Steve Ruddock online poker hearing CA questions

On April 27, the California Assembly Governmental Oversight Committee, chaired by online poker advocate Adam Gray, will host a hearing to discuss Gray’s latest online poker bill, AB 2863.

The hearing, which now appears on the GO Committee’s website, lists AB 2863 the only order of business on the docket, but other than time and place, there are scant details on what will be discussed.

The hearing could be strictly informational in nature. Or, the GO Committee could end up voting on the bill, and sending it off to the Appropriations Committee, the next step in its journey to becoming a law.

Whatever form the hearing takes, we should come away with a better understanding of where California online poker stands, and perhaps get some answers to the following questions.

Question #1: Is regulatory oversight still a concern?

A secondary concern that has been gaining more and more traction over the past two years is whether the state’s already heavily burdened regulators have the manpower and resources to provide the requisite oversight.

Whether it’s the over-complicated bifurcated regulatory system, the investigation into former regulator Robert Lytle, or the backlog of cases they’re still working on, the CGCC’s and the CBGC’s capability to oversee online poker in the state of California has been called into question.

Several tribes, as well as Assemblyman Jim Cooper, have raised this concern have raised this concern. And while it’s not at the level of the horse racing industry issue and bad actor clauses, it does have the capability of derailing legislation and thus warrants attention.

Question #2: Is the $60 million horse racing subsidy acceptable?

On paper, the subsidy the state is setting aside for the horse racing industry, up to $60 million annually, shouldn’t rankle any feathers, for two reasons:

  1. The money earmarked for the racing industry is coming out of the state’s cut of online poker revenue, not from the operators.
  2. The subsidy hasn’t caused the state to seek higher licensing fees or taxation rates.

Essentially, with or without the horse racing money, the state is going to take a certain amount of the proceeds from online poker, and should theoretically be able to allocate it however they choose.

That said, the stakeholders may not like the idea of the horse racing industry being the biggest beneficiary of online poker in the state. The chances that the entire industry, let alone any tribe or card room, could generate $60 million in profit from online poker on an annual basis is a long shot.

So there might be some skepticism and opposition to the amount of the proposed subsidy from different quarters. After all, why should the state essentially make the racing industry the biggest (by far) no-risk winner of online poker legalization?

This massive subsidy may also be a problem with lawmakers, considering one of the major selling points of online poker legalization is the tax revenue it could generate for the state. As written, it seems every dollar the state takes in from online poker would simply be handed over to the horse racing industry.

Question #3: Will PokerStars’ opponents dig in their bad actor heels?

The insider trading charges leveled against Amaya’s former CEO David Baazov were expected to end online poker talks in California this year. Baazov has since taken a voluntary leave of absence as CEO and chairman of Amaya, although he is still a member of the board of directors.

The new charges against its prior CEO, coupled with the company’s past operations in the U.S. (which have been the core of the argument against PokerStars by their California opponents all along), were seen as an argument served up on a silver platter – providing a readymade case that would allow PokerStars’ opponents to dig in their heels and refuse to compromise on bad actor language.

The fact that a hearing is even taking place is actually a good sign in my opinion, perhaps indicating that not much has changed on this front. While bad actor clauses haven’t gone away, the clarion call for such language has declined over the past two years.

Question #4: Are we any closer to legal online poker in California?

An overarching question that will hopefully be answered at the April 27 hearing is whether or not California is making progress on the online poker front, or if the state has stalled or even regressed.

The comments at the hearing could tell us if certain interests think that no bill is still better than a non-perfect bill, or if these stakeholders have softened on some of their longstanding demands.

There are three ways this could go:

  1. Most likely: The major stakeholders continue to disagree on several key points, leaving us in a state of limbo.
  2. Possible: They show some signs of a willingness to work together to craft a bill, an indication online poker legalization is getting closer but is still at least a year or more off.
  3. Long shot: A major concession is announced, and the legalization of online poker suddenly looks like a possibility in 2016.
Steve Ruddock
Steve Ruddock - Steve is one of the most recognizable names in the online poker media space. He brings his deep knowledge and equally deep well of opinions to his coverage at CaliforniaOnlinePoker.com.