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Surprising twist leads to failure in effort to legalize online poker in Calif.

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Posted at 6:27 AM, Sep 07, 2016
and last updated 2016-09-07 09:27:51-04
SAN DIEGO -- The years-long effort to bring legal online poker back to California has failed yet again, despite significant progress in 2016.  
 
Months of backroom negotiations led to major compromises, including, sources tell 10News, an agreement over the tricky issue of the role of the Del Mar racetrack and the rest of California’s horse racing industry.
 
In an unforeseen twist, the coalition of tribal casinos, previously seen as obstructing online poker’s progress, came out in favor of the most recent bill in the state legislature. Meanwhile, a group of tribal casinos which had staunchly pushed for legalization helped block a compromise effort from passing.
 
 
Ever since poker’s “Black Friday”, the day in 2011 when the United States Department of Justice shut down the three biggest websites -- PokerStars, Full Tilt Poker, and Absolute Poker/Ultimate Bet -- with criminal indictments, it has been the responsibility of individual states to legalize poker on the internet.  
To date, only three states have done so: New Jersey, Nevada, and Delaware.  However, due to California’s size and number of active poker players, several gaming entities in the state have desired the ability to establish an internet presence, as 10News reported in a special series in November 2015 called “Check or Bet”.
 
But while many of California’s most powerful gaming stakeholders have stated their interest in launching poker websites, squabbles among those interests have prevented each effort from moving towards legalization in the state legislature.  The two major concerns are the role of the horse racing industry and whether to allow PokerStars to operate its site in California.
 
There was hope of compromise this summer due to the effort of state Assemblyman Adam Gray (D-Merced), who spoke to 10News in “Check or Bet”. Whereas Del Mar had previously told 10News it would not support legalization unless it was allowed to launch a poker site, Gray negotiated a deal in which tracks would agree not to participate directly in online poker in exchange for a large annual payout from poker revenues.  However, the issue of PokerStars participation ultimately ended the chances of Gray’s bill passing this year, and ultimately led to a surprising reversal.
 
PokerStars, the world’s largest online poker site, has spent millions of dollars lobbying for legalization in California and partnered with some of the state’s most powerful tribal casinos and cardrooms, most notably San Manuel and Morongo in the Inland Empire.  Another powerful coalition, reportedly led by Pechanga in Temecula, and including San Diego County’s Viejas and Barona Casinos, vehemently opposed allowing PokerStars to obtain a California license, expressing concerns about the company’s previous legal issues.
 
However, near the end of Cailfornia’s legislative session, the so-called “Pechanga Coalition” came out in favor of a compromise put forth in Gray’s bill. The bill would have created a waiting period for any company which had engaged in illegal online poker activity, essentially forcing PokerStars to wait five years before launching a site in California. The company would have also had to pay a large fine. The goal of this provision appears to have been to allow smaller companies to establish their websites in the California market before PokerStars could begin to compete.
 
This proved to be a non-starter for Morongo and San Manuel.  While they supported the bill as it passed each required subcommittee, the addition of the waiting period led them to come out against the final legislative language.  The bill never came up for a final vote, with industry blogs reporting that legislative support was 12 votes shy of the required two-thirds majority.   
 
This means the bill cannot be voted on during the remainder of this session.
 
Gray is yet to say if he plans to tackle the issue again in 2017.