California is hurting. Each month we see new and painful reminders that our economy – both at the state and local level – is faltering. Here in Los Angeles, we’re experiencing cuts to school programs, our police and fire departments, and other city services related to the continuing decline in state revenues. California needs to take action to secure new sources of revenue, and quickly.
One such revenue source that has been debated at the state level for several years is online poker. A recent study by former State Finance Director Tim Gage tells us that the authorization and state regulation of online poker could generate more than $1.4 billion in state revenue over the next decade – without raising taxes – and create 1,300 jobs statewide.
By authorizing online poker, the California Legislature can secure millions in annual state revenue – funds that are currently flowing out of our state to illegal offshore gaming websites. Authorizing the operation and regulation of online poker will also allow California to implement much needed consumer protections for the millions of Californians who currently play poker online. It is the need for such protections that has compelled groups such as the Los Angeles School Police Officer’s Association, the Los Angeles Airport Peace Officers’ Association and the Peace Officers Research Association of California – the nation’s largest statewide law enforcement group – to support the authorization of online poker in California.
Those protections will help players avoid the fraud, theft and cheating that occurs on illegal websites like Full Tilt Poker, an offshore poker operator that prosecutors said was little more than a massive Ponzi scheme that defrauded players worldwide – and in California – out of millions of dollars.
In February, Sens. Darrell Steinberg (D-Sacramento) and Rod Wright (D-Inglewood) introduced Senate Bill 1463 to create an intrastate online gaming industry in California. However, this bill requires significant amendments to ensure it maximizes the revenue potential for California and that it enacts the strongest consumer protections possible.
First and foremost is the matter of this bill authorizing additional games beyond poker. SB 1463 will allow other games to be authorized after two years, but vaguely defines what those other games would be beyond stating that they will not conflict with tribal gaming compacts. This would require the state to craft new and complicated regulations for these untested new games that would undoubtedly delay the launch of online poker in California.
California knows poker. Poker is well-regulated and well understood in California. Authorizing online poker can be done quickly to get consumer protections in place more quickly and state revenues flowing sooner without getting bogged down in questions about other games, which ought to be addressed later in separate legislation.
California’s longstanding gaming policies have served our state well for decades, and have ensured that the state’s trusted gaming partners – federally recognized California Indian tribes and licensed card rooms – adhere to strict standards that guide fair and well-operated live poker in our brick-and-mortar casinos. As written, SB 1463 will upend those policies by allowing out-of-state and overseas operators to participate in online poker in our state through false fronts, where an eligible licensee lends their name to a business that would be fully funded by silent partners outside California. This scheme would ship our state revenues out of state and offshore, and weaken the state’s regulatory oversight, leaving consumers more vulnerable.
Extending the same strict regulations to the Internet with which existing brick-and-mortar card rooms now comply is a simple matter of fairness. Casinos in California are highly regulated businesses, as they should be. Every manager must be background checked and individually granted a gaming license to prevent nefarious activities and ensure strict financial oversight. Los Angeles is home to four of the state’s largest card rooms. We create thousands of local jobs and generate millions in state, county and city revenue. Online poker legislation, if done right, will help us continue to generate jobs and revenue for California. Unfortunately, we are all in agreement that we must oppose SB 1463 until it is amended.
Internet poker represents the future of gaming. In fact, online gaming is growing at five times the rate of brick-and-mortar casinos. As the largest single online poker market in the nation, California must act this year to be part of that future.
Amending SB 1463 to tighten loopholes for out-of-state operators will ensure that regulations are in place quickly to protect California consumers and to generate new state revenues. Let’s do right by California and authorize an online poker system for Californians by Californians.
Haig Papaian is the chief executive of Commerce Casino in Commerce and is on the board of managers for the California Online Poker Association, a coalition of 29 gaming and nongaming California Indian tribes and 31 card rooms.
