California’s Online Poker Bill Stalled Again; PokerStars Accused of Obstructing Efforts

Once again, following years of delay and debate, California’s online poker bill has been faced with yet another hurdle – but this time it comes from an unexpected source: PokerStars.

On Wednesday, August 17th the latest amendments to Assembly Bill 2863 were introduced by Assemblyman Adam Gray, who authored and introduced the pending online poker legislation and regulation package.

Among these amendments was a specific clause prohibiting PokerStars from reentering the California market for a period lasting no less than five years. The charge to include this anti-PokerStars language was directed by a coalition of seven Indian tribes, led by the Pechanga Band of Luiseño Indians.

PokerStars, the global online poker leader now owned by Amaya, has previously been labelled as a “bad actor” by tribal organizations and legislators in California. This bad actor status is based on the company’s previous refusal to withdraw from the American marketplace following federal passage of the Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006.

According to proponents of the so-called bad actor provision, PokerStars and other companies which willingly violated UIGEA by continuing to serve American customers gained an unfair competitive advantage.

In an op-ed penned for Online Poker Report, gaming lawyer and vocal proponent of the bad actor prohibition David Fried summed up a primary line of reasoning behind banning PokerStars from the California market:

“Through 2011, PokerStars built a list of the names, addresses and email addresses of hundreds of thousands of California residents who have already played online poker for real money, and most people now keep their email addresses for several years.

PokerStars knows which 20 percent of those customers generated 50 percent of the revenues. So while competitors can advertise promotions through mass media to the general public at a high cost per customer, PokerStars can target even better offers to the most valuable players using emails that cost fractions of a penny.

The brand, software and a usable customer list derived from PokerStars’ post UIGEA activity provide it with a huge competitive advantage.”

The debate over California’s eventual passage of an online poker bill, which has stretched over several years, has centered on PokerStars’ role within the newly established industry. Prior to the latest round of amendments being added, AB 2863 included language which would force it to pay a $20 million penalty fee to the state before being able to apply for licensing. The Pechanga coalition countered that proposal with a 10-year ban or a $60 million penalty fee, sparking the latest round of debates over the bill.

Now, Assemblyman Gray himself appears willing to sign off on an amendment which would forego the penalty fee altogether, but ban PokerStars from operating in California for five years. Speaking with the Los Angeles Times, Assemblyman Gray’s chief of staff Trent Hager offered support for AB 2863’s current construction:

“This deal should secure two-thirds [vote] in the Assembly, (and) it will be fairly well received in the Senate.”

Reversing course after serving as the most prominent lobbying force in favor of California’s online poker legislation, PokerStars will now oppose the passage of AB 2863 as currently written. In a statement issued to address the latest amendments, Eric Hollreiser, head of corporate communications for Amaya, outlined the company’s revised stance:

“Momentum toward online poker legislation in California has taken a huge step backward with the last-minute introduction of poison pill language that serves the interests of those who have obstructed similar consumer protection legislation for years.

The new bill ignores the progress that had been made through public hearings and good faith negotiations and adds language agreed to in backroom deals with those opposed to advancing online poker legislation.

Unfortunately, the bill is now doomed to fail and this means millions of Californians will continue to be at risk while playing on offshore, illegal online sites.  By injecting suitability standards that are best determined by regulatory experts at the California Division of Gambling Control this amended legislation picks winners and losers in the state.

Moreover, the bill is not likely to pass Constitutional muster as it applies penalties for alleged crimes without any application of due process.”

Despite the strenuous objections of PokerStars, however, the “Coalition of the Willing” in California – an organized group of vested stakeholders including more than a dozen casinos and card rooms, the horse racing lobby, labor unions, and a handful of tribal gaming operators – is expected to follow Assemblyman Gray’s lead moving forward.

With no financial incentive to protect PokerStars’ role in California, this coalition could easily move to embrace the new legislative language in hopes of finally ending the state’s online poker gridlock.