California Senate leader co-sponsors Internet gambling bill

[mindgames911]

Originally Posted by PokerXanadu

CA SB 1463 was amended yesterday. The changes include:

The bill is now Internet poker only, no other Internet casino gaming.
State can change the license fees after five years instead of after three years.
Licensees have no limits on the number of intrastate sites they may operate.
Licensing and regulation will be done by the CA Gambling Control Commission rather than the CA Justice Department.
Licenses last five years instead of ten years.
Eligible license applicants (licensed b&m casinos, tribal casinos and licensed horse racing associations - all in good standing for at least three years) can form new subsidiaries, joint ventures or consortia to be licensed for Internet poker.
The $30M advance deposit by licensees against site revenue taxes is now for five years in advance instead of three years, and is no longer non-refundable.
Regulations to implement the bill must be done within 120 days.

Hey Poker Xanadu, do you think this adjusted bill will be enough for it to please the tribal side? Do you think it will pass now? Thanks for your input on this board, you're a reliable source of information and give good perspective on here

[PokerXanadu]

Originally Posted by mindgames911

Hey Poker Xanadu, do you think this adjusted bill will be enough for it to please the tribal side? Do you think it will pass now?

I'm not completely certain about this. The provision of the bill about tribal sovereignty was completely rewritten. It seems to say the same thing as before but with better wording. I don't know if the tribes who objected on this issue (relinquishing their sovereignty for the purposes of license application and site regulation) just had an objection to the original wording, which could have more easily been interpreted to cover a wider scope, or they have an objection to the principle of relinquishing their sovereignty for any purpose.

The bill was changed to be poker only, so the amendments will please the tribes as regards casino gaming.

My best guess is that the CA legislators must have worked with the tribes to satisfy them, so the tribes will now all support it.

And yes, I do think it can pass it its current form or close to it. However, this election year's politics may cause some further delay in advancement through the CA legislature, which may work to the advantage of players if a federal bill goes through during the lame duck session and is passed first.

Thanks for your input on this board, you're a reliable source of information and give good perspective on here

YW!

[dangerfish]

Ty for taking the time to explain this stuff PX.

[dmyers1166]

And yes, I do think it can pass it its current form or close to it. However, this election year's politics may cause some further delay in advancement through the CA legislature, which may work to the advantage of players if a federal bill goes through during the lame duck session and is passed first.

This is the best of all world most likely, it gets close but fails on the 2/3 majority with a few nanny demo's and conservative repub's rejecting. Then we can see the lame duck, and next year when the budget is even worse, get it passed as the feds will be dead by then.

[techrush47]

I recently moved to Southern California from Las Vegas and have noticed the drastic difference in rake and game structure in California card rooms and indian casinos. Intrigued by this I did some research. The rake and structure ended up this way in CA because of a twisted history of getting the games legalized and also a splash of greed thrown in.

We have started to see structures move the other way now with the influence of the tribal casinos. I hope the CA license holders take this as a chance to reset their thinking on game structure and rake. I am hopeful for 2 reasons:

1. At least 1 room will want to stand out by offering the games/rake/structures that players want.

2. They are allowed to form consortiums now. IE they can bring in party or 888 to offer some advice on how to rake/structure the games.

Does anyone have reasons to believe CA online poker will be over raked other than pure pessimism ?

[dmyers1166]

Does anyone have reasons to believe CA online poker will be over raked other than pure pessimism ?

Part of the issue is it is a bit of money grab by the state, B&M + tribes will have to pay $30mil (I think that is correct) up front as deposit on 5 year revenue. Not sure the percentage of revenue they have to give the state but I think it is higher than Italy. France does per hand, so that is worse.

Also they will have to charge per hand but can vary the amount charged. Over the long run this can come out to 5% but might be a little tough in the online environment.

Overall, B&M are not the best operators to offer online has they are inexperienced and will want to charge what is charged Live. Of course this would be way way to much and competition would undercut over charging sites as long as there is competition and not rake fixing.

Most likely it is wait and see for us, or if merge allows us to continue to play there we can break the law and bypass bad state sites.

[PokerXanadu]

Originally Posted by techrush47

Does anyone have reasons to believe CA online poker will be over raked other than pure pessimism ?

It will cost $30M in the form of an advance deposit to the state to get a license (in addition to the one-time application fee of $1M-$5M), which will remain on deposit for five years against site revenue taxes. A site will have to rake $60M/year on average for five years to meet that deposit requirement. Easy for a site of the size of PokerStars, PartyPoker, etc. to rake that much, but probably not so easy for an intrastate-only site with multiple competitors starting on equal footing. The competition may help, but more likely in the form of player promotions than rake that is lower than the live poker rooms imo.

[sadyoshi]

I am slightly pessimistic regarding rake. We have experience from the early days of the poker boom, when I'd expect competition to be pretty pure, where basically the rake got set at a certain amount and everybody just did something very close to that.

The few sites that tried to buck the trend, like WSEX which had no rake, weren't where all the fish were and never got any traction. IMO it actually took quite a while for people as a whole to move to the 'better' sites. Fish add kind of an inertia to competition between sites, so there's less motivation for sites to lower rake against competitors.

[pianospike]

Originally Posted by PokerXanadu

It will cost $30M in the form of an advance deposit to the state to get a license (in addition to the one-time application fee of $1M-$5M), which will remain on deposit for five years against site revenue taxes. A site will have to rake $60M/year on average for five years to meet that deposit requirement. Easy for a site of the size of PokerStars, PartyPoker, etc. to rake that much, but probably not so easy for an intrastate-only site with multiple competitors starting on equal footing. The competition may help, but more likely in the form of player promotions than rake that is lower than the live poker rooms imo.

The latest amendments took out the word "nonrefundable" with respect to the up-front license fee. So, if after five years a site has only raked $100 million in total, perhaps they would still have $20 million credit toward future license fees or they would be refunded the $20 million. The language is not totally clear here, though, so it should be amended again to make this explicitly clear.

19990.58. (a) Any entity licensed to operate an
Before the collection of a registered player fee,
wager, or deposit on any authorized game on the licensee's
intrastate Internet gambling Web site , the licensee shall
remit to the Treasurer for deposit in the General Fund a
nonrefundable one-time license fee in the amount
of thirty million dollars ($30,000,000). This amount shall be
credited against fees imposed pursuant to subdivision (b) on the
licensee's gross gaming revenue proceeds for the first three
five years of operation. Upon depletion of the
license fee, the department shall notify the licensee to commence
monthly payments to the state in accordance with subdivision (b).
(b) A licensee shall remit to the Treasurer on a monthly basis for
deposit in the General Fund, an amount equal to 10 percent of its
gross revenues.
(1) Each monthly payment shall be due
on the 10th day of the following month.

[PokerXanadu]

Originally Posted by pianospike

The latest amendments took out the word "nonrefundable" with respect to the up-front license fee. So, if after five years a site has only raked $100 million in total, perhaps they would still have $20 million credit toward future license fees or they would be refunded the $20 million. The language is not totally clear here, though, so it should be amended again to make this explicitly clear.

Actually, despite the deletion of the word "non-refundable", the new wording doesn't make it refundable:

"19990.58. (a) Before the collection of a registered player fee, wager, or deposit on any authorized game on the licensee’s intrastate Internet gambling Web site, the licensee shall remit to the Treasurer for deposit in the General Fund a one-time license fee in the amount of thirty million dollars ($30,000,000). This amount shall be credited against fees imposed pursuant to subdivision (b) on the licensee’s gross gaming revenue proceeds for the first five years of operation. Upon depletion of the license fee, the department shall notify the licensee to commence monthly payments to the state in accordance with subdivision (b)."

It's a "one-time fee" which is "credited against" five years of the gross gaming revenue fee. There is no accommodation in this provision for refunding any unused balance of this fee or crediting it against revenue fees after the five years are up. The only significant difference in this provision between the original bill and the amended bill is that the sites now have five years to use up this advance payment instead of three years.

[RU18LOL]

so whats the best result from the hearing on the 12th? Whats the next step after that?

[keyman]

Originally Posted by PokerXanadu

I'm not completely certain about this. The provision of the bill about tribal sovereignty was completely rewritten. It seems to say the same thing as before but with better wording. I don't know if the tribes who objected on this issue (relinquishing their sovereignty for the purposes of license application and site regulation) just had an objection to the original wording, which could have more easily been interpreted to cover a wider scope, or they have an objection to the principle of relinquishing their sovereignty for any purpose.

The bill was changed to be poker only, so the amendments will please the tribes as regards casino gaming.

My best guess is that the CA legislators must have worked with the tribes to satisfy them, so the tribes will now all support it.

The other important modification that is along the same lines, is that the bill no longer explicitly attempts to regulate poker on both tribal and nontribal lands. While it does still state "throughout California", not having the verbiage about explicitly intending to regulate play on tribal lands is a good change.

Unfortunately, the changes do not go far enough along these lines. The US Congress explicitly found that indian tribes have the exclusive right to regulate gaming on tribal lands (with some restrictions) [NOTE 1]. Thus, the State does not have the right to authorize internet poker on tribal lands. Internet poker (i.e. Class III games [NOTE 2]) on tribal lands can only be regulated by the tribe and are subject to Tribal-State compacts. The changes in the bill should have made it explicit that a license issued under this bill does not authorize the licensee to offer games on tribal lands. It is possible that some wording could be added such that tribal lands may be included later when/if there is an explicit agreement between the State and the tribe on whose lands it is being offered.

Having the bill explicitly not authorize licensees to offer games on tribal lands would eliminate a clear, and to be expected, legal challenge to this, or any other state's, licensing program (i.e. that federal law explicitly says that gaming on tribal lands is exclusively regulated by the tribes, thus the state law is invalid as is attempts to authorize something which the state explicitly lacks the power to do).

If desired by the state, authorization of licensees on each tribe's lands is something that could be negotiated as part of each compact at the time they are updated/renewed. It should be noted that there is a legal process that is mandated for Class III games to be authorized by a tribal government. This process would also need to be followed in order to be in compliance with federal law.

One possibility for having some tribal lands be permitted is that it could be a condition of obtaining a license that any tribe which applies for, and obtains, a license explicitly allow, as a reciprocal agreement, any other licensee under this bill to offer games within their lands. I expect that this is at least similar to the type of reciprocal agreement that would be expected from any other sovereign entity (e.g. another state) wanting to share player pools with California. For instance, it is not reasonable to believe that California would agree to player pool sharing where the other state was permitted offer games to Californians, but California companies were not permitted to offer games to the residents of the other state.


There is a spectrum of possibilities as to how the bill could implement explicitly not authorizing games to be offered on tribal lands. It could be as simple (for the bill) as stating that the license is valid throughout California, except on tribal lands. This would leave the implementation up to each licensee, and enforcement of the tribe's right to authorize each provider up to the tribes. It is, after all, not up to the State to enforce the sovereignty of the tribe. Alternately, it would be possible for the bill to include a method for licensees to determine if an individual player is located on tribal lands upon which the bill does not authorize offering play [e.g. mandate that ISPs have a range of IP addresses which are only assigned to individuals on tribal lands and such range of IP addresses are reported to the commission/department. Licensees then get the list of non-authorized IP addresses from the commission/department.].



NOTE 1: See 25 USC § 2701 (5), 25 USC § 2710, etc. (Poker, if done non-electronically, is a Class II gaming activity under this title. Electronic versions of poker (e.g. internet poker) are Class III gaming activities.)

NOTE 2: For in-person poker to be a class II game on tribal lands it must comply with any state regulations on hours of play and limits on wagers and pot sizes. The classification of internet poker as a Class III gaming activity under the IGRA is something that could be, and probably will be, litigated. What the IGRA states is that class II gaming does not include "electronic or electromechanical facsimiles of any game of chance or slot machines of any kind." See 25 USC § 2710 (7)(B)(ii) [This might open up the whole chance/skill argument wrt. Ipoker being a Class II vs. a Class III game. But let's not go there.]

[keyman]

While I was reading the amended version of this bill and examining one of the State-Tribe compacts, as amended, for a tribe in California, I noticed that there is potentially an additional issue wrt. tribes offering internet poker.

This issue results from a combination of internet (electronic) poker being a Class III, not a Class II, gaming activity. [See my previous post, NOTE 2 for more detail regarding Class II/III.]

Assuming that Ipoker is held to be a Class III game then the compact tribes have probably explicitly agreed not to offer it. This is not as a result of a specific law, but as a function of the compacts negotiated with the State. While I have only read one compact, that compact, as amended, explicitly states that the tribe "shall not engage in Class III gaming that is not expressly authorized in that section [referring to the section defining permitted Class III gaming activities]". Obviously, the referred-to section does not include Ipoker. While there are other mentions of portions of the compact only applying to tribal lands, there is nothing in this section which states that the agreement not to engage in other Class III gaming is limited to tribal lands.

This means that, at a minimum, the one tribe whose compact I read has agreed that they will not offer internet poker on their lands. Given the wording of the compact, it could be argued that they have agreed not to offer internet poker anywhere.

I do not know what the wording is of any of the other compacts. However, it is likely that the state caused very similar wording to be used on all of the compacts. This is made highly likely because there is a clause in the one compact I read which gives the tribe the right to force the State to give them the better terms if better terms were entered into by the State with any other tribe.

[keyman]

The amended version of the bill has a change which will be of interest to those who like to get on the skill/chance bandwagon.

The amended bill requires as a necessary element of defining Poker that:
"Success over time is influenced by the skill of the player."
If that criteria (among others, all of which must be met) then the game is not poker.

The full definition used is:

(z) (1) “Poker” means any of several card games that meet all
of the following criteria:

(A) Not banked by either the house or by a player.
(B) Commonly referred to as “poker.”
(C) Played by two or more individuals who wager against each
other on the cards dealt to them out of a common deck of cards,
including games using electronic devices that simulate a deck of
cards.
(D) Players compete against each other and not against the
person or entity operating the game.
(E) Success over time is influenced by the skill of the player.
(F) Wagers of one player are often designed to affect the
decisions of another player in the game.
(G) The operator of the game may assess a fee.
(2) “Poker” includes poker tournaments in which players pay
a fee to the operator of the tournament under the authority of the
state pursuant to this chapter.

[PokerXanadu]

Originally Posted by keyman

The amended version of the bill has a change which will be of interest to those who like to get on the skill/chance bandwagon.

The amended bill requires as a necessary element of defining Poker that:
"Success over time is influenced by the skill of the player."
If that criteria (among others, all of which must be met) then the game is not poker.

The full definition used is:

(z) (1) “Poker” means any of several card games that meet all
of the following criteria:

(A) Not banked by either the house or by a player.
(B) Commonly referred to as “poker.”
(C) Played by two or more individuals who wager against each
other on the cards dealt to them out of a common deck of cards,
including games using electronic devices that simulate a deck of
cards.
(D) Players compete against each other and not against the
person or entity operating the game.
(E) Success over time is influenced by the skill of the player.
(F) Wagers of one player are often designed to affect the
decisions of another player in the game.
(G) The operator of the game may assess a fee.
(2) “Poker” includes poker tournaments in which players pay
a fee to the operator of the tournament under the authority of the
state pursuant to this chapter.

You seem to have missed the white elephant in the room. This definition of poker not only puts poker into the class of skill games, it also, along with the rest of the treatment of poker in regards to play on the Internet, clearly classifies the electronic version as a standard game of cards, not an electronic facsimile of the game. Your conclusion that Internet poker is a Class III game under IGRA is way off base imo. There is nothing in federal law nor any treatment by states to support such a conclusion. I don't see anyone having a problem in this regards under the terms of the current tribal compacts for Class III gaming.

The i-poker issues of the tribes revolve around three matters of sovereignty:

1. Allowing licensed non-tribal entities to offer intrastate i-poker without excluding tribal lands.

2. Requiring the tribes to give up some of their sovereign rights in regards to gaming.

3. Accommodating the equal entry of smaller tribes into the i-poker market.

#1 is a trade off - the tribes will be licensed for the first time to run a form of gaming on non-tribal lands, which is a far greater change.

#2 has largely been addressed by changing the bill to be poker only, and possibly by changing the wording to be "sovereign immunity" instead of "sovereignty".

#3 has been addressed by allowing consortia to be licensed entities for i-poker.

I'm sure we'll find out in the next few weeks whether all the tribes are satisfied with this amended bill. I doubt the state will pass a bill which will garner an immediate court challenge by any of the tribes.