This is part 1 of a 2 part article from Haley Hintze regarding online poker in California and how the tribes are protection their brick and mortar casinos. Part 2 will be posted tomorrow.

California Online Poker Update: Inside the Noxious Jones-Sawyer AB 2291 Measure

It was only two weeks ago that California’s poker players woke up to the news that not one, but two online-poker measures had been introduced in the state’s legislature. The submissions came hours ahead of a procedural deadline for any new bills to be considered during the state’s current legislative session, which runs through the rest of the 2014 calendar year.

One of the bills was a known quantity, being the third iteration of a measure long championed by CA State Sen. Lou Correa on behalf of the San Manuel Band of Mission Indians, a big LA-area tribal enterprise. That bill has some secondary support from other tribes, dozens of which have gaming interests in the state. The Correa bill isn’t a very good bill, but it gets lobbed out there year after year in the hopes of gaining traction. It hasn’t succeeded yet.

State Senator Lou Correa

Opposite that is the new legislative entry, a recent bill submission by CA Rep. Reggie Jones-Sawyer on behalf of a couple of other powerful tribes, notably the Pechanga and Agua Caliente nations. The Jones-Sawyer bill popped onto the scene as the previous legislative counterpoint to Correa’s bill, sponsored by CA Sen. Roderick Wright and backed by yet another clustering of tribal interests, has dropped quietly away. That’s unlike Wright himself, who continues clinging to his State Senate seat while awaiting sentencing on a recent perjury and voter-fraud conviction.

It’s the Jones-Sawyer measure that’s drawing a lot of attention, being the proverbial new bill on the block. And a look inside exposes it as a bad, bad bill, as corrupt a piece of would-be law as any supposed “Internet Poker Consumer Protection Act of 2014,” Jones-Sawyer’s new AB 2291, could pretend to be.

There’s blessed little actual consumer protection in the Jones-Sawyer bill. Matter of fact, what consumers ought to do is take a cue from the classic Monty Python and the Holy Grail, and demand that their legislators fart in this bill’s general direction.

Calfornia Representative Reggie Jones-Sawyer

Understanding the California Gaming Landscape

It’s a true-enough fact that gambling matters seldom move forward in California without the backing of the state’s tribal interests, who operate virtually all of the important brick-and-mortar gambling venues (when considered in terms of revenue) in the most populous American state. However, all of the tribal interests’ gaming enterprises are land-based, granted in accordance with the tribes’ insistence on sovereignty and self-governance on tribal lands.

Indian Tribe Brick and Mortar Casino - San Manuel Indian Bingo and Casino

Such physical pre-conditions have little relevance in the online world, and the challenges posed by Internet gaming and e-commerce in general are part of the problem. Throughout the United States, the preferred tribal approach to online gambling has to been to attempt to ban it whenever and wherever possible, as was accomplished in the state of Washington in 2006 regarding online poker.

Yet the general consumer demand for online poker and other forms of online gambling is a growing economic force. Gambling revenue is an available income stream, and yet the California tribes’ internal fight over whether to ban it or exploit it is in large part why the progressive state, once thought likely to be among the first US states to legalize online poker, is little farther along the road than it was five years ago.

Even among the tribes who wanted to regulate and move online, there’s been heated debate over licensing, game selection and other matters. If there’s one thing new in the Cali debate, it’s that some of the rival tribal factions have begun private negotiations regarding the competing bills – even if the final result never has any intention of being the “consumer protection” act that both the Correa and Jones-Sawyer measures proclaim.

Excluding the Competition

Just last week, California’s tribal leaders convened for a highly orchestrated symposium regarding the state’s future in online gaming. One of several reports about the affair comes from Kevin Flood, who runs a gaming consultancy called GameInLane.com, and occasionally blogs on gaming matters at his “Kevin’s Corner” gaming blog.

Flood seems to have been among the symposium’s attendees, along with some of the state’s small and independent poker rooms, and a handful of other third-party service providers and consultants hoping to create an “in” with California tribal gaming.

But beyond that, it was tribes and tribes only. Flood noted it only in passing before going on to a couple of wrong conclusions about the state’s online gaming prospects. Here’s what he wrote:

The two primary influential groups engaged in the i-Gambling debate in California have been the American Indian tribes that operate land based casinos and the card rooms that operate card rooms (poker) throughout the state. They were well represent[ed] in the conference. Noticeably absent from the conference speaker list were the race track businesses and other casino operators. Not sure what the implications of this abstention means?

Kevin Flood from GameInLane.com

What that means is that Flood didn’t really do his homework. Had he studied the previous iterations of the various CA i-gaming bills that have been presented to the state’s legislature in earlier years, he’d have known that the non-tribal casinos and the state’s pari-mutuel locations have been forcibly excluded from the tribes’ version of how California online gaming and online poker should be enacted. One early bill first allowed for pari-mutuel licensing, but later amendments specifically removed those operations, along with brusque language to the extent of, paraphrasing here, “Since they won’t be eligible, this document won’t reference them.”

That might sell well to a biased, self-interested audience, but it’s hard to imagine how the California tribes believe they’ll get an online-gambling bill passed in California while pissing off all of the state’s non-tribal gaming interests, overcoming the state’s established anti-gambling factions and getting two-thirds approval from both the California State Assembly and Senate. That last is required because both the Correa and Jones-Sawyer bills were created as so-called “urgency” measures in an attempt to coribly bring them up for votes.

This “our way or the highway” approach is really at the core of why no California online-poker movement has occurred in five years. It’s as if the tribes planning on holding all of the state’s Internet gaming hopes hostage until some point just shy of hell freezing over – a scorched-earth plan that’s likely to provide few real winners.

Yet we’re only scratching the surface… the realities hidden inside the Jones-Sawyer bill get much, much worse.

The Great Wall of California

The game plan for California online gaming, according to the tribes, seems to be, “We’d rather not deal with it, but if it’s going to happen, we get it. We get it all.”

Cold-shouldering what would otherwise be friendly supporters of Cali i-gaming in the form of pari-mutuel outlets is only one small part of the Pechanga / Agua Caliente approach. Another aspect is a push, dominant within the AB 2291’s language, to isolate California from all other jurisdictions, in the dual form of both a preemptive exemption from any federal regulatory initiatives and a preemptive ban on any form of multi-state compacting or sharing of player pools.

From the bill itself (emphasis ours):

19990.16.

(a) To protect Californians from an unprecedented and unwanted expansion of gambling activity on the Internet, and also to protect California’s investments in land-based gaming facilities, which generate thousands of jobs for Californians and hundreds of millions of dollars for the state every year, the state shall not affirmatively elect to be subject to a federal Internet gambling law that would permit persons, other than tribes operating under tribal-state gaming compacts, to operate “gaming devices,” as that term is defined by state law and tribal-state gaming compacts, or to operate house-banked games.

(b) If a federal law authorizing Internet gambling in the state is enacted, and if that federal law provides that states may opt out of the federal Internet gambling scheme, the state shall opt out of that federal Internet gambling scheme in the manner and time frame provided by that federal law. In the event the federal law allows states to affirmatively opt into any federal Internet gambling scheme, this state shall decline to do so. …

If those clauses were to be violated, then the tribes would be entitled to a full refund of all taxes and licensing fees paid to the state. And as for the possibility of multi-state compacting:

(d) If a federal law authorizes Internet gambling agreements between states or foreign jurisdictions, this state shall not participate in any such agreement.

Individual California cities and counties are likewise preemptively banned from creating their own agreements. Just to cement everything into place, the bill also protects itself as a single unit by declaring that its individual provisions are not severable from the whole.

Any Device is a “Gaming Device”

There’s one other term in the provision above worth mentioning, “gaming devices.” California law already contains certain prohibitions and definitions regarding slot machines in particular, but the Jones-Sawyer bill would significantly expand these definitions and create new categories of illegal gaming devices and criminal behavior.

Here’s the relevant passage from AB 2291:

19990.02(d) These rights were separately guaranteed in 1999 and at various times thereafter, when the state negotiated and entered into compacts with tribes pursuant to the federal Indian Gaming Regulatory Act of 1988 (IGRA), under which signatory tribes possess the exclusive right within the state to operate “gaming devices,” defined to include any slot machines, and specifically, among other things, any electronic device enabling a player to participate in games involving an element of chance for the possible delivery of a prize or something of value, as well as house-banked and percentage games. The authorization of certain types of online gaming, including slot machine or house-banked casino-style games, could impinge upon these rights.

This over-broad definition is dangerous, and appears to be closely modeled on the language used in a Florida bill last year that sought to curtail that state’s proliferation of so-called Internet cafes. (For the record, several other paragraphs of text in this AB 2291 separately address retail locations with multiple-computer clustering, to make sure that there’s no doubt that the bill seeks to ban that type of activity.)

The bolded text in the above is the specific and unreasonable expansion, independent of the other provisions targeting Internet cafes. What the above does is link electronic devices to an element of chance in a manner that reminiscent of the Florida bill. From kiddie crane and skill-stop games to adult wagering on fantasy-sports sites, it all comes under the purview of this expanded clause.

In Florida, where that other bill was eventually passed, the overbroad language was something of an accidental, unintended consequence, the action here is deliberate. In one fell swoop, AB 2291 seeks to wipe off the California map any form of virtual or electronic gaming that contains any element of chance whatsoever, no matter how inconsequential the prize or reward.

“You want to have fun,” says this bill, “then you’re going to pay us to partake of it.”

You can read the second part of the article tomorrow, where Hintze writes about why it is not regulation, but rather a Tribal gaming protection bill and much more.