California Dreaming – Update on I-gaming Prospects
Advocates of U.S. Internet gambling regulation have long recognized that no state presents more compelling economic and demographic prospects than California, and they’re hard at work for the fourth straight year trying to get a bill to the governor’ desk. That the Democratic Party controls both the California Assembly and Senate is viewed as a positive, as is the fact that for the first time in eight years the executive mansion also is occupied by a Democrat. This is not to say the path to legalization will be any smoother in 2011.
By James Rutherford

Two bills are under consideration in the current session of the Legislature, which commenced in December and concludes on September 9. Both are fraught with enough problems to render the likelihood slim that either will pass. Indeed, given the stakes and the array of powerful and conflicting interests involved, it is difficult at this stage to imagine a measure capable of marshaling anything resembling broad-based support.

  
The first bill, SB40, “California First: The State Funding, Job Creation and Online Gaming Accountability Act,” authorizing intrastate poker only, was rushed into the Senate on December 6, the day the Legislature convened, in response to fears that the lame-duck 111th Congress would act on a bill introduced by U.S. Senate Majority Leader Harry Reid (D-Nevada) on behalf of his corporate casino constituents in Las Vegas to regulate interstate poker at the federal level.
All of six pages long, SB40 is sponsored by Sen. Louis Correa (D-Santa Ana) and mirrors a five-page draft bill for which Riverside County’ casino-rich Morongo Band of Cahuilla Mission Indians, based in the five-county “Inland Empire” of Greater Los Angeles, and their allies in the tribal casino and commercial card club sectors (organized as the California Online Poker Association) have been seeking a legislative champion since 2009. 
SB40 is opposed by a host of equally wealthy and powerful gaming tribes fearful not only of the Morongo’ intentions but of the competitive implications of a legal online market: among these are the Pechanga Band of Luise√±o Indians, a Riverside County rival, the Viejas Band of Kumeyaay Indians and Pala Band of Mission Indians, both with large casinos near San Diego, and the United Auburn Indian Community in Placer County, owners of a resort-scale casino near the state capital of Sacramento. SB40 was referred in January to the Governmental Organization and Public Safety committees ‚Äï the latter chaired by Loni Hancock (D-Oakland), the former, in something of an ironic twist, chaired by Los Angeles County Sen. Rod Wright (D-Inglewood), sponsor of rival bill SB45.

The ranking Republican on both the Governmental Organization and Public Safety committees is Joel Anderson, whose district lies partly in San Diego and Riverside counties.

No hearings have been held on SB40 to date.

 “The Internet Gambling Consumer Protection and Public-Private Partnership Act of 2011,” would permit any and all gambling games approved by the state Department of Justice. It is the successor to Wright’ SB1485, which stalled in his Governmental Organization Committee in the last legislative session in the face of opposition from the Morongo faction. Introduced in the Senate on December 8, two days after Correa’ bill, SB45 entered the New Year in search of a fresh sponsor or sponsors in the wake of Wright’ indictment last autumn on unrelated charges of voter fraud and perjury.

SB45 was referred in January to the Governmental Organization Committee, where, to date, one hearing on the bill has been held.

As both bills call for the imposition of new taxes and/or fees, under California law they require two-thirds majorities in both the Senate and Assembly to pass.


THE PROSPECTS 
All the stakeholders do seem to agree on two things: that federal interstate regulation would not work to California’ benefit (“the greatest threat to Indian gaming in 20 years,” as Daniel Tucker, chairman of the California Nations Indian Gaming Association, has characterized it) and that no intrastate scheme can succeed politically unless the state’ wealthy and influential tribal casino industry is on board. That is about all they agree on. Deep divisions extend even to estimates of the size and revenue potential. 

THE PROBLEMS
California’ Indians operate the largest tribal casino industry in the United States, accounting for more than 26 percent of the sector’ total GGY. They also are the largest special-interest donors to political campaigns in the United States, most of it spent at the state level, and their influence in Sacramento is immense. As one might expect, they’re also a geographically and culturally diverse and fractious group. The state is home to 108 federally recognized tribes whose lands stretch from the Mexican border to the mountains of the Pacific Northwest. Sixty-seven of them have gaming compacts with the state, 57 of them operate casinos. The wealthiest among them, those with lands in the most favorable locations, run some of the largest and most lucrative casinos in the world. There are, however, only a handful of these. They’re beset by longstanding rivalries. The recession has only intensified the competitive pressures that work to divide them. 

James’ full report on the current situation in California is included as part of GBGC’ Platinum Subscription and Interactive Gambling Report.

James Rutherford is a former editor of Casino Journal and International Gaming & Wagering Business magazines and writes extensively on U.S. and global gaming issues. He is based in the Northeastern United States and can be contacted at jhrford@gmail.com.