When American Indian tribal leaders gathered last February at Harrah’s Rincon Resort, nestled in the quiet, picturesque, rolling hills outside San Diego, much of the talk centered on the need to reach consensus on internet poker.
Agreement among a handful of politically influential tribal governments is believed crucial to efforts to legalize online wagering in California, which with a population of 38 million people is expected to be the country’s most lucrative statewide online poker market.
“California represents the plum when it comes to internet gaming,” Lee Acebedo, executive director of the California Nations Indian Gaming Association, told delegates to the annual Western Indian Gaming Conference.
But when tribal leaders took to the microphones to address the approximately 350 conference attendees, the message was far from optimistic.
And the backroom debate among tribal leaders was not nearly as quiet as the countryside.
An at times heated, closed-door gathering of leaders from nine politically powerful tribes left Sacramento legislators skeptical a bill legalizing internet poker will come out of the 2015 session, if ever.
“We thought we had a lot of support, a lot of momentum last year,” Chairman Bo Mazzetti of the Rincon Band of Luiseño Indians said of failed efforts by a 13-tribe coalition to get compromise legislation voted out of committee.
“Things have changed,” the chairman said, and a much smaller group of tribes seemed hopelessly deadlocked on key issues, primarily licensing parimutuel racetracks and “bad actor” language.
“If tribes don’t get together, there won’t be a bill,” Mazzetti said. “If we don’t do a bill this year, there will not be internet poker in California.”
Robert Martin, chairman of the Morongo Band of Mission Indians—partner with another tribe, three Los Angeles area card rooms and Amaya/PokerStars in a coalition seeking online wagering—was even more pessimistic.
“All of the tribes are not going to get together,” Martin said. “It is just not going to happen.”
Assemblyman Mike Gatto, sponsor of one of two pending bills to legalize online poker, says the word out of Rincon led him to roll back his earlier prediction that his legislation stood a 50-50 chance of success.
“I’m less optimistic that it will get done this year,” Gatto says.
What tribal attorney Stephen Hart calls the “very complicated mosaic” of internet politics in California has for nearly seven years been the focus of state officials, congressional leaders, tribes, card rooms, race tracks and gambling companies both in the United States and Europe.
Bingo Blast
But the future of online gambling in Indian Country may not be shaped in the state legislature. It may rest in the courtroom of U.S. District Judge Anthony Battaglia.
The Iipay Nation of Santa Ysabel, a small, indigenous community in San Diego County, is waging what may prove to be a landmark legal battle with state and federal officials over efforts to run an online bingo website. (See related story, page 32.)
The tribe believes it can under the Indian Gaming Regulatory Act (IGRA) offer internet Class II bingo regardless of whether tribes, card rooms and most likely the racing industry is successful in legalizing commercial online poker.
The Santa Ysabel lawsuit, which is expected to wind its way through the federal courts, may eventually pave the way for an explosion of online wagering in Indian Country.
Or it could prove a disaster for major Class II gambling markets in Oklahoma, Alabama and elsewhere.
“This can be a milestone case,” says independent consultant Norm DesRosiers, a former commissioner with the National Indian Gaming Commission (NIGC). DesRosiers has been retained by the tribe’s partner, Great Luck LLC, as an expert witness in the litigation.
“If the tribe prevails it will not only enable other tribes to engage in bingo with the internet as a technological aid, but poker, which is also Class II gaming. Tribes will be able to get into the internet gambling business with no state or federal regulations.”
But there are risks for tribes operating the roughly 35,000 Class II machines (8 percent to 12 percent of the tribal casino inventory nationwide) if the courts find the devices are facsimiles of Class III, casino-style games which require tribal-state regulatory agreements, or compacts.
Economist Alan Meister, author of the Indian Gaming Industry Report, estimates Class II machines generate 14 percent of the tribal casino industry’s $28 billion in annual revenue.
“I don’t appreciate Great Luck putting us all out there,” says John Tahsuda, a tribal attorney and lobbyist for the Oklahoma Indian Gaming Association. Oklahoma tribes operate roughly half the nation’s Class II machines.
Long-Shot Gamble
It came as little surprise at the Rincon conference that some prominent tribes were in angst over the delay in getting an internet poker bill out of the legislature.
The Rincon and Pala bands of Luiseño Indians and United Auburn Indian Community were reportedly being pressured by their online partnerships.
Rincon has a management agreement with Caesars Entertainment; Pala’s enterprise, Pala Interactive, was launching a website in New Jersey; and United Auburn has a longstanding agreement with Bwin.Party Digital Entertainment.
Tensions increased when it was learned New Jersey Governor Chris Christie may have been delaying the Amaya/PokerStars launch at the bequest of billionaire Sheldon Adelson. The casino mogul has been urging Congress to outlaw online gambling.
In a letter to pending bill sponsors Gatto and Reginald Jones-Sawyer, the three tribes and more than 20 card rooms said they were willing to accept extending licenses to parimutuel racing associations and agreed to softening “bad actor” and “tainted asset” provisions.
Bad-actor provisions were drafted to prohibit the licensing of foreign companies that accepted U.S. wagers after passage of the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA).
The provisions were apparently targeted to online giant PokerStars, which before being purchased by Amaya Gaming last year paid $730 million to settle a Department of Justice investigation.
Rincon is in partnership with Caesars Entertainment, which last week said it believes Amaya/PokerStars should at least be considered for licensing in the United States, a U-turn from its prior position on the issue.
The shifting position on the two issues riled some tribal leaders at the closed-door meeting, particularly Chairman Mark Macarro of the Pechanga Band of Luiseño Indians of Temecula. Pechanga and the Agua Caliente Band of Cahuilla Indians of Palm Springs have been steadfast in their opposition to licensing racetracks and easing bad-actor provisions in bill language.
Pechanga officials said they were “ambushed” when informed at the meeting of the Feb. 10 letter to Gatto and Jones-Sawyer. Leaders from nine tribes attended the session, which did not include Morongo and San Manuel, though they were invited.
Macarro and Rincon Councilman Steve Stallings at one poin
t got into a heated exchange.
“This was an ambush, plain and simple, under the pretense of consensus-building,” a tribal official said.
“Unfortunately, the letter, which tribes did not know of until arriving at the meeting, effectively capitulates on principles of great importance for tribal rights and future tribal generations,” Macarro said.
“The ploy was disingenuous and disrespectful toward most tribes attending today’s meeting. Clearly we have a long way to go to resolve the outstanding issues.”
Future Looks Dim
Officials with Rincon, Auburn and Pala contend Pechanga has dominated closed-door discussions on internet poker, which they believe have not been progressive.
In seven years of legislative debate, an internet poker bill has never made it out of committee.
“We just got tired of years of endless, unproductive meetings,” said a tribal leader who requested anonymity.
The two tribes, with support from a few other Indian governments, have the political clout to block a bill, industry and capital observers said.
“Without Pechanga, there will be no bill,” said one state official who requested anonymity. The official said it would not be difficult to block a tax bill requiring a two-thirds vote for passage.
“Without Pechanga and Agua on board, it’s going to be tough sledding,” said another high-ranking official who also requested anonymity.
In addition to backing off his prediction that online poker had a 50-50 chance of passing, Gatto objected to characterizations by the tribes that he and bill sponsor Jones-Sawyer were “overwhelmingly supportive” of proposed amendments offered by the Rincon and Pala bands of Luiseño Indians, United Auburn Indian Com-munity and more than 20 card rooms.
Gatto’s AB 9 limits website licenses to tribes and card rooms. It also prohibits licensing companies that took U.S. wagers after passage of UIGEA.
“I welcome the letter,” says Gatto. “This is exactly what is supposed to happen in the legislative process. People who have an interest are supposed to submit their comments on how we can improve any legislation. Do I welcome it? Yes. Do I embrace it? No. Do I agree with everything in it? No.”
Jones-Sawyer, whose AB 167 extends license eligibility to tracks and includes no bad-actor or tainted-assets language, did not respond to requests for comment.
Macarro and Agua Caliente Chairman Jeff Grubbe are not likely to budge on their opposition to tracks and softening bad-actor language.
Expanding gambling in the state, they believe, would encroach on tribal casino exclusivity and jeopardize the industry’s sustainability for future generations.
“No iPoker in California is the clearly preferable option” to legislation licensing tracks and bad-actor companies, Grubbe says.
“We’re not doing iPoker in a vacuum,” Macarro says. “There’s a public policy that not only can’t be ignored, it has to be addressed.”
Parimutuel racing, a broad-based, largely agricultural industry that includes tracks, breeders and labor unions, would expand the internet coalition throughout the state. But few believe it would generate a two-thirds vote this year. And they are more skeptical it will get through the legislature in 2016, an election year.
Chairman Martin has long contended that the agenda for a number of California tribes was to block legislation. He finds the position of Macarro, Grubbe and others to reinforce that belief.
“It’s not going to happen,” he says.
