4 States That Have Come Closest to iGaming Legislation

By in Industry Insight on

Overview of American iGaming Law

If you ask 10 average Americans about online gambling legal status in the states, you’d likely hear 10 different answers.

Some people believe all forms of online gambling are banned by federal law, while others think individual states have the right to regulate the iGaming industry on their own. When the divergences between online poker, casino gaming, sportsbooks, and daily fantasy sports (DFS) sites are added to the mix, ascertaining the legality of online gambling is admittedly a mess.

In 2003,Chris Moneymaker’s momentous win at the World Series of Poker (WSOP) Main Event sparked an online poker boom, one which saw dozens of operators enter the American market. At the time, federal law on the subject of gambling through the internet was unclear, allowing sites like PokerStars and Full Tilt Poker to grow into truly massive, multibillion dollar operations at their respective peaks.

By 2006, however, the proliferation of iGaming had spawned full-fledged online casinos, complete with slot machines, table games, and even keno and bingo. With millions of Americans wagering real dollars on iGaming platforms, the majority of which were offshore operations that paid nothing in taxes to the Internal Revenue Service (IRS), the Congress saw fit to act.

That action proved to be highly controversial, as lawmakers on Capitol Hill slipped a provision known as the Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006 into a spending bill to support defense of U.S. ports. That port bill was obviously passed without much delay, allowing the federal government to officially outlaw the practice of conducting iGaming-related business with American customers.

The UIGEA relied on a 1961 law known as the Wire Act (18 U.S.c § 1084), which prohibited wagers from being placed through “telephonic” means. Clearly, that law was written before the internet age, but because the early modem and dial-up era of online connection was affected through telephone lines, the Wire Act was widely interpreted as being applicable to online gambling as well.

In 2007, U.S. Attorney Catherine Hanaway delivered testimony to Congress explaining how the DOJ interpreted the Wire Act at the time:

“The Department of Justice’s view is and has been for some time that all forms of Internet gambling, including sports wagering, casino games and card games, are illegal under federal law. While many of the federal statutes do not use the term ‘Internet gambling,’ we believe that the statutory language is sufficient to cover it.

As we have stated on previous occasions, the department interprets existing federal statues, including 18 U.S.C. Sections 1084, 1952, and 1955, as pertaining to and prohibiting Internet gambling.”

When the UIGEA was passed, major operators like PartyPoker immediately complied with the new law, pulling up their proverbial stakes and withdrawing from the U.S. market altogether. Conversely, sites like PokerStars and PartyPoker continued to serve American players, seemingly daring the federal government to enforce the UIGEA’s restrictions.

That staring contest played out for five years, until April 15 of 2011, when the Department of Justice (DOJ) unsealed an indictment known as United States v. Scheinberg, 10 Cr. 336 (2011). That indictment targeted the owners and operators of PokerStars, Full Tilt Poker, and the Cereus Network, which covered both Absolute Poker and Ultimate Bet Poker.

Immediately, the domain names for these established online poker rooms were seized, and the sites were shuttered, replaced by a sternly worded warning from the Federal Bureau of Investigation (FBI).

Known forever afterward as “Black Friday,” that day signaled the start of America’s iGaming prohibition. The UIGEA was now an enforceable law, making the lucrative business of online gambling a risk for entrepreneurs, and the pool of iGaming platforms that were “U.S.-facing” quickly dried up. Those that remained were considered “rogue” sites, and aside from rubber-stamped licenses issued by sham gaming regulators in places like Costa Rica, Curacao, and the Kahnawake reservation in Canada, they weren’t regulated in any real sense.

Despite the loss of regulated iGaming, millions of Americans continued to seek out rogue sites while wagering volume remained unabated. Simply put, the demand for online gambling remained strong, even as the supply side suffered serious setbacks.

Perhaps recognizing that Americans benefited more from iGaming regulation than prohibition, the DOJ issued a surprising reversal of longstanding policy in December of 2011 – changing its official interpretation of the Wire Act.

In a letter to subordinates, U.S. Deputy Attorney General James Cole outlined the DOJ’s revised stance on the Wire Act’s scope:

“The Department’s Office of Legal Counsel (“OLC”) has analyzed the scope of the Wire Act, 18 U.S.c § 1084, and concluded that it is limited only to sports betting.”

Without warning, the DOJ had restricted the Wire Act’s coverage to sports betting activity only – meaning the law couldn’t be used as precedent for banning poker or casino gambling conducted online.

Legal experts observed that the DOJ’s ruling paved the way for individual states to explore their own iGaming legislation, as federal law no longer prohibited the industry.

Just 13 months later, Nevada and New Jersey took the plunge, turning their land-based casino hotspots into the second and third states to legalize online gambling, respectively. Delaware became the first state to do so in June of 2012, but the state’s small stature and lack of a casino industry left the spotlight on the Silver and Garden States.

After that initial flurry of legislative activity –  which created regulatory frameworks for iGaming to be offered by licensed casinos and “racinos” (in Delaware) – industry insiders expected several states to follow suit. Those hopes grew when New Jersey’s collection of online casinos and poker rooms began exceeding expectations out of the gate, sending millions of dollars in badly needed tax revenue to state coffers.

Unfortunately, the early momentum witnessed in those three states never materialized nationwide. While several states, including coastal powerhouses in California and New York, floated their own iGaming bills, the complexity of the debate has led to ongoing delays in every instance.

At this time, that elusive fourth state to authorize iGaming has yet to step forward, leaving only New Jersey, Nevada, and Delaware as havens for safe, secure, and legal online gambling.

Even so, the list of states currently considering iGaming legislation continues to grow, and in 2017 the prospects for finding that fourth state have never been better.

The list below highlights four states where iGaming bills are being debated, ranked in descending order based on the likelihood of passage:

1 – New York

Back in November of 2015, when New York Attorney General Eric Schneiderman sent a cease and desist letter to major DFS operators DraftKings and FanDuel, the Empire State seemed like the last place online gamblers would want to be.

Schneiderman’s actions forced the DFS sites out of a leading American marketplace, disturbing the semblance of peace enjoyed by the iGaming industry since 2011. Once again, lawmakers were targeting online gambling operations, leaving players out in the proverbial cold.

As for other games, specifically online poker, a pair of bills had been introduced in 2014, but the so-called “conversation starters” failed to garner any serious consideration.

All in all, New York’s iGaming landscape was a barren wasteland, up until last year that is.

In June of 2016, the N.Y. Senate passed SB-5302 –  a bill introduced by state senator John Bonacic which would legalize and regulate online poker – by an overwhelming 53-5 margin. At the time, iGaming industry insiders widely believed that the N.Y. Assembly would quickly move to pass the law, with powerful assemblyman J. Gary Pretlow having previously authored his own online poker proposal in 2014.

Unfortunately, Pretlow soon declared the online poker initiative “dead” in the Senate, effectively shelving the issue until 2017. As the Chairman of the Assembly Racing, Gaming and Wagering Committee, Pretlow’s stance on the subject is considered to be crucial, as he looms as the potential “kingmaker” in gambling debates.

In explaining the Assembly’s decision to avoid consideration of SB-5302, Pretlow expressed concerns over the potential for cheating, and for out-of-state players to access New York’s online poker rooms, among reasons for delaying passage.

On the DFS front, in August of 2016 – after a series of negotiations between DraftKings / FanDuel executives and state authorities to improve consumer protections – Governor Andrew Cuomo signed a law authorizing DFS within the state. The move was hailed as a major success by iGaming proponents, signaling a state’s willingness to explore the industry and adapt, rather than fall back on blanket bans.

With the right to play DFS now secure in New York, online poker has returned to the forefront of the debate.

A pair of identical bills are currently under consideration by the state’s Assembly and Senate: AB-5250 and SB-3898. Pretlow sponsored the former, while Bonacic sponsored the latter  -continuing both men’s lengthy involvement in New York’s iGaming debate.

If approved, poker would be defined as a game of skill under state law, rather than a game of chance. Up to 11 interactive gaming licenses would be issued to land-based casino and racetrack operators within the state, and those entities would be free to partner with established iGaming providers like 888 Holdings, bWin.Party, and the like.

In order to obtain a license, operators would pay a flat $10 million fee to the state, while a 15 percent tax on gross gaming revenue would be applied annually thereafter. Only players 21 and up, who are physically located within New York’s borders, would be permitted to play for real money.

In February of this year, Pretlow gave a lengthy interview to a local media outlet, outlining his renewed confidence that online poker would be safe and secure. Pretlow’s comments were quite optimistic, and he made it clear that 2017 should be the year New York joins New Jersey, Nevada, and Delaware:

“When I do sign off on something, my colleagues feel that it is a good deal and they don’t question why I made a certain decision. They know that if that decision was made, it’s for good reason.

So I don’t really see there’s going to be much opposition to moving this along.”

To that end, the N.Y. Senate even included a line item for online poker revenue in its most recent budget proposal. Using the budgetary process to enact law is usually unpopular, but other states like Pennsylvania have explored the option as a way of bypassing partisan legislative gridlock.

Once again, however, the Assembly decided to get in the way, removing the online poker revenues from the budget altogether. As Pretlow explained, the state’s political hierarchy intervened to keep online poker separate from the budget debate:

“It won’t be in the final budget, I don’t believe, because there are people opposed to it who are higher than me and don’t want it in the budget.”

On May 9, the Senate Finance Committee passed SB-3898 via voice vote, sending Bonacic’s bill to the full Senate for review. The Senate Racing, Gaming and Wagering Committee, which Bonacic chairs, previously became the first committee to send SB-3898 up the legislative ladder.

At the time this page was written (5/18/17), SB-3898 is being debated by the full Senate. Considering the years’ worth of tinkering and adjustment, one would suspect that this version satisfies the demands of various stakeholders, so Senate passage is viewed as highly likely.

Of course, lawmakers can be fickle creatures, so until both the Senate and Assembly provide final passage and send online poker to Governor Cuomo’s desk, nothing is set in stone.

Proving this fact, Pretlow gave an interview just after the Senate Finance Committee vote, during which he raised several pressing concerns held by fellow members of the Assembly. According to reporter Andrew Whitman, with local news station FiOS-1, Pretlow talked about the concern that New York is expanding its gambling industry too quickly, and the need to involve tribal gaming operators in any major iGaming proposal.

And adding to the intrigue, the Cuomo administration has remained curiously quiet when it comes to online poker, offering neither support nor opposition.

Despite that fact, his willingness to sign DFS regulations into law suggests that Governor Cuomo far from a hardliner on iGaming. Should the Senate and Assembly come to terms before the current legislative session ends on June 22, New York is poised to become the fourth iGaming-legal state in the country sometime this year.

And if Pretlow’s newfound fears cause another delay, punting online poker into 2018, the slow but steady progress in the last two years would suggest that passage would be all but guaranteed.

2 – Massachusetts

When lawmakers in Massachusetts enacted the Expanded Gambling Act of 2011, the intent was to create a brick and mortar casino industry by allowing one slot parlor, along with up to three Las Vegas-style casino resorts.

The opening of Plainridge Park Casino in 2015 fulfilled the slot parlor requirement, while MGM Springfield and Wynn Boston Harbor are set to open in 2018 and 2019, respectively.

But when the Bay State budged on casino gambling, a surprising move given Massachusetts’ historical aversion to passing “vice” laws, it also paved the way for iGaming discussions.

Stephen Crosby, who serves as chairman of the Massachusetts Gaming Commission (MGC), has long been on record as supporting a full-fledged “omnibus” package of iGaming regulations. Although he couched that support early on by saying that iGaming must wait until the state’s new land-based casino licensees were selected, the choice of Wynn and MGM in 2014 left him fully on board.

In August of 2016 a bill known as HB-4569, which sought to temporarily regulate DFS in Massachusetts until full-scale regulations could be implemented in 2018, was signed into law by Governor Charlie Baker.

When HB-4569 became law, it prompted the creation of a special panel tasked with studying the depth of DFS and iGaming options available to state legislators. Crosby was voted to chair the Massachusetts Special Commission on Online Gaming, Fantasy Sports Gaming and Daily Fantasy Sports, which convened for the first time in November of 2016.

Crosby used the forum to lead the charge for omnibus legislation, telling reporters after the meeting had adjourned that regulating all aspects of iGaming under one umbrella was the best approach:

“Would it make sense for the Legislature to try to craft an omnibus regulatory bill for all of these new electronic gaming technologies – because there’s so many of them?

Hopefully, this will be an opportunity for us to continue…the initiative that we’ve made about trying to come up with some omnibus legislation that will give the Legislature and then probably the Gaming Commission the tools to regulate all of online gaming

If they could craft a bill, which incorporated regulatory priorities, fundamental values, whatever, that could be applied to all of these games – e-sports, [daily fantasy sports], online poker, whatever all the new ones are – maybe then they could give it to some agency to implement, and the agency does the grunt work every six months making it apply to whatever the new technology is.”

The special panel is scheduled to deliver a report on its findings on or before July 31 of this year.

To kick off the 2017 legislative session this January, state senator Ted Barr (R-Gloucester) – who serves as the state’s Senate Majority Leader – introduced a two-page placeholder bill known as S-200.

The bill would authorize Massachusetts to issue interactive gaming license to its existing land-based casino licensees, provided those venues don’t spread games that could compete with a proposed online lottery program.

State senator Jennifer Flanagan (D-Worcester & Middlesex) also revived her 2016 effort to legalize online lottery sales in the state, which achieved passage by the Senate before lapsing in the Assembly.

With the introduction of S-182 in late January, Massachusetts now has a pair of major iGaming expansion bills raised in the legislature.

Unfortunately for fans of poker and casino table games, it looks likely that only online lottery regulation will be seriously taken up in 2017, with Massachusetts playing things closer to the vest on the omnibus iGaming package.

As iGaming industry expert Steve Ruddock of Online Poker Report detailed in a recent report, that strategy is based on the fact Steve Wynn owns one of the two Massachusetts’ land-based casinos which are still under construction. Wynn has long been known as an opponent of online gambling measures nationwide, and despite comments by a company-paid lobbyist at a Special Commission meeting in March, he maintains that stance today.

As a Wynn representative reiterated to Online Poker Report, the mogul hasn’t softened his opposition to iGaming in the slightest:

“Among other concerns, we continued to believe that online gambling is unable to effectively identify and authenticate the end user, creating a risk of underage gambling.

We still maintain our position on this matter, as communicated by Mr. Wynn over the last several years.”

The Wynn issue is likely a minor hurdle to overcome, but as Ruddock observes, the hardline stance adopted by Massachusetts Attorney General Maura Healey provides a more pressing obstacle.

Healey is no fan of online casinos, slot parlors, or poker rooms, as expressed by the following statement delivered on the day she assumed office in January of 2015:

“In this new era, the public must feel confident that no casinos will be brought online before meeting their commitments and following the law.

I have a responsibility to the public to ensure gaming accountability, and have made this a priority for my new administration.”

With local media outlets reporting that Healey is exploring a potential gubernatorial run in 2018, her signature could be the only thing standing in the way of full-fledged iGaming passage in Massachusetts.

That’s obviously not a good sign for iGaming enthusiasts, but if you’re looking for encouragement, her involvement in crafting the state’s DFS regulations should provide some solace. Healey worked diligently to create a laundry list of the strictest DFS regulations yet enacted, ensuring that recreational players wouldn’t be preyed on by well-heeled professionals, among a litany of similar consumer protection safeguards.

She wasn’t an ally of DFS either, but upon recognizing the legal quandaries created by an unregulated industry, Healey did the right thing and shielded Massachusetts from rogue operators and unscrupulous practices.

If she can do the same with online casinos and poker rooms, Massachusetts may one day support the safest and most secure iGaming industry in the country.

3 – Pennsylvania

With a dozen brick and mortar casinos operating throughout the state, Pennsylvania is not bound by the same sort of gambling aversion that hampers other Northeastern locales.

To that end, online gambling bills have been introduced in the Keystone State as early as 2013 – the same year regional neighbors New Jersey and Delaware joined the iGaming fray.

The first crack at online poker and casino regulation, HB-1235 sponsored by state representative Tina Davis (D-141), stalled out in the House. Even so, the Pennsylvania Senate initiated a full-scale economic study in December of 2013, through the passage of SR-273 – which called for Econsult Solutions to oversee an iGaming impact study.

When the research firm returned its results in May of 2014, predicting that Pennsylvania would collect $68 million in iGaming’s first year, followed by $110 annually thereafter, the “data” convinced lawmakers that online gambling would provide lasting financial benefits.

Of course, Econsult Solutions couched its study in an estimated taxation rate of 20 percent for poker, and 60 percent on casino and slots. Those figures were far from set in stone, as the subsequent debate over Pennsylvania’s proposed iGaming industry would later prove.

The research findings compelled state senator Edwin Erickson (R-26) to introduce SB-1386 in June of 2014, but lawmakers took no action on that particular proposal.

By 2015, with evidence of iGaming’s positive economic impact making headlines in New Jersey, lawmakers in Pennsylvania renewed their efforts to get in the online gambling game. Added incentive was provided by the state’s ongoing budget crisis, which left a projected budget shortfall of $2 billion at the time.

State representative John Payne (R-106), who serves as chair of the House Gaming Oversight Committee, introduced HB-649 in February of 2015. The bill would’ve legalized both online poker and casino games. Online gambling operators would’ve paid a $5 million licensing fee, with gross gaming revenue taxed at 14 percent across the board.

In a statement issued to announce HB-649’s introduction, Payne provided a mission statement for Pennsylvania’s renewed iGaming effort:

“Right now millions of Americans, including Pennsylvanians, participate in illegal online gaming where no regulation currently exists. By enacting effective state policy, we can help curb the illegal market while ensuring strong safeguards are in place to protect consumers.

We are currently facing a projected $2 billion budget shortfall. I think it’s important we consider all responsible options to boost revenue before we consider asking our taxpayers for more money to fill that deficit.

The implementation of legalized online gaming in Nevada, New Jersey and Delaware demonstrates the technologies exist to regulate Internet gaming safely and effectively. This legislation is the first step toward ensuring future growth as the industry expands.”

In November of 2015 the House Gaming Oversight Committee passed HB-649 in an 18-8 vote, marking the first time legislators there had successfully passed an online gambling measure. This victory seemed to the stage for what most believed to be imminent iGaming passage in Pennsylvania.

Instead, the next year-and-a-half devolved into rancorous debate over a multitude of barely connected issues, including video gaming terminals (VGTs) at airports, the expansion of slot parlors at racinos, and of course, the all-important question of tax rates.

The drama began in June of 2015, when state senator Kim Ward (R-39) introduced SB-900. The bill called for a much higher 54 percent tax, which aligns with Pennsylvania’s land-based slot levy, along with $10 million licensing fees, and a requirement that players register for online accounts by visiting a land-based licensee venue first.

These conditions are widely considered to be untenable for iGaming operators, leaving no room to turn a profit and effectively shuttering the industry before it ever begins.

When SB-900 began attracting interest from conservative lawmakers, draining support from Payne’s HB-649 in the process, the stage was set for the budgetary gridlock of today.

By 2016, with Payne diligently tabling HB-649 to keep the measure alive, Pennsylvania brought up a pair of amendments to tackle the increasingly controversial VGT issue. Those amendments were attached to a new iGaming proposal, however, further muddying the waters.

The year was defined by ongoing collaboration between the opposing sides, including 47 separate hearings on the matter. But despite an edict from Governor Tom Wolf – who included a line item of $100 million to $250 million based on iGaming revenue in the 2016-2017 budget – Pennsylvania lawmakers were unable to reach an agreement before legislative work ended in 2016.

Fast forward to mid-May in 2017 and not much has changed.

In fact, the issue has become increasingly clouded by the introduction of no less than three separate iGaming bills: HB-392, SB-477, and HB-524.

Each of these proposals would authorize sweeping changes to Pennsylvania’s online gambling landscape, including the legalization of DFS in addition to online poker and casino games. The bills also call for expansion of land-based gambling products like multistate progressive slot and tablet gaming at airport terminals.

Where the bills differ is the tax rate applied to online gambling revenue.

The two bills put forth in the House stick with a 14 percent tax, which aligns closely with the 15 percent standard established by New Jersey’s successful iGaming gamble.

The Senate bill opts for a higher 25 percent tax, while raising the licensing fee for land-based operators from $8 million to $10 million, and the fee for software providers and other vendors from $2 million to $5 million.

This divide has led to an increasingly convoluted discussion between both legislative bodies, one made even more urgent by the state’s looming tax-share deadlines.

To illustrate the complexity of the ongoing discussions, the House – which is widely considered to be more receptive to iGaming than the Senate – decided in April to give up on HB-392. Instead, the bill’s sponsor, state representative George Dunbar, added his name to HB-271 as a co-sponsor.

The new bill, the fourth to emerge in Pennsylvania thus far in the 2017 session, is written as a “shell,” with only one original provision about tablet gaming in airports.

As Dunbar told Online Poker Report, this shell bill is intended to give the Senate carte blanche when it comes to crafting their own online gambling provisions, given that body’s continual tinkering with House efforts:

“We put in one thing, tablets in airports, and basically said, ‘You load it up with what you want in it. It puts the ball in their court.

We sent up the bill for them to load up along with the budget for them to figure out this is what we need to do to get this done. It’s up to them to change the budget or send the bill back to us with everything on it.

“We just need them to tell us what they want. We’ve told them what we want, and they’ve taken no action for some reason. We truly don’t know why. It’s time for them to put up. That’s where we’re at. I’m sure they’re going to come up with something.”

As of today, each of these bills is being bantered about within the House and Senate, but the proverbial clock is ticking in terms of the May 25 (soft) and July 15 (firm) deadlines for local tax-share distributions.

Even with that incentive looming overhead, the sheer abundance of moving parts in Pennsylvania’s legislature has made an already intricate issue far too complicated. Variable tax rates on DFS, poker, and casino games, the divide between industry standard taxation and land-based equivalents, and an inability to separate online regulation from brick and mortar gambling expansion looks likely to prolong Pennsylvania’s iGaming debate until 2018.

4 – California

The situation in California has become so convoluted that we’ll spare you the gory details, but sufficed to say, the Golden State has failed to strike the iGaming motherlode.

Industry experts have long tabbed California as the prime destination for iGaming expansion. The state is home to dozens of tribal and commercial casino venues, along with racetracks, card rooms, and other legal gambling ventures. And as the largest state in the union, with nearly 40 million residents, the potential revenue stream generated by taxing iGaming operators would be truly enormous.

For those reasons, California has always been ahead of the curve – at least in terms of proposing new legislation.

Way back in 2009, more than two years before the DOJ even reversed course on the Wire Act, state legislators authored a draft document outlining the framework for statewide online poker regulation. That document, entitled “California Online Poker Law Enforcement Compliance and Consumer Protection Act of 2009,” proposed the creation of an online poker industry which would fall in line with the UIGEA of 2006.

Over the next nine years, California would see a string of online poker bills introduced on an annual basis, a list of which can be found below:

  • 2010 – SB 1485 – Internet Gambling Consumer Protection and Public-Private Partnership Act
  • 2011 – SB 45 – Internet Gambling Consumer Protection and Public-Private Partnership Act
  • 2011 – California Online Poker Association (COPA) draft bill
  • 2012 – SB 1463 – Internet Gambling Consumer Protection and Public-Private Partnership Act
  • 2013 – SB 51 – Internet Gambling Consumer Protection and Public-Private Partnership Act
  • 2013 – SB 678 – Authorization and Regulation of Internet Poker and Consumer Protection Act
  • 2014 – SB 1366 –The Internet Poker Consumer Protection Act
  • 2014 – AB 2291 –The Internet Poker Consumer Protection Act
  • 2015 – AB 167 – The Internet Poker Consumer Protection Act
  • 2015 – AB 9 – The Internet Poker Consumer Protection Act
  • 2016 – AB 2863 – The Internet Poker Consumer Protection Act
  • 2017 – AB 1677 – The Internet Poker Consumer Protection Act

As you can see by this graveyard of failed online poker bills, California has attempted to pass such a law every year since 2010 – with many years seeing multiple attempts.

Unfortunately for the millions of online poker enthusiasts there, California has succumbed to a prolong legislative standoff between several interested stakeholders.

At the heart of the debate is online poker behemoth PokerStars and the company’s desire to operate within California’s newly created online poker market.

Many legislators and local casino operators welcome PokerStars, recognizing that California’s online poker experiment stands to benefit from the company’s wealth of resources and experience. In fact, a coalition consisting of Commerce Casino, Hawaiian Gardens Casino, and Bicycle Casino – three of the largest land-based operators in the Los Angeles area – were joined by the Morongo Band of Mission Indians to form a pro-PokerStars coalition in 2014.

In 2014 a second coalition emerged, comprising 13 tribal groups under the leadership of the Pechanga Band of Luiseño Indians, to take on the PokerStars alliance.

According to this tribal coalition, PokerStars should be deemed a “bad actor” based on the company’s conscious choice to operate within California after the UIGEA of 2006 made doing so illegal. As the bad actor argument goes, PokerStars gained an undue competitive advantage over online poker rooms like PartyPoker, which willingly abandoned the U.S. market after the UIGEA became law.

Proponents of the bad actor theory claim that by continuing to serve Californians until “Black Friday” struck five years later, PokerStars accumulated valuable data on customer activity that its competitors lack. In the coalition’s first public statement, issued in March of 2014, the tribes voice strong opposition to PokerStars’ return to the California market:

“For the last quarter-century our tribal governments have worked constructively with the State to protect and strengthen the reputation of the California gaming industry by ensuring the honesty, good character, and integrity of licensees, employees, owners, and vendors. To now weaken California’s suitability standards would undermine our collective goal of creating a legislative framework that protects consumers from nefarious operators.

As we prepare to enter the next chapter of gaming in California, we urge the State Legislature to maintain the highest standard of suitability in order to prevent unscrupulous entities and brands from any involvement in legislatively authorized internet poker opportunities.”

That statement drew a line in the sand, and from that point onward California’s multitude of online poker bills have become battlegrounds for lobbyists representing both coalitions.

The anti-PokerStars coalition has floated several proposals to address the bad actor issue, including a mandatory 10-year suspension and a $60 million one-time fine suggested by the Pechanga just last year. Intense negotiations on both sides resulted in that fine being cut to $20 million during the most recent debates this April, but Assemblyman Adam Gray (D-21) abruptly backtracked on those terms and opted for a five-year suspension period instead.

The bait and switch tactic didn’t go over well with anybody, prompting the once promising collaboration between the rival coalitions to fall apart.

Assemblyman Reggie Jones-Sawyer (D-22) has sponsored online poker bills each year since 2014, but even he was forced to admit defeat for the 2017 session after the latest clash between PokerStars detractors and advocates.

Speaking to Online Poker Report this April, Jones-Sawyer effectively shelved AB-1677 until 2018 at the earliest while citing Gray’s sudden change of heart:

“I don’t want to sound like a minister or psychologist, but we’ve got to start from ground zero where we’ve got to at least get people to want to try to get it done again.

When I first started on this in earnest, we were going slow and methodical, and we had some successes. We weren’t trying to rush anyone and we weren’t pitting one side against the other, as best we could.

(Gray) may have thought there was a way to make the deal, to finally get this done. I don’t know what happened after that to unravel something for which I thought we were very close.”

Now we have to go back to the same methodical strategy as before, but we may have to go even slower because you don’t want to have people pushed up against the wall. That’s when people start to get a little nervous and strained.

Obviously, we’re not going to put anything across the desk now. If you look at the Assembly, we have other big things such as the transportation bill to focus on.

This would not be a good year to put something controversial in. I think the ability to work out something next year has a bigger chance if we do some of the come-together healing things right now.”

Considering the lack of enthusiasm voiced by Jones-Sawyer, one of online poker’s most vocal supporters in the state during the last four years, California seems no closer to passage than it was back in 2009.

And that’s a shame too. A densely populated, cosmopolitan locale like California could easily transform online poker into a perennial cash cow, proving once and for all that well-managed iGaming industries are economic engines.

But until the bad actor sticking point has been successfully negotiated, players there are left to ride the same wash / rinse / repeat cycle that has defined California for nearly a decade.


Any state which takes up the iGaming debate enters into a tangled web of legal, budgetary, and political interests, as proven by the recaps above.

Making any change to the law involves cooperation on an immense scale, but for many reasons, iGaming regulation has proven to be a tough nut to crack. Between the varied positions held by existing land-based gambling operators, including tribal organizations, and the direct impact of tax revenue and licensing fees, legalizing the online gambling business is nothing short of a Herculean task.

As the longstanding meccas of American gambling, Nevada and New Jersey both had added incentive to capitalize on iGaming expansion after the DOJ’s revised Wire Act opinion. As for Delaware, the Diamond State simply took initiative and gambled on the growth of an ascendant industry.

But for the four states listed on this page, and any others hoping to authorize online gambling in one form or another, achieving a similar breakthrough has proven to be difficult indeed.

With that being said, progress continues to be made with every committee hearing and vote, and surely the list of American states where iGaming is legal will grow – either this year or next.

Michael Stevens

Michael Stevens has been researching and writing topics involving the gambling industry for well over a decade now and is considered an expert on all things casino and sports betting. Michael has been writing for GamblingSites.org since early 2016. ...

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