California’s Difficult Fight for Legal Poker and Sports Betting

Legislation, US

California continues to struggle with legalizing its sports betting and poker industries. Despite PASPA’s defeat in May, 2018, the Golden State seems as far as ever from legalizing these segments.

California has had a failed attempt to legalize its sports betting and poker industries for nearly a decade, with each year a bill being put forth, and each year the opposition managed to curb the enthusiasm of lawmakers.

For a long while, California did look like the state that is most likely to pass a legalized online poker bill, enabling card rooms to find a new foothold in the Golden State, but multiple failed attempts have dashed all hopes.

Delaware and Nevada quickly followed suit, leaving California on the side lines. However, the passage has been most unaccommodating. Different industries have come kicking and screaming into the fray, with sports betting entities and tribal operators mounting various conditions and provisions, which in most cases have been to the great disadvantage of would-be card rooms.

In 2016, for example, the horse racing industry agreed to allow private companies to operate card rooms in California. Understandably, a price was asked and while that didn’t affect the negotiations a confrontation with tribal operators was enough to scrap the plans anew.

California is unlikely to see poker legalized in 2019, as tribal operators continue to protest against PokerStars and pursue legal action against player-banked games. Click To Tweet

Most notably, tribes were almost ready to agree to admitting new players, but they wanted PokerStars not to be allowed in California. Understandably, tribal operators would have stood very little chance against the world’s best-known online poker room. At the time, the Poker Players Alliance (PPA) stepped in to defend PokerStars, explaining that it was either with the company or not at all that poker will become legal in California.

Now, in 2019, we ask ourselves – what are the hurdles ahead of legalizing online poker in California?

Private Companies vs Tribal Operators

Towards the end of 2018, the conflict between private companies running card rooms and tribal operators reached a new height, with the latter realizing that card rooms were using “house-banked games” to safe themselves legal trouble. Instead of having a casino bank, operators decided to pass the buck to the players, effectively buying themselves a way into the vibrant market of poker, although admittedly – through a loophole.

This has been going on for years with tribal operators launching a succession of complaints in the California Gambling Control Commission and the Bureau of Gambling Control to no avail. Just a few months ago, the Rincon Bank of Luiseno Mission Indians and Santa Ynez Band of Chumash Mission Indians decided to pair up and challenge operators in the Superior Court of California. The lawsuit targeted a number of high-profile properties and brands.

Lobbyists Back PokerStars at the Expense of Poker

The news that PPA will back PokerStars were not well-met by the tribes. Operators openly said that it was ludicrous to expect them to divide over PokerStars. However, Doug Polk, high-profile poker player and a native of California Tweeted that even the poker community would be against poker if the results obtained of any legal move just led to entrenchment of the status quo and deepening of the existing monopolies.

The anti-liberalization stance exhibited by the tribal casinos is a way to kill the industry, however. Proof of that can be cited in New Jersey, where online poker revenue continues to decline while other casino segments are thriving.

In California, the lack of legalization actually kills the game and it will eventually bite into the revenue of the tribes. However, at this moment this is not what they care about. By postponing legalization of the industry, tribal operators are in fact capable to continue to rake money without having to compete with established house names, such as PokerStars.

Similar to New Jersey, though, tribes will have to brace themselves for a continuous decline in their revenue. Without vibrant and strong brands, such as PokerStars to invest into the industry, it’s highly unlikely that poker will thrive much longer in California.

PokerStars have been known to invest since 2016 and bolstering the efforts to lobby a way into legalized poker. Reportedly, the company has spent $2 million, knowing that the chances of a bill were slim to begin with.

Some suspect that tribes may yet call on PokerStars to create market opportunities, but by that time, a lot of time and effort will have been wasted.

At the same time, tribes have been revving up the rhetoric whereby PokerStars is a “bad actor”. Bad actors in the poker world are companies that have failed to comply with certain rules, such as providing to the residents of certain areas while the activity was illegal there. Therefore, upon legalizing the industry, these actors are not allowed to participate in it.

It did operate across multiple states before Black Friday, but after the federal ban struck, PokerStars began lobbying, denying U.S. poker fans an opportunity to play from the majority of states. In fact, PokerStars was even recently caught in a legal battle with Gordon Vayo claiming that the company owed him prizing money.

Mr. Vayo was later found to be lying, but instead of pressing charges, PokerStars subsequently dropped the case. It just goes to show that PokerStars are not the sort of company to vilify and antagonize individuals willy-nilly.

Meanwhile, sports betting in the Golden State is another unlikely development, though far more feasible than the dogged poker issue. Assemblyman Adam Gray, once a dedicated supporter of poker, has now shifted to back sports betting.

Summing up, PokerStars have not done one thing wrong in California, despite the vilification that has been backed by some tribal operators. And while everyone continues fighting over peanuts, the entire industry in the state is slowly petering out.

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