already have gaming licenses in California. That way, Californians would know they could be confident in the operators and they would not have to wait for the state to investigate newcomers.
There are also other issues that need to be addressed, such as punishment for illegal play, blocking companies that have done illegal i-gaming business with Californians, and the number of hubs to allow. All parties may not agree on these points either, but at this time, it appears these may be areas where compromise is most possible.
What Next?
By January, Californians will have a new governor and attorney general. The political landscape will have changed, and the tribes, card clubs, racetracks and out-of-state companies will have had time to talk, deliberate and possibly come to agreement amongst themselves. Tucker says, “We’re going to really sit down and see what will be the best way to do this, for everyone involved, including the state.”
Tucker believes it will be two years before any i-gaming or i-poker legislation is passed in California. Wright wants something done in this session or the next. Lombardi expects to see more intrastate i-gaming bills in California’s legislature when the next session begins in January. But one thing they all agree on is that technology is not waiting for the law. “Technology is just growing, growing and growing, and we don’t want to be left out of it,” Tucker says. “There’s got to be some way that satisfies everyone.”
Lombardi expects Wright to once again lead the charge toward i-gaming gold in California. Wright has a racetrack and card rooms in his district and has become an expert on the issue. Wright claimed to know more about i-gaming than anyone (including i-gaming company representatives) at his hearing in June—and Lombardi says he was probably right: “I found him to be highly intelligent. He’s scholarly; he studies his subject and immerses himself in the subject. As a person who’s been in the gaming business for 25 years, he’s one of the most knowledgeable elected officials I’ve ever met when it comes to the topic of gambling.”
So, although Wright’s first attempt at an i-gaming bill was not a winner, it appears his knowledge and willingness to work might make him the senator to look to for some real action next year. Tucker says CNIGA will work with any lawmaker that puts forth i-gaming legislation.
Lombardi says this is the way the process is supposed to work. Wright now knows where the troubles are in his bill, and interested parties know what he would like to see. Tucker is hopeful the groups involved will reach an agreement of some sort.
Lombardi adds: “I think [Sen. Wright] set the table for a successful legislative effort next year to craft a bill that will have lots of compromise in it, but in the end will generate a lot of new revenue for the state of California. It will give Californians—over a million of them that like to play poker on the Internet—an opportunity to play on a site where there’s some consumer protection. That’d be good for everybody in the state.”
Sarah Klaphake Cords is the New Media Editor for Casino Enterprise Management. She can be reached at editor3[at]aceme.org.
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