California iGaming Week in Review: The Calm Before The Storm

Posted on May 8, 2014

Things have started to quiet down in California following the frenetic online poker hearing on April 23rd, but I have the distinct feeling online poker in the state of California is sitting on a powder keg, capable of exploding at any minute. You just know in the pit of your stomach that at some point the “PokerStars situation” is going to bubble back up to the surface.

In the meantime we have some more staid stories to get to in this installment of the California iGaming Week in Review including the following stories but also a whole lot more.

We’ll start off this column with a look at a new study demonstrating the import role tribal gaming plays in California, as the industry contributes some $8 billion to the California economy each year according to the report’s findings.

We’ll also take a look at an editorial from contracostatimes.com that pushes aside the impact of online poker on the tribal and gaming interests and asks whether online poker expansion is right for the citizens of California – a novel idea.

New study shows importance of tribal gaming

According to a recent article at Pechanga.net California’s tribal gaming industry is a key cog in the state’s economy, responsible for some $8 billion of California’s economy and some 56,000 jobs.

The article is interesting as it gives you a glimpse into the economic impact away from the gaming tables that casinos can have on a local economy, which is often lost in the shuffle.

This study also comes during a critical point in the debate over possible expansion into online poker, which could bring in even more revenue for California (and the tribes) and generate even more secondary and tertiary markets that further boost the California economy.

Quiet week from PokerStars

Following their blockbuster announcement during the April 23rd online poker hearing in California PokerStars and their partners have been relatively quiet, but so have the voices of opposition – leaving me with a sort of “calm before the storm” vibe.

Hopefully this silence has something to do with backroom talks that are taking place as the tribal and card-room interests try to reach a consensus on how to proceed and keep online poker expansion on course.

Of course the 800 lb gorilla in the room continues to be the world’s largest online poker site, PokerStars, which is hanging over the California debate and will be a pivotal point in the legislature’s decisions moving forward.

On the one hand they could take the Nevada approach and bar PokerStars, but this has the very real possibility of dissolving the tenuous consensus between the tribes and the card-rooms, sending PokerStars partners away from the bargaining table.

The other option is to allow PokerStars to apply for a license and leave the suitability decisions up to the regulators, which is what regulators are supposed to do. This would seem to be the better option, as it’s not the absolute decision that a “bad actor” clause is, although we don’t know what kind of pushback the non-PokerStars aligned tribes and card-rooms would create.

Is online poker good for California?

In an excellent op-ed that appeared in the contracostatimes.com Tim Herdt asked the one question that seems to have been lost in the shuffle while legislators and special interests debate horse racing, PokerStars, and revenue sharing: Is online poker expansion good for Californians?

Herdt is of the mind that there is a reasonable chance for an online poker bill to emerge this year (and he also called the California Chrome Derby victory so his handicapping credibility is instantly improved in my mind) as the tribes are speaking with a powerful unified voice:

When they speak with one voice on any gambling issue, Sacramento pays attention. So, there is now a chance – not as good a chance as California Chrome has of winning the Kentucky Derby on Saturday, perhaps, but no longer a long shot – that an Internet poker bill will emerge from the Legislature this year.

Herdt himself seems to be on board, seeing online poker expansion as a positive on three fronts:

It would generate significant revenues for the state, create thousands of jobs, and acknowledge the reality that illegal play will grow and thrive even if California does nothing.

California iGaming Barometer

No change this week as there has been very little in the way of news or information from the major players.

Online poker expansion in California continues to be a real possibility, but the likelihood still remains fairly low.

The good news is that California is still the most likely state to pass online gambling legislation in 2014, so they may see an increase in the level of scrutiny and lobbying pick up now that other states like New York, Pennsylvania and Massachusetts are looking like long-shots, and even the word long-shot might be giving them too much of a chance.

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Steve Ruddock

Steve Ruddock is a longtime member of the online gambling industry. He covers the regulated US online casino and poker industries for variety of publications, including OnlinePokerReport.com, PlayNJ.com, USPoker.com, and USA Today.

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