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CALIFORNIA, HERE WE COME

Online poker regulation is closer than ever, and a survey says the citizens of California are ready for it
BY DANNY ALLER

HUNDREDS OF MILLIONS of dollars in state tax revenue. Thousands of new jobs. Secure government regulation. Freedom to earn a living. 

Those are just four major factors at stake in California poker players’ continued fight to legalize the game online—and all they’re waiting on now is for state lawmakers to push their chips forward.

“We are very close to getting this done in California,” John Pappas, executive director of the national Poker Players Alliance, told ALL IN on July 3. “We need a few breaks in the coming weeks, and we will continue to push.”

For the last three years, Pappas and poker players have fought the good fight to make this happen. Bills have been drafted, then died, each of the last two legislative sessions.

This year, however … well, this year might finally be different.

And when the California legislature reconvenes on August 17—ending a month-long recess—Cali’s online poker community gets its best shot yet at poker history. Delaware was the first to legalize online poker in October of 2013, followed by Nevada and New Jersey a month later. California is trying hard to be state number four.

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“The stakeholders in California were too fractured for it to be realistic before,” Pappas said of why the prior bills failed before picking up steam this year. “While there is still considerable tension between the varying interests, they have all agreed that regulation of iPoker is a good thing. Now they are just fighting over who gets what.”

For those of us in the poker media, online poker regulation is an issue we watch closely almost every day of the year. But California’s case is special—mostly because the estimated windfall of state tax revenue from legalizing and regulating online poker stands between a reported $200 and $450 million annually, depending on what projection model you believe. Even if the low end of the spectrum is what California brings home, that $200 million figure dwarfs—by tens of millions of dollars—what the other three states combined currently rake in annually from regulated online poker operations.

So, yes, the stakes have been raised, so to speak, by California, with its population near 34 million—some 21 million more than Nevada, New Jersey, and Delaware put together.

Of course, for California lawmakers to pull the proverbial trigger for online poker legalization, they need ammo, right? And while ALL IN Media House didn’t know if it would find any ammo when it commissioned a recent survey of 1,500 California residents, spread across the state, about their feelings on the issue, the results can be interpreted as nothing less. (The survey was conducted by the National Research Institute and Survata Inc. between the dates of May 21 and May 28, 2015, polling registered California voters aged 21 and above. These groups have done survey and customer opinion research for hundreds of top brands and groups including Disney, Samsung, Deloitte, Harvard University, Microsoft, T Rowe Price, University of Notre Dame, and Stanford University.)

Here were the five questions we asked and the responses:

• Do you/would you want California to pass online poker regulation and create significant tax revenue for the state? 

RESULTS: 66% Yes, 34% No

• Would you consider playing poker online in California if it was licensed and regulated by the state of California? 

RESULTS: 51% Yes, 49% No

• Would you feel safe playing on a licensed and regulated poker site that is backed by the state of California? 

RESULTS: 71% Yes, 29% No

• Would you (or do you) feel safe playing on an unregulated, unlicensed, and illegally operating offshore online poker site? 

RESULTS: 15% Yes, 85% No

• Would regulated online poker in California keep you from frequenting California’s brick and mortar casinos? 

RESULTS: 29% Yes, 71% No

After being informed of ALL IN’s study, Pappas had a very simple reaction. “The survey results serve to reinforce that internet poker regulation is the right direction for California,” he said. “Regulation will provide strong consumer protections and tax revenue, and the survey confirms that it would be complementary to the existing tribal casinos.”

There are many involved in the lobbying process in California, including “Californians For Responsible iPoker,” a group organized by online poker giant PokerStars, which couldn’t agree more with Pappas and is supporting the initiative. “Today, millions of California poker players cannot play the game we love online, while other states and dozens of countries have authorized iPoker,” reads a message on their website, www.Californians4iPoker.com. “Authorizing a well-regulated iPoker market in California will protect the state’s poker-playing consumers, support local business, and generate both jobs and revenue in California.”

And more than one California lawmaker is trying to make that happen.

As of the start of July, three online poker bills—AB 9, AB 431, and AB 167—had made it deep in the legislative process and sat in lawmakers’ hands. And each was scheduled for Governmental Organization hearings in mid-July. But on July 2, just a few days before the hearings, one of the three—AB 9, which was championed by Assemblyman Mike Gatto (D-Glendale)—was put on hold. Gatto announced he was pulling the bill because he “didn’t have a consensus” from all major parties (namely, the state of California, horse tracks, card rooms, and tribal casinos) involved. But he also said he wouldn’t hesitate to “resuscitate” AB 9 if that happened before the session reconvened on August 17.

That left Assemblyman Reggie Jones-Sawyer’s (D-South Los Angeles) AB 167 and Assemblyman Adam Gray’s (D-Merced) AB 431 still in the mix. It was Gray who arguably stole the show during what was called an “informational” hearing on iPoker before state lawmakers at the end of June. There, Gray said whether it’s this year or 10 years from now that online poker becomes regulated, he hopes everyone involved in the decision finds terms they agree on.

John Pappas

John Pappas

“I make no prejudgments about the final outcome of any of the pending bills,” Gray said, “but I will say that each year the California legislature and various gaming interests fail to agree on an iPoker bill, not only does it put consumers at risk while gambling on illegal offshore websites that provide few protections and regulations, but the state of California is also losing out on collecting revenue that might be used for essential programs like public safety, health care, social service, and education.”

Just making it to the stage of an “informational” hearing was a win for supporters of the measure, namely because it gave lawmakers a chance to hear more about the deep-rooted issues and what hurdles were left to be cleared. And Pappas says while the problems are not easy ones to sort out, they most certainly can be overcome.

“There are still two major issues that remain unresolved: allowing the race tracks to participate and the so-called ‘bad actor’ provision,” Pappas said. “These should really be non-issues, but they have become immovable objects in the debate. I am hopeful that a breakthrough can happen in the coming weeks.”

The first of those two is fairly self-explanatory. The second of the sticking points—the bad-actor debate—might as well be called the “PokerStars Provision,” because it’s aimed solely at keeping the longtime online poker provider out of this entire equation. PokerStars’ parent company, Amaya, is licensed to operate in countries around the world, but not the U.S. Many at the hearing spoke out against allowing those operators that violated the Unlawful Internet Gambling Enforcement Act of 2006—and “violated” is frankly a strong word because online poker was a massive gray area in that notorious piece of deceptively passed legislation—to return to U.S. soil. (PokerStars, so far, has not been permitted to enter the other three U.S. markets either.)

"Operators stand to make considerable profits. And more revenue for the operators means more revenue for the players. Everything California does must focus on creating the best consumer experience."

When asked who would benefit the most from online poker being legalized in the state, Pappas said what everyone must understand is that this is first and foremost about the players and taxpayers of the state of California.

“The devil will be in the details [of whatever agreement is reached]. If the market is player-friendly, then everyone will win. Obviously, the players have the most to gain [from] a large regulated market that will provide basic protections to consumers. But operators stand to make considerable profits if they offer a compelling product,” he said. “And more revenue for the operators means more revenue for the players. Everything California does must focus on creating the best consumer experience. If they do that, everyone wins.”

Top pros are doing their part to raise awareness. PokerStars sent Daniel Negreanu and Jason Somerville to Sacramento in June to play an online session against state lawmakers who were interested in seeing the game in action and asking questions.

Pappas said seeing everyone take a hands-on approach to understanding the issue is encouraging.

“The pros help raise awareness and they also reinforce that poker is a game of skill. Both are important in this debate,” Pappas said. “It is no different than many causes that recruit celebrity spokespeople. Lawmakers love to meet the players they see on TV and it elevates the issue. It is also a great platform for the pros to talk about the game of poker and why skill predominates.”

It will certainly take some skill from Pappas and other proponents to push California to regulation, but the progress made this year has been undeniable. At this point, Pappas says California is so close, he can taste it in every sip of Napa Valley wine—and he’s ready when the time comes to celebrate with a toast to the state’s entire online poker community.

“I can’t imagine what the bar tab will be when this gets done!” he laughed. 

Danny Aller is a freelance writer based in Tallahassee, Florida and a sports reporter for Reuters America.