Important CA Notes
- CA residents can play at offshore poker rooms legally
- Despite several recent pushes, iPoker has not passed yet
- Tribal casinos offer plenty of live cardrooms
- Commercial casinos are still currently banned
- Prospects for legalization are excellent in coming years
- 0 never
“Reviewed by Chuck Humphrey – 50 year Gaming Law Practitioner”
California is one of the American states actively pursuing the legalization of online poker. Since 2010, a number of bills attempting to legalize the activity have been introduced in the state legislature, but none have been successful thus far.
The state, however, has finally moved forward – at least, in the discussion sense. The state has scheduled several hearings in the coming months. Even with these hearings, there is still a lot of work that needs to be done for a passage of a bill in the Golden State. Despite several bills in the legislature, there has yet to be a consensus on a bill that will satisfy California’s many gaming interests.
Future Outlook of Online Poker in California – Estimated date of legalization: 2019-2020
The following graph tracks our expected legislation of online poker in California on a state law level. It is currently already legal on a Federal level. This graph monitors the current rise or fall of expected legalization.
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Recent Activity – A Work in Progress
Though California does not have any law in place that permits online poker at a website operated in California, California statutes do not expressly forbid online poker (see Penal Code Sec. 337a(a)(3) and (6), as well as 337j for more clarification), and it is still legal according to the US government’s 2011 Wire Act revision. But, under the given circumstances, it’s currently deemed illegal to own and/or operate an online poker site within the state. Despite the state not allowing for state-operated poker sites, the preamble to SB 1485 of 2010 stated the following about unregulated poker:
“Over 1.5 million Californians participate at offshore poker websites, sports betting and casino sites on more than 600 unregulated gambling Internet Web sites every week.”
With such activity, it’s no surprise online poker legalization in California has been the subject of a perpetual list of bills – which is promising. A brief history of the bills introduced so far leading up to the present situation is given below.
The reason legalization has not occurred in California is a lack of consensus within the Indian tribes that control significant interests in land casino gambling. Work is being made towards a resolution of this issue, but there are also differing views between the Indian tribes and other interest groups.
An illustration of this lack of cohesiveness is the dissolution of the California Online Poker Association (COPA). COPA was formed in 2010 with members from 31 Indian tribes and 20 prominent card rooms and horse tracks. The objective was to push for legalization of online poker in California. For over a year, it gave hope to millions of online poker enthusiasts. Senator Wright introduced SB 1485 in the California senate in March 2010. A hearing set for June 29, 2010 was canceled by the author and the bill died when the senate session expired. Senator Correa introduced SB 40 and Senator Wright introduced SB 45 in December 2010. Both bills died in January 2012.
Senator Wright introduced an online poker bill for the third time in February 2012, SB 1463, but died without any hearing. In October 2012, the Morongo Band of Mission Indians and the San Manuel Band of Serrano Mission Indians, two of the strongest member groups, left COPA. A Los Angeles Times report [A] stated that Ryan Hightower, the spokesman for COPA, announced that the organization had disbanded because of, “insufficient progress within the legislature toward the passage of an online poker bill.” Senator Wright again introduced his online poker bill, SB 51 [D], in December 2012. 2012 was a lost year for online poker legislation in the state, though it did garner plenty of momentum for legalization of online gambling.
In 2013, the state gathered even more steam, with California tribes banding together to draft a bill that was introduced that year [B]. The tribal bill was never fully introduced, but there were other bills that did get introduced in the state legislature. Senator Correa introduced bill SB 678 [E] in February 2013. Both were not passed and new proposed bills SB 1366 by Senator Correa and AB 2291 by Assemblyman Jones-Sawyer, were introduced on February 21, 2014 that would regulate online poker if passed. Both these bills were shelved on August 5, 2014, but a new bill was introduced in December 2014 by Assemblyman Mike Gatto, AB 9.
All of these efforts died in the state legislature, a familiar theme for those who have been following online poker in the state since the Department of Justice reversed their decision on the Wire Act [C]. The debates surround bad actor clauses, the inclusion of interstate compacts, tax rates, and which entities in the Golden State would be allowed to offer online gaming.
There were high hopes for passage within 2015 after Gatto’s bill was introduced the year before, along with another bill from Assemblyman Reggie Jones-Sawyer. In 2014, he introduced SB 678 with State Senator Lou Correa, who also worked with him on his 2015 introduction of AB 167 [F]. Mike Gatto pulled his bill in July 2015, saying he would not move forward because “there was no consensus” on the issue just yet. Jones-Sawyer’s AB 167 was condemned to the same fate.
Although AB 431 [G], a bill introduced by Assemblyman Adam Gray, did get to the Assembly Floor despite opposition – the bill offers no specifics on online poker regulations and is only two pages long. It’s noteworthy it made it the floor, but this was nothing more than a placeholder with no chance of passage.
In short, almost all potential bills through 2015 have been withdrawn or had no shot of passage. Bad actor clauses and tax rates remain a hotly debated topic, but there has been some compromise there. There was heavy division among the coalitions about giving California racetracks the ability to apply for licenses if online poker was legalized, but most of those discussions have been resolved in 2016. With the budget finalized on July 24, 2015 [H], the door was shut on the chances of iPoker passing in 2015.
In February 2016, California Assemblymen Adam Gray and Reggie Jones-Sawyer introduced AB 2863 – a bill to legalize online poker. This bill received a hearing on April 27, 2016 and it passed the Assembly Governmental Organization Committee by a 18-0 vote. AB 2863 would give the horse racing industry up to $60 million a year and in return they cannot own or operate any state online poker websites; a move in the right direction and well received. On June 22, 2016, the state’s Assembly Appropriates Committee passed the bill. It then went to the full Assembly but did not receive a vote and was shelved. This legislation would require a $12.5 million license fee from potential poker website operators, charge a tax rate ranging from 8.847%-15% depending on the amount of revenue generated, and would not allow PokerStars to enter the market until 2021.
AB 1677, a bill to legalize and regulate online poker in California, was introduced on February 17, 2017 by Assemblyman Reggie Jones-Sawyer. It’s pretty much the same bill as the previous year, and unfortunately, it didn’t make any headway.
Nevertheless, the future is still relatively bright long-term for online poker legalization in California. Though those who follow the situation must be getting sick of the same arguments and divisions between different coalitions, there is still a ton of interest going forward.
PrivateTable.com, Santa Ysabel Tribe
Santa Ysabel Interactive launched an online poker site in June 2014, despite California not yet regulating the activity. The site was located at PrivateTable.com, but appears to have shut down around May 1, 2015, which took residents of California who are 18 or older. As one would expect they were being sued by the state of California and there is no real money play.
The Tribe has stated that they support any efforts in the State to pass online gambling related legislation, but are relying on the federal Indian Gaming Regulatory Act (IGRA), along with their tribal sovereignty to state that they are within their rights. The site was scheduled to be available for real-money play in November of 2014, but nothing came to fruition. The Tribe has closed their only land-based casino after amassing a debt of $50 million.
Some speculate that this may speed up the process of a bill passing, but I think PrivateTable.com was more of sideshow. The barriers and issues that have stopped something from passing so far still remain the same.
Current Gambling Laws in California
In order to appreciate why California has been unable to pass laws permitting regulated online gambling, one has to understand the history and rights of Native Indians with respect to gambling.
In 1987, the U.S. Supreme Court recognized the inherent right of Indian tribes to offer gaming on federally recognized tribal lands. In 1988, Congress passed the Indian Gaming Regulatory Act (IGRA) [I] through which tribal governments could conduct gaming as a means of promoting economic development and self-sufficiency. Under the IGRA Indian tribes (referred to as “nations”) had to negotiate with U.S. states concerning scope of gambling and level of regulation. But it was made clear that Indian nations would be the sole owners and primary beneficiaries of Indian gaming. Because compacts have to be made with states and because the tribal gaming is subject to Federal oversight, the process has never been totally smooth.
California has one of the largest and most powerful Native Indian lobbies. It also has a history of antagonism between the Indians and the settlers. According to the California Nations Indians Gaming Association (CNIGA), there are 61 tribes that have signed compacts with California. The compacts allow for the operation of video slot machines and casino banked card games in a competition free environment subject to the tribal casinos paying a share of the revenue to the state. CNIGA [J] has stated that the California Indian tribes feel they have been forced into accepting unfavorable terms in these compacts and are therefore now wary of every move that is being made with respect to online gambling. Because of the contributions they make to the Democrats and Republicans alike, the Indian tribes have sufficient backing in the legislature and are able to stall undesirable bills.
For the state in general, most gambling statutes are covered in Division 8 of the Business and Professions Code. Chapter 4 covers horse racing. Chapter 5 is The Gambling Control Act [K]. Clause 19801 (a) prohibits commercially operated lotteries, banked or a percentage games, and gambling machines, and strictly regulates pari-mutuel wagering on horse racing. Therefore, the forms of gambling permitted apart from the native tribal casinos are poker in card rooms, the California lottery and betting on horse races. The operators conducting such activities are required to obtain a license.
Section 330 of the California Penal Code [L] provides a partial list of the prohibited games and the penalties for violation. The section reads, “Every person who deals, plays, or carries on, opens, or causes to be opened, or who conducts, either as owner or employee, whether for hire or not, any game of faro, monte, roulette, lansquenet, rouge et noire, rondo, tan, fan-tan, seven-and-a-half, twenty-one, hokey-pokey, or any banking or percentage game played with cards, dice, or any device, for money, checks, credit, or other representative of value, and every person who plays or bets at or against any of those prohibited games, is guilty of a misdemeanor, and shall be punishable by a fine not less than one hundred dollars ($100) nor more than one thousand dollars ($1,000), or by imprisonment in the county jail not exceeding six months, or by both the fine and imprisonment.”
History of Gambling in California
Land Based Poker in California
Gambling in California [M] report by Dunstan provides the background of gambling in the state. Poker has been played in California since the time of the gold rush. It continued to be played in card clubs after the state was founded in 1850. These card clubs were neither declared legal nor illegal. They were also not regulated. However, a number of card games were explicitly banned and this list included stud horse poker. In the 1970s, Texas Hold’em poker became extremely popular in the neighboring state of Nevada. The California card clubs also began to offer this variant. After prolonged litigation, all forms of poker became permissible in card clubs from 1987. In 1984, under the Gaming Registration Act all existing card clubs had to obtain a license. New card clubs would have obtain a license before starting operations. Today, the Indian tribal casinos are also allowed to offer poker.
The rationale for allowing poker in card clubs is as follows: The card clubs only charge fees for providing services and do not take money from the players as a result of wagering. The amounts lost by some players are won by other players and therefore the money remains within the community. In comparison, in card games like blackjack players lose money to the house. Therefore, games in which players wager against the house are banned. Another reason is that poker involves a fair element of skill.
There are two other forms of land based poker allowed according to California gambling laws [N]. Players can wager on poker at homes provided no rake is taken. Nonprofit organizations are allowed to host poker games under restricted conditions for the purpose of fund raising. The material constraints are that no cash prizes are to be awarded to the winners and that at least 90% of the revenue collected should go to charity.
Non-Poker i-Gambling Laws in California
There are two sets of gambling laws in California. The compacts with the Nation Tribes govern gambling at the casinos on Indian lands. These casinos offer banked card games and slot machines, which are illegal in the rest of California. The other set of gambling laws stem from the constitution of California. Gambling is covered in the Business and Professions code of the constitution. The California Penal Code prescribes the punishments and other details. The major forms of gambling permissible are non-banked games like poker in card clubs, horse racing and lottery. Gambling at fund raisers and on cruise ships are also permissible, but are prevailing to a minimal extent.
Section 19 (b) of Article IV of the constitution states “The Legislature may provide for the regulation of horse races and horse race meetings and wagering on the results.” The detailed laws are provided under Chapter 4 of Division 8 the Business and Professions code. Article 9 deals with the wagering. Only pari-mutuel wagering is allowed. All other forms of betting are illegal. Originally, the wagering had to take place at the racetrack. Now simulcast wagering is allowed. California residents can place wagers from authorized sites away from race tracks, including on intrastate and interstate horse races, under simulcast wagering.
Sections 19 (a) and (d) of Article IV of the constitution contain the directive principles with regards to lottery. The Legislature has no power to authorize lotteries in the state as such. However, the California State Lottery was established in 1984 through a constitution amendment. The functioning of the California State Lottery is governed by the California State Lottery Act of 1984 [O], which is Chapter 12.5 of Title 2 the Government code.
The California Lottery is run by an autonomous five-member commission. The Lottery Act limits the types of games that can be used. The present list includes a number of Draw games, Super Lotto Plus and Powerball. In 2005, California Lottery joined Mega Millions. The lottery returns 50% of the revenues as prizes, 34% is allocated to educational institutions and the remainder covers administrative expenses.
Under Penal Code Section 322, “every person who aids or assists, either by printing, writing, advertising, publishing, or otherwise in setting up, managing, or drawing any lottery, or in selling or disposing of any ticket, chance, or share therein, is guilty of a misdemeanor.”
Card clubs have to be registered with the Attorney General under the Gaming Registration Act. The laws governing the operations of card clubs are included in the Gambling Control Act, which is Chapter 5 of Division 8 of the Business and Professions code. The California Gambling Control commission is the regulatory authority. The card clubs can offer games that are not expressly prohibited under law. The prohibited games include banked or percentage games and gambling machines. Players can wager on poker in card clubs.
Sections 330 and 337 of the California Penal Code deal with violations of the Gambling Control Act. Violations are mostly defined as misdemeanors, but punishments depend upon the nature of violation and the repeated the nature of the offense. Punishments range from fines to imprisonment, or both.
Article 17 of the Gambling Control Act deals with nonprofit organization fundraisers for charitable gambling. Clause 19885 (b) states, “The playing of controlled games for the purpose of raising funds by nonprofit organizations is in the public interest.” Section 337j (e) of the Penal Code includes in controlled games “any poker or Pai Gow game, and any other game played with cards or tiles, or both”. Though bingo does not fall under “controlled game”, Section 19 (c) of Article IV of the constitution specifically allows bingo only for charitable purposes.
Owing to a recent change in federal law, cruise ships can call at consecutive California ports and allow gambling.
The state of California has entered into a separate compact with the each of the tribal nations. Hence, these compacts are not like uniform statutes covering all the casinos operated by the Indian tribes. The broad details are available at the CNIGA website [P]. Each compact with a tribe spells out the games that can be offered by that tribe, the maximum number of slot machines or tables that are allowed, the revenues that must be paid to the state, how much money has to be paid to tribes without casinos and what services like education, health and police the tribes have to provide on their own lands. Tribal casinos generated $7.8 billion to the economy in 2014, the latest numbers available, and support over 63,000 jobs per a report from the California Nations Indian Gaming Association.
Author: Joseph Falchetti (twitter)
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