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• Will Online Poker Benefit From Sports Betting Case 2017

Anyone who has followed California’s futile efforts over the years to legalize online poker knows not to get their hopes up. It only ever results in disappointment.

But while online poker has turned into a busted flush (more on that later), perhaps regulated sports betting stands a better chance of becoming a reality.

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If the Golden State did give the green light to sports wagering, it would be the biggest domino to fall since PASPA’s repeal last year.

Besides boasting a population of almost 40 million, California is also the country’s wealthiest state. In fact, if it were a country in its own right, its $3 trillion economy would be the fifth-largest in the world.

Furthermore, sports-loving California is home to 19 major professional sports teams, easily eclipsing any other state.

Jennifer Roberts,associate director of the International Center for Gaming Regulation at the University of Nevada at Las Vegas, said, “California is certainly an attractive state for regulated sports betting because of the size of the population and the number of college and professional sports teams.”

These factors alone clearly indicate California would be a mammoth market if state-sanctioned sports betting was permitted.

Boutique analyst firm Eilers & Krejcik Gaming forecasts that California could generate as much as $2.1 billion in annual taxable revenue from legal sports betting. That’s if the legislation includes mobile wagering.

By comparison, NewJersey generated $200 million in revenue from nearly $3 billion in bets in the 12 months following sports betting’s launch in June 2018.

California’s gambling stakeholders

Certainly, achieving legalized sports betting won’t be easy, though, especially as various parties have skin in the game. CA’s key stakeholders in gambling are:

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• The tribes
• The card rooms
• Horse racetracks
• The CA Lottery

There are more than 60 tribal casinos throughout California. The dominant tribes are controlling gaming in the state, an industry worth around $8 billion in revenue a year.

When it comes to sports betting, the tribes are opposed to having to reopen their agreements with the state. They are also against splitting the gambling market with the likes of the tracks and the card rooms.

As well as casinos, more than 70 legal card rooms of varying sizes are in California. However, individual rooms offer player-banked versions of casino games, like blackjack and baccarat.

This means players take turns to assume the role of the house, and the card room takes a cut of the action. This shrewd workaround of the law led to tensions with the tribes for years and was the subject of a recent lawsuit.

However, a trio of tribes lost the case in federal court in the summer.

Is California wagering ‘a zero-sum game’?

While the resolution to this dispute gives the prospect of sports betting and online poker a slight boost, we are still a long way off the main stakeholders seeing eye to eye.

RichardSchuetz, who spent four years as commissioner for the California Gambling Control Commission, said, “The three industrial actors (tribal casinos, card rooms and tracks) basically treat any expansion of wagering as a zero-sum game.

“That is, if one benefits, it hurts the others. And then there is always a challenge as to what the constitution and the tribal compacts allow, and that often becomes confused by the different actors.”

Meanwhile, Roberts said, “The addition of a new form of gambling raises complicated questions, such as who will be allowed to offer it: state lottery, card rooms or tribes. And whether it impacts any exclusivity, compacts or authorized forms of gambling.

“I don’t see (legislation) going anywhere until these key stakeholders can come to an agreement.”

What needs to happen for California sports betting to pass?

For sports betting to become a reality, California needs to pass a constitutional amendment.

The first step to kickstart that process began in June. For the second year running, AssemblymanAdamGray and state Sen. Bill Dodd introduced an amendment in their respective chambers.

Legislative rules mean bills with tax implications need a two-thirds majority to pass in both the Assembly and the Senate. California voters also have to give the green light to the amendment by a straightforward majority.

The earliest an amendment could be put on the ballot would be in November 2020. Issues relating to the cost of licenses, tax rates and who could offer sports betting would be decided later.

That means we would likely be looking at sports betting launching in California in late 2021 at the earliest.

That would be three-and-a-half years after PASPA’s repeal. And even then, it would also probably be restricted to land-based venues, at least at first.

However, Jim Ryan, CEO of the online arm of California’s Pala Band of Mission Indians, which is behind PalaCasino.com in New Jersey, remains skeptical.

“There needs to be a constitutional amendment, which the residents of California need to vote on in a ballot. I just don’t see the will to do that at this point in time based on the discussions we have had with the various tribes in the state.”

Schuetz is equally pessimistic about progress in 2020. “My guess is you will see some lobbyists, lawyers and legislators make money by making some noise about sports wagering, but at the end of the day, nothing will pass. It will mainly just be a dance that seems to happen year after year after year.”

But what about California online poker?

Efforts to legalize online poker in California have been going on for more than a decade.

Alas, lawmakers have failed to pass a bill in all those years, while key stakeholders struggled to agree on the framework for online poker.

Although no constitutional amendment is required, there still needs to be a two-thirds majority for it to be given the go-ahead. However, hopes are fading for Californians ever being able to play regulated online poker.

“I would make online poker a huge underdog for legalization in 2020,” Schuetz said. “It is an election year, and the conventional wisdom is that this is never a good time to make an effort to pass gambling-related legislation.

“Moreover, there just isn’t much energy behind poker anymore, partially because it has been upstaged by sports wagering. And, secondly, because it has been something of a non-event where it is legal.”

That non-event he referred to is poker’s struggling fortunes in other states. In the only meaningful US market where regulated online poker exists, New Jersey, revenues continue to disappoint.

The Garden State’s poker sites generated revenue of $1.7 million in August, which was down 9.5% on a year earlier. Poker was dwarfed by online casino’s revenue of $39.4 million for the same month, meaning poker accounted for a paltry 4.1% of total gaming revenue.

The right ingredients for California online poker to thrive

What California isn’t lacking is liquidity to make a success of online poker. To illustrate this point, the state’s population is more than four times greater than New Jersey’s.

Sports Betting Poker Sites

There is also a real appetite for the game, backed up by the vibrant land-based poker scene. California was even thought to be one of the world’s largest online poker markets before Black Friday in 2011.

Regular players are also treated with loyalty comp points and VIP privileges which have various tiers. Royal ace no deposit bonus 2019.

California’s population likely has an appetite to sustain three or four large poker sites. And that’s even without compacting with other states to increase player pools.

But despite all this, Ryan said the wrangling and subsequent impasse has all but killed poker’s chances.

“I think everybody got exhausted by it, and I just don’t think anybody has the will to try to make poker happen. Right now, if anything is going to happen, people will be focused on sports betting.

“I think it is a larger market opportunity and is a product that doesn’t exist. Many of the tribal casinos would welcome that in their properties, whereas poker does exist in a land-based environment today.”

Using online poker to acquire players

Regulated online operators in markets like New Jersey and the UK use poker as a low-cost customer acquisition tool and cross-sell players into casino and sports betting.

But there won’t be online casinos, and possibly not online sportsbooks, in California. Without these other products, online poker loses much of its appeal from a revenue generation standpoint.

Summing up online poker’s chances, Schuetz sounds even more downbeat than Ryan.

“From all of my experience in California, I would be startled if online poker ever became a reality in the state.

“Back when I was in the middle of this debate, the operators would say there are millions and millions of dollars to be made. But in a state the size of California, it was basically budget dust. It is just too contentious between the different industrial actors and not enough money in it for the state to take much of an interest.”

A gloomy outlook for sports betting, poker in California

In conclusion, things don’t look too good for the prospect of sports betting, and especially online poker.

While sports betting does appear to have the greatest chance of being legalized, much rests with the politically influential tribes. They hold all the aces.

So, it’s a frustrating wait if you’re a Californian who is itching to play regulated online poker or place a legal sports wager in a regulated environment.

H2 Gambling Capital estimates that Californians gamble around $200 million a year on offshore casino and poker sites. The research firm suggests another $200 million is bet annually with offshore sportsbooks.

That’s hundreds of millions of dollars bettors are wagering via unregulated channels and the state is missing out on taxes.

Ryan said, “If the government is unwilling to present them with a regulated product, they are simply betting with offshore books. All you need to do is go to a sporting event in California and you will see a number of people around you betting on their mobile devices.

“The horse has already left the barn, but the question is, do you want to regulate it, tax it, create jobs and protect the consumers? That is what state governors need to wrap their heads around.”

We say, don’t hold your breath.

When the Professional and Amateur Sports Protection Act (PASPA) was overturned in May by the US Supreme Court, it opened up new vistas for state-by-state sports betting legalization. It also caused the pot to boil among poker players who had long been clamoring for some kind of official federal weigh-in when it came to online poker.

With the SCOTUS May 2018 overturn of the longstanding PASPA US sportsbetting ban, New Jersey won its case and Gov. Phil Murphy placed the first bet at Monmouth Park racetrack in June. (Image: Dominick Reuter /AFP/ Getty)

But What About Online Poker?

When New Jersey won its long-running battle to overturn PASPA and open the door to intrastate sports betting regulation, it caused a seismic shift across the US. Talking about the change in sports betting with Online Poker Report this year, California Assemblyman Reggie Jones-Sawyer (D-Los Angeles) noted that “sports betting raises all tides.”

And noted professional poker players — never known for keeping their thoughts inside their own heads — used social media for a “what about us?” outcry.

“Every Major sport (NBA, NFL, MLB) is behind the legalization of sports betting, and all of them will profit by it. But how can Sports Betting online be legalized w/out online poker being legalized (clearly more skill than sports betting)? The time is NOW to legalize online poker,” Phil Hellmuth tweeted on May 15.

Hellmuth, like many other Americans, didn’t really understand that the PASPA overturn didn’t actually “legalize” sports betting. It simply removed the obstacles for states to decide for themselves if they wanted to create frameworks for regulated sports books in their own states.

And the Department of Justice 2011 reinterpretation of the 1961 Wire Act — a decision that effectively allowed state-by-state legalization of online poker — had already done exactly that. That DOJ ruling did not overturn the Wire Act itself, of course, which still precludes interstate sports betting. All such action must take place inside a state’s own borders or it runs afoul of the law.

But by removing online poker from its grip, the 2011 Wire Act reinterpretation opened up the option for poker liquidity between states: something sports betting is still precluded from doing.

Aligning with Sports Betting

In line with Hellmuth’s views, the Poker Players Alliance not only rebranded as the Poker Alliance but restructured its organization to reflect the new desire to see sports betting and poker regulated.

“It makes sense for states that are eyeing sports betting to also realize the benefit of regulated iPoker and iGaming,” president Rich Muny wrote in a May 14 press release.

Away from calls for change within the poker industry, Senate Minority Leader Chuck Schumer (D-NY) offered a glimmer of hope on a political stage. Anticipating the surge of interest in sports betting across multiple states, Schumer called for federal regulation.

“With the Supreme Court’s ruling, it’s incumbent on the federal government to take a leadership role and provide the necessary guidance to prevent uncertainty and confusion for the leagues, state governments, consumers and fans alike,” read an August 29 memo to ESPN.

Fusing Sports Betting and Online Poker Regulation

Although Schumer stopped short of stating that online poker should be part of any legal framework, optimists will point towards recent efforts by Republican Senator John Bonacic (R-Mt. Hope). Despite being on his way out of office, the New York politician submitted bill S3898A in the wake of PASPA’s downfall.

Will Online Poker Benefit From Sports Betting Case 2

Intrinsic in the bill is the push to have sports betting and poker brought under the “skill game” definition. As well as showing that poker and sports can coexist in a single regulatory framework, Bonacic’s efforts inspired Joe Barton (R-TX).

Although the year passed without any formal action, he told RollCall.com in June that he was looking at ways poker regulation could be attached to his horse racing reform bill.

With four states — Nevada, Delaware, New Jersey, and soon Pennsylvania — showing that regulation is not only possible but successful for internet poker, the blueprint has already been written. And there is nothing precluding state-by-state online poker legalization and even interstate player pooling as we head into 2019.

Will Online Poker Benefit From Sports Betting Case 2017

The larger issues have been infighting between commercial entities who might benefit — or lose business — by legalization in major markets like California. And nothing in that arena looks likely to shift in the new year.