Hardline Tribal Letter on California Online Poker a Machiavellian Diversion? (Part 1)

United States-based online poker legislation watchers did a collective head-turn late Wednesday, when the text of a strident letter from a hardline California tribal coalition was published.  In the letter, several politically powerful tribes reiterated their collective opposition to compromise-seeking language contained in a recent measure introduced by CA State Rep. Reggie Jones-Sawyer.  The result: Online poker legislation in the Golden State again appears headed nowhere in the near future.

CaliforniaJones-Sawyer last year introduced a bill at the behest of these same hardline tribes which included a couple of controversial clauses — the preemptive barring of California’s racetracks and pari-mutuel facilities, and the insertion of so-called “bad actor” language aimed squarely at international online poker giant PokerStars, which has long set its sights on reentering the California market through potential partnerships with other Cali tribes.

The ban on pari-mutuel facilities being considered for possible licensing and the previous inclusion of the bad-actor clauses were both eliminated from the latest version of Jones-Sawyer’s California online poker bill, AB 167, which is under preliminary consideration in the CA Assembly’s GO (Governmental Organization) Committee.  The changes were seen as vital by most political observers in building a consensus among all pro-online parties, the better to face entrenched anti-gambling forces which could otherwise prevent any online-poker from garnering the two-thirds majority it would need to gain Assembly approval.

Except those seven hardline tribal nations — the “Cali 7,” as I’ve taken to calling them — don’t want any part of a compromise that might actually move an online-poker bill forward.  You can read all about the basics of the letters sent by the hardline tribal nations in Sadonna Price’s update here at 4Flush earlier today.

It’s gotten to the point where the evidence is mounting that the Cali 7 really don’t want online poker in the state at all, and have been using their collective political pull to damage the prospects of any regulated online poker coming to California, America’s largest state, any time soon.

Several California state legislators have publicly opined that short-term prospects (meaning 2015-16) are bleak for the passage of any online-poker bill in the state.  That includes a statement from CA State Rep. Mike Gatto, who coincidentally has reintroduced a rival bill that contains that clauses that the hardline Cali 7 continues to demand.  However, given that California Governor Edmund Brown has already stated that no bill will be signed that preemptively excludes the state’s pari-mutuel facilities from consideration, it’s clear that the issues won’t be resolved any time soon.

The interesting thing is, despite being the primary sponsors of most of the California online-poker bills that have been introduced to date, this might be what the Cali 7 group has planned all along.

The seven tribes whose leaders sent two letters to Rep. Jones-Sawyer are the Agua Caliente Band of Cahuilla Indians, the Barona Band of Mission Indians, the Lytton Band of Pomo Indians, the Pechanga Band of Luiseno Indians, the Viejas Band of Kumeyaay Indians, the
Yocha Dehe Wintun Nation and the Sycuan Band of the Kumeyaay Nation.  Six of the seven were co-signatories to a letter first published last night at OPR, while the seventh, the Sycuan nation, is reported to have sent a separate level.

Other tribes who were initially part of an earlier, larger coalition with similar aims have since modified their stances, but the Cali 7 tribal nations, each of whom runs a major casino adjacent to a large California metropolitan area, are among the state’s wealthiest and most well-connected in the political sense.  For the most part, the current state of affairs is very profitable for them, and legalizing any form of online gambling in the state represents a possible long-term revenue threat.

It also represents a possible windfall, perhaps even an advantgeous re-working of these tribes’ existing gaming compacts with the state, if the state can be backed into a legislative dead-end.  There’s a very real chance that this is these tribes’ real motive, with tens or even hundreds of millions in possible renegotiated gaming revenue at stake.

The Cali 7 Flip-flop Regarding Online Poker

Despite the fact that the hardline coalition of tribes headed by the Pechanga, Agua Caliente, Viejas and Yoche Dehe nations have been behind most of the California online-poker bills introduced to date, these tribes were originally against the introduction of such a bill.  The reasons for them being against such a bill are echoed within the current concerns and protests, including the largely imaginary negative impact online gambling might have on these tribes’ established land-based-casino revenues, and the claims that the state’s licensing of possible non-tribal entities would violate the exclusivity claimed by the tribes under IGRA and existing tribe-state compacts.

That online gambling caters to a significantly different cleintele than land-based casinos hasn’t stopped B&M casinos around the globe from claiming otherwise, and that’s not likely to change soon.  However, the whole issue about exactly what sorts of online gambling might be covered under IGRA and existing state compacts has yet to be clarified or tested in court.

Late last decade, an entity existed called the California Tribal Business Alliance (CTBA), did their own research feasibility into California online poker.  The CTBA features three similarly hardline tribes, including the Viejas nation and the Pala Band of Luiseño Indians.  Last year, when the Cali 7 was more like the Cali 12, the Palas were also a member of that hardline group, before perhaps realizing that there way too many skeletons dancing behind the facade of its Pala Interactive entity to warrant the continuation of such a politically militant stance.

The CTBA provided its own legal advice regarding how online gambling might affect existing tribe-state compacts, and asked a third-party consultant, Michael Genest of Genest Consulting, to do a financial impact of what online gambling would mean for tribal and state revenues.

You might find Genest’s conclusion surprising, but remember also that it was based on the tribes’ own legal opinions.  Wrote Genest, in part:


Violation of Exclusivity

Poker is legal in California (under certain circumstances) and the provision of poker to the public at a physical location does not violate the exclusivity clauses of the 2004 and 2006 Indian gaming compacts. However, by authorizing the use of an electronic device for the play of virtual poker, the proposal would result in the loss of $365 million in annual Indian gaming revenue to the state’s General Fund.

This is because the exclusivity granted by the compacts is for the use of “gaming devices.” Section 2.6 of the compacts defines a gaming device as a “slot machine, including an electronic, electromechanical, electric or video device that, for consideration, permits: individual play with or against that device or the participation in any electronic, electromechanical, electric or video system to which that device is connected; the playing of games thereon or therewith, including, but not limited to, the playing of facsimiles of games of chance or skill; the possible delivery of, or entitlement by the player to, a prize or something of value as a result of the application of an element of chance; and method for viewing the outcome, prize won, and other information regarding the playing of games thereon or therewith.”

It is indisputable that this definition would encompass the use of the internet to provide poker play. In addition, the National Indian Gaming Commission has opined that the use of a device in the play of what would otherwise be a class II game (e.g., non-house banked poker) makes it a class III game14 (i.e., covered by the exclusivity clause of the compacts).

In other words, Genest’s analysis, based on the tribes’ own legal opinions, was that the state’s total revenue derived from tribal casinos would decrease by $365 million annually.  That’s because, if the state didn’t grant exclusivity to the tribes based on the tribes’ own reading of Class II / Class III gaming, California would be in violation of its existing gaming compacts with state tribal casinos.  Those compacts remain in effect until 2030.  And thus, the tribes, wouldn’t have to share any of their gaming revenue with the state.

Except, and without explanation, the hardline CTBA tribes later reversed themselves on this key issue, and early this decade issued new internal legal opinions to the effect that the state really could license online-gambling services to anyone and everyone, if it so chose.  They then asked Genest and his new consulting firm,  Capitol Matrix Consulting (CMC), to do another financial anaylsis, based on the new — and opposite — legal assumptions.  That was the oft-cited study which suggested that California could garner as much as $845 million in new state revenue for 2015-19, had the state gone ahead and regulated online poker last year.

Not all the Cali 7 tribes were involved in obtaining the Genest analyses, which were coordinated through prominent California tribal lobbyist Jerome Encinas.  Encinas is one of California’s foremost tribal lobbyists, representing dozens of the state’s tribal nations on various issues.

All this background about Class II and Class II IGRA gaming?  And about how several of California’s most powerful tribes, who had once opposed online poker of any sort, suddenly changed their tune?  In Part 2, we’ll tie it all together with a look at the ongoing Iipay Nation online gambling case, which on its face makes little sense.

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