L.A.’s card clubs and state American Indian casinos – once bitter rivals – are now pooling their pots. They’re hoping to hit it big if online poker is legalized in the state next year.
A statewide consortium of card clubs and tribes launched a poker site this month called Calshark.com that’s free; players can’t win or lose money. The idea is to build a base of online players that will transition to legal real-money gaming.
As for the alliance, “You have some people who have animosities on both sides, but we need to move on and protect our assets,” said Haig Papaian, owner of the Commerce Casino and a member of the California Online Poker Association consortium.
The stakes are huge.
California is the nation’s largest Internet poker market with an estimated 2 million residents wagering $13 billion annually on offshore online sites. The consortium wants to lock in players before any competitors get a piece of the action.
Among the members of the consortium are large local clubs, including the Bicycle Casino in Bell Gardens, Hollywood Park Casino in Inglewood and the Hawaiian Gardens Casino. The member tribes include the Morongo Tribe of Mission Indians and the San Manuel Band of Mission Indians, which operate casinos in Southern California.
The consortium is seizing on a 2006 federal law that outlawed interstate online poker sites but left intrastate gambling up to individual states. So far, no state has licensed online gaming for real money, but momentum has been building as some of the technical difficulties have been worked out. The federal law requires players only gamble on sites based in their state. The consortium plans to use geo-location software to ensure players log in from California.
The tribes and clubs are betting on a bill authored by Sen. Lou Correa, D-Santa Ana, that would legalize online gaming and is set to be taken up by the Legislature in January.
“Our people believe we can do it now,” said John Scribner, chief of staff for Correa. “The bill is still very much alive.”
The Calshark site allows players to get a thousand free chips by providing information, including age and location. Games include Texas hold ’em and Omaha-style poker. By winning pots and playing on consecutive days, players can earn more free chips.
“The primary purpose is for players to get comfortable with the playing system, so if legalization happens, they can move to a real-money game,” Papaian said.
The 31 clubs and 29 tribes plan to split the revenue from the site, while Correa’s bill would funnel 10 percent of the revenue to the state. A study commissioned by the consortium found that online poker sites could generate $450 million in the first year alone, while sending $80 million to the California general fund in various fees and taxes.
Jon Richmond, chief executive at Beverly Hills’ U.S. Digital Gaming, which provides technology and oversight to online poker sites, said that with free-play online poker becoming increasingly popular, it’s important to get sites up fast. Already established poker brands such as the Miracle Mile’s World Poker Tour operate free sites.
“On the Internet, there’s a first-mover advantage,” Richmond said.
The desire to develop a site with broad support helped the two sides overcome some nasty history.
In 2004, the two battled over an initiative that would have allowed the state’s race tracks and card clubs to add 30,000 slot machines. The proposition would have altered the terms of a 1999 compact between the state and American Indians that gave tribal casinos exclusive rights to operate slots in California.
The proposition was defeated with a blitz of tribe-funded advertising. But the two sides started to reconcile in 2008 as the recession lowered American Indian gaming revenue and illegal off-shore poker sites drew millions from California players.
“Our goals seemed to be aligning,” said Morongo Chairman Robert Martin, who initiated contacts between the two sides. “They bring a lot of players, political clout and experience. We decided to let those old battles go and start new.”
Papaian, who has been on the board of directors at Commerce Casino since 1995, said his decision to support the consortium stemmed from a realization that online wagering wasn’t going away.
“Why should we allow the off-shores to drain us when we can keep the money in our own economy?” he said.
The big challenge now for the consortium members is to win passage of Correa’s bill. But the proposal will face opposition from the California Tribal Business Alliance, which includes the Pala Band of Mission Indians, the operator of a north San Diego County casino. The alliance maintains that the 1999 compact gives exclusive right to operate online gaming sites to California tribes that have electronic gambling in casinos.
David Quintana, the alliance’s political director, claimed the legislation would give the consortium an unfair advantage.
“We can’t have one group go in and create a monopoly for themselves,” he said, adding most tribes in the alliance are looking to building their own free-play sites.
Also omitted from the consortium is the Hustler Casino in Gardena, which has a strong brand name and has launched its own free-poker site.
I. Nelson Rose, a professor of law at Whittier College, said he expects that if the Correa bill passes, the state will issue licenses to multiple parties to satisfy political constituencies. But he doubts they would all succeed.
“They will allow more than three, and then a lot of those will fail,” said Rose, who studies gaming law.
Meanwhile, the consortium has opened up another lobbying front. There are three bills pending in Congress that would legalize interstate online poker sites.
The biggest fear is that Nevada casinos – with their decades-old brand names – will invade the national and California markets with their own sites. The bills, some of which are supported by Nevada casinos, require operators to have either a minimum number of slot machines or poker tables to operate online sites. Those criteria would exclude either the California card clubs or tribes.
“They set it up in a way that everything has to go through Nevada,” said Papaian, who is traveling to Washington, D.C., in the coming weeks to lobby against the bills.
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