Commerce Casino makes money when gamblers are sitting at its tables. Yet Commerce and two other big L.A. card rooms want Californians to be able to play poker at home, online.
If that sounds like a bad business move, consider this: When online poker was briefly permitted a few years ago, the card clubs’ business went up.
“When people were playing poker online, it encouraged many players to come into our brick-and-mortar casino,” said Haig Papaian, chief executive of Commerce Casino. “That’s more revenue for us.”
That’s why Papaian and the bosses of the Hawaiian Gardens Casino and the Bicycle Hotel and Casino in Bell Gardens are backing legislation that would legalize online poker in the state and, they hope, provide a big boost to their in-person poker business. They’ve been trying for years, so far to no avail, but think the odds are with them this time around.
Opposition from Native American tribes, many of which feared online gambling would hurt tribal casinos, has softened and two major gaming tribes – the Morongo and San Manuel bands of Mission Indians – have sided with the card clubs. They also have the backing of Amaya Gaming Group of Pointe Claire, Quebec, which recently bought PokerStars, by far the largest online poker operator.
What’s more, the federal government, which effectively shut down the domestic online poker industry four years ago, has clarified its stance on Internet gambling, saying it is allowed in states that enact safeguards to make sure minors and players from other states can’t participate.
Last month, two state lawmakers who lead the key committees with oversight of online gaming – Sen. Isadore Hall, D-Inglewood, and Assemblyman Adam Gray, D-Merced, introduced legislation, saying that after five years, it’s now time to hammer out a deal. Their identical bills, which have yet to be fully fleshed out, join two other bills already in the pipeline.
“There is much greater momentum to get a bill done this year compared to any time in recent memory,” said Keith Sharp, a Pasadena attorney representing the three local card clubs.
There’s also more urgency this time around on the part of card clubs and other poker backers, thanks to the threat of a federal ban of online gambling. Two members of Congress last month introduced a bill, backed by Las Vegas casino magnate Sheldon Adelson, that would ban online gambling.
Sharp said there’s a chance that states with existing regulations for online gambling – including Delaware, Nevada and New Jersey – could be grandfathered in.
“If California can join these states in legalizing online poker before a congressional ban passes, then it, too, might be able to keep online poker,” he said. “Also, because California is so big and has such a big congressional delegation, it would be much harder to pass a national online gaming ban if it’s already legal in California.”
Some tribal opposition
Still, it’s by no means a done deal. Six tribes last week sent a letter to one of the other lawmakers carrying a bill, Assemblyman Reginald Jones-Sawyer, D-South Los Angeles, saying they will oppose any attempt to expand the number and types of businesses that can offer Internet gambling. They specifically pointed to a provision in Jones-Sawyer’s bill that would allow racetracks to participate in online poker.
These six tribes, including the Agua Caliente Band of Cahuilla Indians, also oppose allowing “bad actors” to operate online poker platforms in the state. It named PokerStars as one such bad actor, nothing that federal criminal indictments had been brought against executives at the firm in 2011 as part of a federal crackdown on the online poker industry that was dubbed “Black Friday.”
PokerStars settled allegations of money-laundering and fraud with the Justice Department in 2012, agreeing to pay $731 million while not admitting any wrongdoing. As part of that agreement, PokerStars absorbed the assets of Full Tilt Poker, which had been the largest online poker platform behind PokerStars.
In forming the coalition with local card clubs and the two Indian tribes, PokerStars cut revenue-sharing deals with each of them. Papaian said his club would receive “a small percentage of whatever proceeds they make,” once online poker became legal in California.
Representatives from the other two card clubs, the Hawaiian Gardens and Bicycle casinos, did not respond to requests seeking comment. They have designated attorney Sharp as their spokesman on the Internet gambling issue and Sharp said he could not provide any more details on PokerStars’ revenue-sharing agreements.
The push for legalizing online poker comes as poker revenue at local card clubs has been declining, thanks in part to offshore online poker platforms that cornered the poker market after federal authorities shut down the domestic online poker industry.
The offshore operations can’t have revenue-sharing agreements with local card clubs or casinos, meaning local gambling establishments are missing out on the action. But even worse for local card rooms is that they can’t advertise through the offshore entities as they did with the domestic ones. That’s meant that the number of online poker players who venture into their local card club has fallen dramatically.
Papaian said that after Black Friday, poker business slowly started dropping and going away at his casino.
Indian tribes operating casinos also saw their poker business drop, Sharp said.
That’s one big reason why the Morongo and San Manuel tribes have joined the local card club coalition.
“We’re trying to get online poker legalized and regulated in California,” said Matt Cullen, chief executive of San Manuel Digital, the entity the San Manuel tribe formed to explore online gambling opportunities. “Right now, California consumers are playing on mobile devices with offshore entities. It’s risky and unregulated and there could be some unscrupulous players.”
He, too, said that legalizing online poker would bring more poker players into the San Manuel casino in Highland, northeast of San Bernardino.
“It’s a case of a rising tide lifting all boats,” he said.
Robert Martin, chairman of the Morongo tribe, which has a casino in Cabazon, said online poker is coming and that his tribe and others need to be prepared.
“Internet poker is the future of gaming and we have to adapt to the changing marketplace,” he said.
Unlike the tribes that oppose legalization, both the Morongo and San Manuel tribes accept that racetracks will enter the online poker business, too.
“It’s very clear from legislators in Sacramento that racetracks want the opportunity to compete in this space,” Cullen said. “They will have to be dealt with, which is why we are not as steadfastly opposed to their inclusion in online gaming bills as maybe some other tribes are.”
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