GPWA Times Magazine - Issue 12 - April 2010

By Vin Narayanan O n February 9 of this year, the Cali- fornia SenateGovernmental Organi- zation Committee held an informational hearingon Internet poker and three facts clearly emerged from the full-day ses- sion: California’s budget problems are so severe that legislators are seriously considering online poker as a potential new revenue stream. There are huge political and legal hurdles that need to be cleared before regulated online poker becomes a real- ity inCalifornia. The online gambling industry is posi- tively salivating at the opportunity to break into theCaliforniamarket. State Sen. Roderick Wright, who chairs the committee that held thehearing, not- ed inhis introductory remarks that there wasn’t an active bill regarding Internet poker. “Thepurposeof thehearing today is toes- tablish a frameworkwithwhich the legis- lature can lookat Internetpoker,”Wright said. “This is not for or against anybody’s ideas. This is not about anybody’s pro- posal,” Wright added. “We’re trying to identifywhat wouldbe the best course of action for the state of California. We’re trying to educate ourselves as to what makes sense.” “Whatever we end up doing will end up in court, so clearly JudgeWapner will be deciding this,”Wright added. While Wright joked about the potential legal battles surrounding online poker (more on that later), he was quite seri- ous about the educational purpose of the hearing. Among the people invited to testify at the hearing were Ed Andrewes, managing director of eGaming for Lad- brokes,PaddyPower’sCormacBarry, for- mer Tain CEO Roberto Savio and Jonas 1. 2. 3. Sunderland, headof business intelligence at theSwedishGamingBoard. Andrewes had no doubt a regulated on- line poker market in California would thrive. “Why would people come off the illegal sites to play legal sites?” said An- drewes, restatingaquestionasked earlier bya legislator. “[Because]playerswant to playon regulated sites. Theywant toplay where they can find the trust and share the trust.” Barry was even more bullish about the prospects of online poker in California. There is “a very significant pent-up de- mand,” Barry said. “Based on research fromGBGC [Global Betting and Gaming Consultants], the California online pokermarket will be $150 to$200millionwithin threeyears,”Barry said. “Californiacanhaveasignifi- cant license fee, one larger than Italy,” Barry added. “[You] can easily charge sin- gledigitmillionsandahavea highersurchargethanFrance –around5 to7percent–be- cause the operatorswant ac- cess to” Barry also said online poker could bring jobs toCalifornia if it actedquickly. “It’sa unique opportunity to become the center of excellence for onlinepoker, not only in California, but worldwide,” he said. “An- other state will eventually do this, and if California hasn’t, that’s where all the op- eratorswill go to set up jobs.” The committee received independent con- firmation of the likely growth and size of the California online poker market from WilliamEadington,aprofessorofeconom- ics at theUniversity of Nevada, Reno and SimonHollidayofH2GamblingCapital. Holliday said California has about a $200-millionmarket for regulatedonline poker. And Eadington assured the com- mittee thatplayerswould indeedembrace regulation. “If youmakea legal alternativeattractive, it increases themarket,” Eadington said. “Players have demonstrated a preference for legal forms of gamblingover illegal or gray formsof gambling.” Eadington recommended that Califor- nia issue three licenses for online poker, while veteran gaming law expert Frank Catania suggested that the open market should determine how many licensees wereavailable inCalifornia. “Companiesshouldapply for licensesand licenses should be issued,” Catania said. “And it shouldbewell regulated. Internet poker that comes from other places like Isle of Man do very well, and it will do verywell here.” While it’s heartening that the committee received such strong pro-Internet poker testimony, most of the witnesses made it quite clear that regulation would only happen if the “exclusivity” issues were sorted out. What exclusivity issues, you ask?Well, here it is inanutshell... When theNativeAmerican tribes negoti- atedagreements–calledcompacts–with the state of California that allowed them to build casinos, one of the clauses that was part of the compacts gave tribes ex- clusive rights to offer gambling devices. ONLINEPOKER INCALIFORNIA– CANTHEGOLDENSTATEGET ITDONE? NEWSANALYSIS “Anotherstatewill eventuallydo this,and if Californiahasn’t, that’s whereall theoperators willgo tosetup jobs.” –CormacBarry, PaddyPower 32 Online Poker in California