24 Things We Learned at the California Online Poker Hearing

24 Notes From the Online Poker Hearing

The 10 most important themes

#1: California legislators want online poker

Throughout the hearing the legislators questions and comments certainly had a when not if vibe to them, from Vice-Chairman Brian Nestande and Chairman Isadore Hall III, to Reginald Jones-Sawyer who introduced the tribe-friendly AB 2291.

One interesting motivation came during the opening remarks when Representatives Nestande and Perez both intimated that California needs to get this done before a federal bill is passed.

#2: PokerStars is the point of contention and its partners are not backing down

When this topic came up it literally took the air right out of the room.

Read this for more on the topic.

#3: The vice chair of the GO committee Brian Nestande is sympathetic to PokerStars

It became very clear that Representative Nestande was sympathetic to PokerStars, which makes sense when you consider his district abuts the land of the Morongo tribe. At one point Nestande wanted to make it very clear that PokerStars was not convicted of any crime, you know just for distinction.

#4: The horse racing industry feels left out

And they are being left out. Their lobbyists seem to be limited to themselves and labor, both of which are shrinking in power.

#5: The smaller tribes want full revenue sharing

In his opening remarks Representative Wesley Chesbro stated his concerns about the fate of smaller tribes, “who don’t have lobbyists” and remarked that their voices need to be heard. Chesbro went on to explain that success in gaming has thus far been about location, and tribes who don’t have “location” — near a highway — don’t have a fighting a chance.

Because of this Chesbro and several speakers stated that proceeds should benefit all tribes, AKA there needs to be revenue sharing.

#6: Licensed operators are taking black market operators very seriously

Talk of Black Market operators began with the first speaker of the day, Antia Lee, who said licensed providers will have to compete with them; “they are there and they are going nowhere.”

Her remarks were echoed by every online poker provider and operator who testified during the hearing.

Tobin Prior of Ultimate Gaming made this point visually (that there is confusion among consumers) by showing a slide of a Google search for “legal US online poker” with the first result being an affiliate site marketing Bovada and states “100% legal after new US rules come into effect.”

#7: California can support 5 or 6 operators

It seemed like a lot of people were taken aback when Chris Krafcik (with his wonderful name and wonderful shirt according to Chairman Hall) said the California market could support only “five or six” operators. Obviously this means competition for players will be a lot fiercer than some anticipated.

#8: The technology is impressive and it works

Tobin Prior from Ultimate Gaming was insistent that the technology works, and has been proven to work, comparing it to a car crash test and saying “you either pass or fail.” Prior went on to say that people intimating it doesn’t exist are flat wrong and “we have the evidence to prove it.”

When Anna Sainsbury of GeoComply demonstrated the geolocation technology and explained what it was capable of doing (complete with real-time look at the process in New Jersey) virtually the entire panel said “wow.”

#9: Let Regulators regulate

A common theme throughout was to leave the minutiae to the regulators and not handcuff them with a law bogged down with policy.

#10: Online poker is now universally seen as a compliment to live poker, cannibalization concerns almost nonexistent

Everyone from Tom Ballance of the Borgata to David Fried of the California Grand Casino stated that anxiety over online gambling cannibalizing land-based gambling was unfounded and the two industries were in fact complimentary.

According to Ballance, poker revenue is up 60% at the Borgata in first quarter thanks to online poker — complimentary indeed!

Fried cited evidence of how Black Friday had a larger impact on their poker business than the economic collapse of 2008.

7 Interesting things

  • Tobin Prior made an important but overlooked point, when online poker launched a year ago “the sky did not fall in.”
  • Speakers were quick to blame geolocation and payment processing and registration process but few mentioned the unrealistic early expectations.
  • California is apparently looking at a hurried New Jersey timeline according to CGCC Chairman Richard Lopes.
  • Money laundering concerns were dismissed out of hand several times. Sandy Millar stated “Money laundering is not an issue for intrastate online poker…there are too many trails.”
  • Tom Ballance said Borgata Comp Points were “by far” the most popular online store redemption.
  • Each additional step in the registration process costs sites 10% of registrants, with the biggest drop-off point coming when players have to surrender their Social Security Number according to Ballance and Prior.
  • Payment processors see California as the linchpin that will force banks to accept online gaming transactions according to Doug Lewin from Optimal Payments.

7 off the wall things

  • Ultimate Gaming CEO Tobin Prior called the unregulated era from 2003-2013 “the Lost Decade.”
  • PokerStars stole the show. The theater that was the combined testimony of Morongo Chairman Richard Martin combined with the press release was impressive. Especially considering…
  • If you say PokerStars aloud storm clouds form and it starts raining. Seriously, not one single mention (there may have been one or two early on) of the company by name, but they were referenced a bajillion times?!?!?!
  • Adelson’s “moral” arguments are not resonating. Note to Andy Abboud, nobody seems to care.
  • Andy Abboud made the point that algorithms cannot tell if a player is drunk, to which I would respond, that algorithms don’t ply their patrons with free drinks either.
  • Thankfully, before Rev Butler blamed the bubonic plague and the Boar Wars on online poker he was cutoff, which left me wondering; when was the last time you saw someone cutoff at a casino? Or if the good Reverend had imbibed some spirits while waiting the five hours before his panel was called considering his harried testimony?
  • Abboud fielded several questions from the legislators, with his incoherent, circular answers generally being met with eye rolls and awkward silence.
Steve Ruddock

About

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.