Why California should regulate egaming
California can either bury its head in the sand or position its gaming industry for the future, says Senator Roderick Wright, sponsor of the intrastate poker bill in the US' most populous state.
Current estimates are that somewhere between 300,000 and over a million Californians are playing online games. Because California does not have a regulated site for online games, those players are going to illegal, underground, offshore sites where they are at the mercy of unscrupulous operators and are occasionally cheated out of their money with absolutely no recourse.
Senate Bill (SB) 1485 recognises all online games that would be legal in California, not only poker. California has had legalised online betting for horse racing for several years as permitted under federal law. We also have over 90 card clubs in addition to over 60 Indian tribal casinos.
The federal government, recognising the probÂlems being created by online gaming, recently amended the law relative to online gaming to give states greater latitude in regulating the games. SB 1485 takes advantage of the federal law on behalf of California.
The growth in popularity of both poker and other online games, coupled with the number of players in California, means we have an underperforming asset. How much is this asset worth? We really have no way of knowing until we put it out to comÂpetitive bid in the private sector. By seeking private operators, the state will assume no risk.
Will we receive revenue from the asset? Of course. But we will also be able to offer consumer protection and do a better job policing the games, as we do with other forms of gaming permitted in California. We looked at the experience of the state of Washington in outlawing offshore games; SB 1485 contains similar protections.
I have heard references to Sweden as a failed effort at online gaming. But at a February hearing on internet poker held by the California Senate GovÂernmental Organization Committee, the director of Sweden’s very successful programme testified that they have captured nearly 40% of Sweden’s online players. They expect to exceed 50% of the Swedish market in the near term and they are quite pleased with their enterprise. Given the size of California, and the number of players, 30% would be a profitaÂble effort. This doesn’t take into account the growth in popularity of online games. Clearly, there is real potential for a profitable business enterprise.
There has been some concern raised as to whethÂer or not a Californian online game would violate the exclusivity provisions of our Indian compacts. The majority of the revenue from tribal gaming goes into a fund to assist non-gaming tribes and the cost of regulatory oversight. With that said, both our own Legislative Counsel and the Justice Department, which oversee the compacts, have opined that there is no such breach.
But even with that opinion, SB 1485 will not become fully effective until all challenges to exÂclusivity have been resolved favourably. This will be done for two reasons. First, obviously we don’t want to risk any real dollars we are receiving for a venture we have no ability to quantify. Second, and more importantly, we entered into compacts with sovereign nations. We don’t take that lightly. We may not see any consumer protections or revenue for two or three years.
However, the sooner we begin the sooner we can achieve the needed changes. Just as the internet has changed the news and information busiÂness, it will also have an impact on gaming. We can sit here with our heads in the sand, or position California for the future.
This column first appeared in the July 2010 issue of eGaming Review.