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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