Casinos Bid for Internet Poker
12/13/09 - Los Angeles Times - View Source
By Patrick McGreevey
With the state bracing for billions of dollars in budget shortfalls, a group of casinos is offering California leaders a stake in a new pot of money if they allow Internet poker sites to set up business in the state.
A consortium including the Morongo Band of Mission Indians and the Commerce Casino plans to take the idea to the state Legislature next month. The two would be among the gambling interests seeking to operate poker websites if the proposal were approved.
Gambling industry experts say $347 billion annually is wagered online globally, with millions of U.S. residents giving their credit card numbers to Internet sites so they can bet on poker games they play on their personal computers against other gamblers who are doing the same.
Federal law does not explicitly prohibit U.S. citizens from playing Internet poker, although there are restrictions on using financial institutions to transfer money for Internet betting, according to I. Nelson Rose, a professor at Whittier Law School and an expert on gambling law. But federal and state laws prohibit the Web-based games from being operated in this country. The more than 1,000 existing Internet poker sites are based abroad, and the state is unable to tax them.
"About 1 million Californians are playing poker offshore right now," said Patrick Dorinson, a spokesman for the Morongo band.
He said the consortium proposes that the state regulate such games in California to ensure their legitimacy and protect players' privacy and that some of the revenue be shared with Sacramento.
Rose has advised the Commerce Casino, a card club, that California would be exempt from federal restrictions if the businesses were operated entirely within state lines and served only Californians. Federal attorneys disagree, and Rep. Barney Frank (D-Mass.) has introduced federal legislation to legalize Internet poker.
The California Legislature would have to tread carefully. State law gives Indian tribes the exclusive right to operate electronic games of chance.
A breach could jeopardize the $361 million the state gets annually from its share of slot play, said Cheryl Smith, president of Stand Up For California! Her group opposes gambling expansion without strict regulation.
State Sen. Roderick Wright (D-Inglewood) chairs the Governmental Organization Committee, which reviews gambling legislation, and is planning hearings on the proposal in February. He said any legislation would have to permit Internet games without allowing expansion of electronic gambling in casinos that would compete with Indian slots.
And any bill would have to be supported by Indian tribes, said Wright, who benefited from $50,000 spent on television ads by Morongo in support of his election last year.
Some in the gambling industry say that legalizing Internet poker businesses in California would shift profits away from the 58 casinos operated by Indian tribes in the state -- and thus reduce its income from such enterprises.
"Card game gambling on the Internet would take business away from brick and mortar casinos," Robert Smith, chairman of the California Tribal Business Alliance, wrote in a letter to legislators. He called the Internet poker proposal "a Trojan horse for the wholesale expansion of non- Indian, off-reservation gambling."
Still, some lawmakers see the potential to rake in big money for the state.
"I think it is workable and a potential source of new revenue," said Sen. Dean Florez (D-Shafter), a member Wright's committee. "How you structure it is the key."
State officials have no estimate for the potential windfall, but California Internet poker games could take in $1 billion each year, Rose said. If the state took the same 25% cut from poker that it takes from Indian-run slot machines, it could mean an extra $250 million for government coffers.
Wright said he expects that the state would get a flood of requests for permission to operate Internet card games from many of the 67 Indian tribes with state gambling compacts and California's 89 non-Indian card clubs, as well as from charitable groups.
"There are 300 to 400 entities who could apply and say we want a piece of the action," Wright said.
Jim Butler, head of the California Coalition Against Gambling Expansion, said making gambling easier will mean more personal bankruptcies and foreclosed homes.
"If someone can come home from work and give their credit card number to an Internet site and lose thousands of dollars, that is going to exacerbate a bad situation," Butler said.