Some say legalization could bring revenue; tribes don’t want competition

The proponents of legalizing online poker are holding their cards close to their vests as they prepare to introduce a bill to the Legislature this winter.

Proponents are touting lawful California-based Internet poker available only to Californians as a balm for the state’s aching budget — and say the benefits include regulation, taxation and safety.

But the vast majority of 59 tribes that have the monopoly on gaming are opposed to the encroachment on their franchise.

The only other entities that can offer gambling in California are about 90 cardrooms as well as the California State Lottery, its affiliates and a handful of horse-racing tracks.

Online gambling is prohibited by federal law under the Unlawful Internet Gambling Enforcement Act of 2006. The law allows for some exceptions, one of which is intrastate gambling, where the operator and all the players are in the same state.

That is what proponents want California to explore.

The effort to get someone to carry online poker legislation started in the summer, but proponents weren’t able to get an author to carry a bill by the end of the last session.

“We just ran out of time, and the legislators just had too much going on with the budget,” said Patrick Dorinson, spokesman for the Morongo Band of Mission Indians, which operates Morongo Casino Resort Spa, off Interstate 10 in the Southern California desert. Dorinson said proponents expect to have a legislator carrying a bill when the new legislative session starts in January.

Despite online gaming being illegal, it is still available. If an online gambler is willing to create an arm’s-length transaction, that gambler can find a way to play poker online.

“People are going online and playing poker right now. We should all be focusing on the idea that this is something whose time has come, and let’s ask the question: How do we get it right?” Dorinson said. “We want to protect California consumers that are playing right now.”

And by regulating Internet poker, the state potentially can take a cut of the action, he said.

“Let’s regulate it, and the state should get a cut of it. There is a lot of money sloshing around now and the state is not getting any of it.”

If online poker became legal in California, it could open the door to legal battles over the tribes’ exclusive deals to offer slot machines, lottery games outside of the state lottery and “percentage and banking” games such as blackjack.

Tribal operations do not have an exclusive deal to offer poker games, but there is the question of how tribes will react to what they consider a bad-faith move.

Native American tribes have the exclusive right to negotiate with the state for gaming compacts, and that issue is quite clear, said Doug Elmets, spokesman for the United Auburn Indian Community, which owns Thunder Valley Casino near Lincoln.

He called online poker “a misguided concept, and it is inconsistent with California law,” Elmets said. “There are clearly bitter feelings about this. All this effort did was wake a sleeping giant. The large casinos do not want this.”

Native American tribes have huge clout in the Legislature, where tribal lobbying and potential tribal campaign contributions have gone from nonexistent a decade ago to being major players today.

The state might find a potential revenue stream from online poker, but that windfall could come at the cost of the revenue the state gets from tribal gaming, said Howard Dickstein, a partner with Sacramento law firm Dickstein & Zerbi.

“It creates a serious issue depending on whether the Internet machines constitute a violation of tribal compacts, and the tribes stop paying in their hundreds of millions of dollars annually,” Dickstein said.

The state collects a piece of tribal gaming revenue through compacts with the tribes. California casinos had revenue of $7.4 billion in 2008, down from $7.8 billion the year earlier.

Sacramento Business Journal – by Mark Anderson Staff writer

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[SC] Circuit Court Order: Chimento, Et. Alv. Town of Mt. Pleasant (10/01/09)

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Voters beset by the worst recession in decades and smacked with a variety of new taxes are turning to the 2010 ballot for several different ways to reverse Beacon Hill wallet grabs – measures that, if successful, would leave state government gasping for funds.

Proposed questions filed by Wednesday’s deadline and with a shot at making the November 2010 ballot include a safeguard for local aid to cities and towns, the lifting of state caps on charter schools, sales tax rollbacks, eliminated turnpike tolls, and a repeal of the recently enacted alcohol sales tax. Another topic mired in fiscal complexities – guaranteed access to quality health care – was also filed in the form of a constitutional amendment.
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update from John Pappas, PPA Executive Director (06/11/09):

The PPA knows how concerned all of you are about the recent actions taken by the United States Attorney’s office for the Southern District of New York in freezing funds from some payment processors for online poker. The PPA wants to take this opportunity to do two things: (1) clear up the misconceptions about what was done and its implications, and (2) talk to you about what the Poker Players Alliance is doing to protect your right to play poker. Please accept my apology in advance if this is Too Much Information, but given the misinformation out there, I think Too Much is far preferable to Not Enough.

1. The PPA is not aware of any Federal law that restricts your right to play poker online. For many years, the DOJ has attempted a very broad interpretation of the Wire Act (18 USC §1084), a bill first passed in 1948 and revised in 1961. The Wire Act was passed in order to control the transmission of sports bets and sports betting information. The Wire Act does not affect or control online gaming of any type, including poker. This was affirmed in the US Fifth Circuit Court’s landmark 2002 ruling affirming that the Wire Act pertains only to sports betting. [see re In MasterCard]
   
   The Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) also does not restrict your right to play poker online. The UIGEA is a very specific piece of legislation designed to restrict the transfer of money among between online gaming sites and players by putting the enforcement burden on banks. While the regulations covering the UIGEA were supposed to be in place 9 months after its passage, they have just recently been finalized, but are not yet in effect. Unless something changes (and the PPA is seeking to make that change happen), they will go into effect on December 1, 2009
   
   We have been advised that the action taken by the Department of Justice was NOT an enforcement action based on the UIGEA. Since the regulations have not yet taken effect, the DOJ could not use them as a basis for action. It is important to note that the UIGEA regulations do not try to restrict payouts only deposits to “unlawful Internet gambling” sites. Further, we do not believe that online poker is unlawful under this Act.


2. We have been advised that the seizure attempt was, at the least, technically incorrect and at worst was a serious violation of the rights of the payment processors and you, the poker player. It is our understanding that some of the seizures were done without the benefit of proper warrants and represent an almost shocking trampling of due process. Further, we have been advised that vis a vis online poker, the SDNY does not have the legal authority to act under the two laws they cite in their action, the 1961 WIRE Act and the Illegal Gambling Business Act.


3. The funds that were seized were not the property of any online site – it was YOUR MONEY that was seized. All of the sites involved have made good on any checks that bounced or transfers that were not properly completed, but the Department of Justice seized your money here.


4. This action in no way means that online poker is finished in the United States. There have been many actions like this in the past – the NETeller seizures, cease-and-desist orders against ePassporte, the arrest of SportingBet executives and others. Online poker has weathered those actions, which appeared in several cases to be significantly worse than this one. The PPA has been in contact with several of the leading poker sites on a near daily basis since these events began to unfold, and I can tell you that they are all completely committed to staying the course and remaining in the US market.


5. Your money is safe at the major poker sites. I cannot speak for all the poker sites, but several have assured me that your money is safe and secure; however you should check with whatever site you play on. In most instances the poker sites have a procedure in which they segregate player funds, your assets and not theirs, and keep them in bank accounts that are completely separate from their operating funds – in fact, player accounts are kept in different banks.

The Poker Players Alliance firmly believes that the DOJ has significantly overstepped their legal boundaries in taking this action. Given that this is a public forum, I am unable to disclose precisely our legal strategy to combat this action. I can tell you that 1) we have assembled a legal team which is made of very seasoned criminal and civil action attorneys, 2) we have had direct communication with SDNY and higher ups at the DoJ about this enforcement action and have laid out both or legal and policy concerns, 3) we are briefing our Congressional allies about the situation and preparing them to take action if necessary, 4) we will continue to raise positive awareness for this with the media.

At this time the PPA is not organizing a letter writing/call campaign into the Doj, White House, etc, focused on this issue. A full blown campaign organized by us, could be more detrimental than helpful at this critical juncture – this could change. I am aware, however, that individuals on this forum and other place are taking the initiative on their own and we welcome that.

Now for the really important stuff – what YOU, as a poker player, can do right this minute to help the cause.

1. Send a letter to your Senator and your Representative. This is even easier than you might think – just click here. This link will take you to a site that allows you to create and send letters to your Senator, Representative and to President Obama. This is the quickest and most effective way to make your voice heard in Washington right now.


2. Email or call five of your poker buddies and ask them to do the same thing.


3. Join the Poker Players Alliance. Click here to join – it’s free and only takes a few minutes.


4. Excuse the sales pitch, but – if you really want to help us, join as a Premium member. It only costs $20, you get a lot of cool stuff and your money will be used to convince Washington that online poker needs to be legalized and regulated.

Please feel free to ask questions at our contact page or at [email protected].

Sincerely,
John A. Pappas
Executive Director
Poker Players Alliance

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In light of recent events by the Southern District of New York (SDNY) to freeze payment processor accounts containing pay-outs to online poker players, the PPA would like to clarify the facts as we know them today. Be assured, the PPA is keeping close tabs on this situation and is doing everything possible to protect our members’ money and rights.

• On or about June 4, 2009, a federal agent working with a federal prosecutor from the Southern District of New York contacted at least two banks in the Los Angeles and Scottsdale areas and requested that accounts containing approximately $19 million in player deposits and payouts be immediately frozen until a seizure warrant could be obtained from an appropriate judicial officer.
  • It is important to underscore that in at least two cases, the prosecutor acted and the banks responded without a warrant being issued.
• Two days prior, the same agent and prosecutor team sent a seizure order to Wells Fargo freezing at least $14 million in accounts at that bank which were designated as pay-outs of winnings to Internet poker player.
• In most cases, the pay-outs were the return of initial deposits made by players. That same prosecutor sent two subpoenas to two individuals associated with one of the payment processing companies.
• The seizure notice and subpoenas appear to allege violations of the Wire Act and the Illegal Gambling Business Act, even by .com sites that are exempt from Wire Act liability and by .net sites that do not accept money.
• These actions are not related to enforcement of the Unlawful Internet Gambling Enforcement Act (UIGEA.).
• At least 24,000 player accounts have been affected directly or indirectly by the SDNY action. PPA has been in touch with the affected poker Web sites and has been assured that all players have been or will be appropriately reimbursed.
• On Monday, June 8th, the PPA sent a letter to the Assistant United States Attorney for the Southern District of New York asking to be part of any future warrant hearings. The letter is available at www.pokerplayersalliance.org.

The PPA is working closely with legal counsel on this issue to determine the appropriate course of action and will keep members updated as events warrant.

This is yet another example of misguided efforts to prohibit online poker. A more effective way to provide important protections while allowing individuals the freedom to play poker online is to regulate and license the industry. We need your help to make this happen. Send a letter to your member of Congress asking them to support licensing and regulating online poker.

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