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. 

California Indian Tribes Going All In For Online Gambling In A Double Dip Recession?

The State of California, like many states in the current economic climate, is strapped for cash and tax revenue. It is no secret that legalized and controlled online gambling could result in meaningful revenue contributions to the states coiffures. Thus the online gambling bill SB 1485, proposed by State Senator Wright to legalize online gambling under state control.

One of the major state lobbying groups opposed to this legislation is the state's Indian tribal community.

While attending the 2010 GIGSE conference in Montreal I received an education on the California Indian nation's position concerning the legalization of online gambling in California. I was surprised that the tribes were actually opposed to the legislation. It really made absolutely no sense to me why this would be the case. The tribes are currently heavily invested in land based casino operations and have built up an economy and expertise in this area. Their sovereign nation status provides them with a unique opportunity to extend their land based success to the Internet. It is no secret that the future growth of online gambling is on the Internet. Why would they kill the goose that laid the golden egg?

It appears there are two issues contributing to the tribes position.

Competing Indian Tribes - There are several Indian factions competing for the online wallets of California consumers. This is a battle within the Indian nation for ownership and dominance of Internet gambling in California. The individual Indian factions do not want online gambling to happen unless their faction gets a part of the action. This debate is healthy and at the same time concerning. Land based casino operations clearly allow each tribe to physically locate gambling facilities within their communities. Internet gaming is a different story requiring a different model to distribute the benefits to all Indian tribes. In a way the benefit distribution for online gaming may be more equitable then the current offline gambling model. If the Indian nation is trying to use their current land based casino wealth distribution model as a proxy for the Internet model we could be in for a long and confusing battle.

The State Of California As Primary Beneficiary - All of the tribes are concerned that the current legislation proposed by State Senator Wright favors the State Of California as the primary arbitrator, operator and beneficiary of online gambling operations. This is a valid concern with only three gambling hubs proposed by the legislation. Who decides who will get them and how? The Indian tribes are rightfully suspicious of the states final legislation given the impetus behind the legislation.

What Is the Solution? The tribes do need to get their act together sooner rather then later. If they do not they may be responsible for the entire state missing the window of opportunity and a potential big source of revenue for all state residents. They should "bury the hatchet" so to speak, within their own ranks. Getting the Indian tribes moving into cyberspace can only help their community and provide their constituents with skills and job training they desperately need. A model for distributing benefit to all Indian tribes is the way to go to resolve a potentially prolonged battle.

The State of California should allocate one of the hubs to be managed by the Indian nation. This has a few interesting consequences. The tribes will have to cooperate to determine how they can all benefit from the legislation. They will also have to propose a plan on how individuals within these tribes will benefit. Can this lead to cyberspace jobs and job training for American Indians? Will it result in a general fund to manage the distribution of online gaming proceeds to the tribes? Should one of the hubs actually be hosted on Indian land helping the tribes develop an Internet infrastructure that can be leveraged in other ways?

In conclusion, the legalization of online Internet gambling in California has the potential to change the Indian nation in a positive way, providing the tribes can bury the hatchet and work together to make it happen. This may be a once in a lifetime for the Indian nation. It would be a shame if tribal squabbling get in the way of legislative enactment.