California Legislative March To Legalized Internet Poker

There has been much head scratching and speculation about the  state of California's implementation of legal Internet gambling (i-Gambling).   With New Jersey, Nevada and Delaware ahead of California in the march towards a US online gambling experience everyone has been wondering where is California in all this? 38 million people, a technology innovation machine, large pool of investment capital and no i-Gambling product?

California is moving forward with legalizing iGambing/Poker primarily because the vested interest groups; American Indian tribes and card rooms; have dropped their guns and hatchets and are willing to cooperate to get the job done. California does not want to be perceived as the Luddites of i-Gambling, a reference made by Richard Schuetz, California Gaming Commissioner, in the legislative debate.  There  are two bills pending in the legislature that address the legalization of Internet gambling in the state of California and one of them is going to pass very soon(soon is 6 months?).  

A recent  symposium to discuss these bills, held in the state's capital Sacramento, brought together the various interest groups involved in the discussion and the prediction of the time frame and nature of the implementation in California was brought forth.

Primary Influential Parties.  - The two primary influential  groups engaged in the i-Gambling debate in California have been the American Indian tribes that operate land based casinos and the card rooms that operate card rooms(poker) throughout the state.  They were well represent in the conference. Noticeably absent from the conference speaker list were the race track businesses and other casino operators. Not sure what the implications of this abstention means? 

It appears that the card rooms and the Indian tribes have decided to move beyond the  debate stage an into legal enactment of i-Gambling Poker gambling in California. However, it is interesting what the motivation for online gambling is for each group. The current legislation for i-Gambling is exclusively for poker only and not for standard casino games. At first blush this makes some sense from the card room perspective but not from an Indian casino business model. In a rather honest and up front question and answer exchange both interest groups articulated their positions.

Why Do American Indians Want To Legalize Online Poker? -  With a widely dispersed casino presence in California supporting relatively small poker offerings it does not appear that online poker is a good fit  for the Indian nation. The tribes actually realize this and are not that interested in this "first" phase of legalized California i-Gambling. They believe that poker has to come first for political reasons and that the real holy grail is  online casino style games. They believe this will follow a successful online poker roll out.   

Why Do Card Rooms Want Legalized Online Poker? The card rooms obviously see the benefit of online poker. However, their motivations are mixed. There is a genuine interest on their part to offer the disabled, especially the veteran community, a stay at home  poker option. They see a very large pool of these people as being customers. I assume that this is a genuine goal. However, cynics may not see it this way and assume they have used this as a convenient reason to push the legislation to enactment. They also see a relationship between online play and land based play. They may be following the WSOP model where a year of online play results in qualifying for the land based event. This has been proven to be successful with a number of winners of the WSOP tournament having played primarily online.

Following The European Online Regulated i-Gambling Model -  We have seen from the implementations in New Jersey and Delaware that there has been extensive leveraging of people, ideas and processes developed in the EU from operation of legal pan European i-Gambling.  Apparently, this trend is being followed in  California as well. Both Mario Galea formally (is no longer with Malta regulatory commission and is currently a consultant to the NJ gaming commission) from the Malta regulatory commission and Michael Ellen from the Alderney commission where represented at the conference. Ironically, both of these jurisdictions have suffered from  the shift from a .com to  a .co  in Europe. These jurisdictions may be obsolete in a few years(predicted by Dutch gaming attorney at Casual Connect 2014 in Amsterdam). So is California wise to rely exclusively on these regulatory experts for its online gambling implementation?

  Not to diminish the accomplishments of Mario and Michael I would argue that relying exclusively on  European i-Gambling expertise is short sited and perhaps ignoring technical, security, online marketing, mobile adoption rates, player  acquisition,  retention techniques, etc. developed outside of Europe.  The US and particularly California may be a very  different marketplace for i-Gambling requiring a different set of controls, player acquisition, payment processing and monetization. California, may look at the opportunity as a new beginning for i-Gambling creating its own unique approach to the space. 

Where Is The Bay Area Tech Powerhouse? It seems odd that the bay area tech and venture capital communities have not been engaged in a more significant way in California's i-Gambling initiative. The Bay Area tech and gaming  community is just 100 miles west of Sacramento  should it not be more involved in the process? Advances in cloud computing, cyber  security, player profiling, game development, venture funding, etc. are sitting at your door step? Why are these skills, products, services, investment capital, manpower  not participating and perhaps leading  in this process?

Las Vegas - Richard Shultz, California's i-gambling commissioner, is a Vegas veteran and knows the world of land based gambling and regulation. However, he has come forward and expressively states that Vegas really does not know much about i-Gambling and perhaps  not the best source for i-Gambling regulatory direction,   strategy and  leadership.  This is a bold and wise proclamation by Mr. Shultz and a demonstration  of his deep knowledge of the Vegas casino business community.  California I-Gambling, if executed properly, with the help of resources in California, under the direction of Mr. Shultz will become the model in this arena not Las Vegas. Expect innovation in California based on player adoption rate, access, shear numbers and player expectations.

Of course Mr. Adelson's  public denouncement of i-Gambling in the US was a side topic of discussion in the context of the Vegas elite players not supporting US i-Gambling. The California representatives were somewhat dismissive of his position. After all the California tribes and the card rooms are deciding the fate of i-Gambling in California and they have already decided that it is a go.

Social Gaming - One has to mention  social casino/poker in the same breath as legalized i-Gaming in California. It is going to be hard to ignore this form of gaming and its community given the fact that most new online poker players (last 10 years) have experienced this form of game play and are sitting in these rooms right now. Some strategy has to be developed to engage thes players and to recognize their importance in the poker ecosystem. Not clear how this is addressed from a legal and legislative  perspective. However, ignoring this pool of players would be a big mistake.   

Summary - In summary, the gathering in the state's capital was timely, bold, informative and encouraging.  California may become the biggest and most successful legal i-Gambling operation in the world  given its population, knowledge base, investment capital, skill sets and business processes. The cooperation of the Indian tribes is very impressive given their history. They deserve a healthy piece of the action which I am sure they will get.  The state does have to understand that California is not Europe and Europe has not done the best job in terms of the introduction of a regulated i-Gambling regime.  We can benefit from Europe's mistakes and their accomplishments.  The shear size and popularity of social casino games and social/freemium poker would be foolish to ignore in California. There is gold in them there hills and someone is going to mine it.  

Kevin Flood is the CEO of Gameinlane, Inc. Kevin writes  about online games and their impact and integration into i-Gaming, i-Gambling, Social Casino, land based casino operations  and E-commerce environments. Kevin is a frequent speaker at i-Gaming  events and conferences in Asia, Europe and the US. Kevin and his Gameinlane team are currently working on i-Gambling, social gaming, gamification, land based casinos and e-commerce projects.Kevin is a resident of California and  can be contacted at kflood@gameinlane.com.