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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Inside Gaming: Internet poker in California shapes up as coveted prize

24 November 2014

California is shaping up as the nation’s Internet poker battleground in 2015.

Everyone wants a piece of the potentially lucrative pie.

With 38 million residents, California has an Indian casino industry that produces almost $7 billion in annual gaming revenue — one-fourth of the nation’s total. Internet gaming proponents think the Golden State will erase doubts about the financial strength of the activity that is burdened by setbacks in New Jersey, Nevada and Delaware.

California’s racetrack operators view Web gaming as a way of revitalizing its business. State card room managers believe online wagering is a natural partner to live cash games.

Legislation legalizing online poker stalled this year in Sacramento. It’s expected to be a different story in 2015.

Multiple bills covering online poker will be introduced when California’s Legislature convenes Jan. 6 for its two-year session. As soon as next month, when lawmakers meet to organize for the session, online poker talk will surface.

By the time 2015 is wrapped up, a bill legalizing online poker will await the signature of Gov. Jerry Brown.

The question is whether the legislation contains language that keeps PokerStars from having a seat at the table.

PokerStars complicated matters this year.

Three Los Angeles-area card rooms and the Morongo Band of Mission Indians — operators of Morongo Casino Resort & Spa in Cabazon — had a deal with PokerStars for the European online giant to provide the group with an Internet wagering platform.

However, 13 tribes, led by the Pechanga Band of Luiseno Indians, favored an online poker bill that contained a “bad actor clause.” The language sidelines an Internet wagering company that accepted bets from American players after October 2006, when the Unlawful Internet Gambling Enforcement Act was passed.

In the months following the shelving of the California legislation, events changed the landscape.

PokerStars, which was kicked out of the U.S. by federal prosecutors in April 2011, was purchased in August when Montreal-based Amaya Gaming Group, Inc. paid $4.9 billion for its Isle of Man-based parent company.

Amaya is licensed as an interactive gaming technology provider in New Jersey and wants to launch the PokerStars brand through a partnership with Resorts Atlantic City. An application is pending with the state’s Gaming Enforcement Division.

Changes in PokerStars — new ownership and the company’s 2012 payment of $731 million to settle criminal and civil charges — could fuel a New Jersey launch, possibly after Jan. 1.

“The key is New Jersey,” one influential California tribal gaming source said. “That could answer some questions.”

Earlier this month, the San Manuel Band of Mission Indians joined Morongo and the card rooms in PokerStars’ corner. The tribe, which operates the San Manuel Indian Bingo & Casino in Highland, had been part of the 13-tribe anti-PokerStars coalition.

San Manuel Chairwoman Lynn Valbuena wrote in a Nov. 9 letter that joining with Morongo and Amaya gives the tribe “the best opportunity to achieve our I-poker business goals and objectives.”

Pro-Internet-poker lobbyists think keys to California’s Internet gaming legislation are the yet-to-be-named new chairmen of Senate and Assembly government organization committees, as well as the panels’ makeup.

“Who are the authors and are they strong authors?” one lobbyist said.

Supporters of legal Internet poker in California aren’t dismayed by negativity surrounding the U.S. online poker market.

Federal legislation to create a nationwide online wagering system is bottled up and unlikely to surface after the new Congress is seated in January.

Las Vegas Sands Corp. Chairman Sheldon Adelson is the nation’s most vocal — and wealthiest — opponent of online gaming. The 12th richest billionaire on the Forbes 400 is spending millions to hire lobbyists and create a coalition to fight any and all Internet wagering legalization efforts nationwide.

Adelson hired former California Assembly Speaker and ex-San Francisco Mayor Willie Brown to oppose online poker in Sacramento.

Golden State poker advocates aren’t deterred by the diminished revenue figures produced by legal online gaming.

Analysts once projected the U.S. online gaming market would reach close to $8 billion by 2017. Not anymore.

Internet wagering in New Jersey accounted for just under $9.5 million in gaming revenue during October, down almost 7.5 percent from September. The figure was the state’s lowest total since January. The only online gaming operator to show an month-to-month increase was British-based Betfair, which is using the gaming license of the closed Trump Plaza.

Nevada has been equally disappointing.

In September, Nevada’s three online poker sites — WSOP.com, Ultimate Gaming and Real Gaming — reported combined gaming revenue of $693,000, the lowest single-month total since the state began releasing monthly online numbers in February. In June, the sites collected a combined $1.037 million in gaming revenue.

Station Casinos, Inc.-owned Ultimate Gaming canceled its online wagering agreement with Atlantic City’s Trump Taj Mahal Casino Resort in September and ceased operations in Nevada on Nov. 14. The 19-month-old site was the nation’s first legal and regulated poker website.

Ultimate Gaming Chairman Tom Breitling said the current state-by-state approach to legalizing online gaming “has created an extremely cost-prohibitive and challenging operating environment.”

Delaware’s market is inconsequential.

In Nevada and New Jersey, several banks refused to allow credit cards to be used for online gaming transactions. Also, software created to ensure players were located within a state boundaries didn’t work and kept many bets off the board.

Morongo Tribal Chairman Robert Martin thinks the momentum is moving forward for California to get into the Internet poker game and change the image of the activity.

“As tribes come together on this issue, the opportunity for success grows,” he said.
Inside Gaming: Internet poker in California shapes up as coveted prize is republished from Online.CasinoCity.com.