R O U G H D R A F T Senate Committee on Governmental Organization Roderick D. Wright, Chair Examining the Public Policy and Fiscal Implications Related to the Authorization of Intrastate Internet Poker in California Tuesday, February 9, 2010 State Capitol, Room 4203 SENATOR RODERICK D. WRIGHT: ...with our informational hearing. I’ll be the referee. I want everybody to obey my commands at all times. There will be no saving by the bell, except after Round 10. After Round 10, you will be able to be saved by the bell. No rabbit punches. And again, obey my commands at all times. (Pause) Okay. I’m going to give a couple more minutes for our members to get here. At this morning’s presentation, the part of Steve Rittvo will be played by—Mr. Rittvo got stuck in snow in Washington, D.C., so he will not be here this morning. Again, as you can see from the agenda, we have kind of an ambitious agenda, but I think it’s necessary for the scope of what we’re trying to do. We’re going to schedule to try to have approximately a 30-minute break, and we hope we can wrap up by about 4 o’clock. Now given the nature of what we’re doing, we’re going to set up a little pool as to what time we get out. (Laughter) You know, depending on who wins the pool, maybe we can give the money to somebody’s charity. But you can’t filibuster in order to extend the time if you bet on one side or the other. I want to ask some of the witnesses if you would—and I know many of you have statements. If your statement is written, if you’d please give it to the sergeant because we’re going to form kind of a compendium of those things that were said for later handout, but it’s not necessary for you to come and say the same thing that someone has already said. So if it’s already been said, you can kind of say, he just said what I was going to say, and that’s cool. You know, no offense will be taken if that’s what you do. Again, we’re going to get started probably in five minutes. I’d like to get just a couple of other members in. You know, they were surprised we actually did start on time but we’re going to try to do that. Those members of the first panel, if you would come forward and have a seat up because, as soon as we get going, we’re going to crank that up. Mr. Soderborg, Mr. Eadington, Mr. Millar, Mr. Catania, Mr. Derossi, and we’ll just get you guys queued up. Again, Mr. Rittvo will not be here today. He is stuck in snow back East. So because of that, we will crank up for him. Again, I will open with a brief opening statement and then we’ll get right to the panels for the people who were betting long that we’re still going to try to keep on time. As a matter of fact, what I think I’ll do, gentlemen, if it’s all the same, I’m going to just go ahead and do the opening. Again, because this is an informational hearing, a quorum is not necessary because we’re not voting on anything today. So I’m going to go ahead and get us started. I’m going to open and then we’ll go right to the witnesses. Let me say a couple of things at the outset. I know we’ve got people who have traveled from Europe. We’ve had people who’ve traveled from across the country and some people who were trying. We do have an award for the people who’ve come from the furthest. Right now, I think Sweden is in front. So if anybody’s come from further away than Sweden, let them be recognized now. But right now, the Swedes have the trophy for people who’ve come the furthest. For those of the general public or watching on CalChannel, again, this is will be available if you want to get a copy. The purpose of the hearing today is to establish a framework by which the legislature can look at Internet poker. And I want to make clear that this is 2 not a referendum on anybody’s proposal today because, as of present, there is no proposal before this committee or any committee in the legislature. There certainly are some ideas floating around, and this isn’t for or against anybody’s idea. So I mention that because I’ve heard discussions where people said I like this or that about this guy’s proposal. This is not about anybody’s proposal in particular. What we’re talking about is Internet poker. We’re trying to identify what would be the best course of action for the state of California, so we’re trying to actually educate ourselves as to what makes good sense. There are a number of fiscal implications. There are discussions as to what’s legal; there are things as to what’s not legal, whether or not it violates exclusivity. I could go into a number of issues that I hope we examine today. I’ve read some of the material from some people who said, well, this is illegal. Clearly, whatever it is we do, it’s probably going to end up in court. So Judge Wapner will be the ultimate decider of what gets done and what does not. We’ll also be exploring what’s the best method to proceed so there are a number of things, some of which, I’m sure that the staff of the committee and I and other members have not even begun to consider. So that’s why we’re here and, again, this is not an opportunity for people to level, you know, issues at other folk, and I know that there are longstanding wars that people have had and people have been on this side or that side. This ain’t the place to do that. So if you’re going to do that, as usual, that takes place outside. So, you know, if you’re going to have a fight, you have to go outside and do it, although I do referee. I only do that on Wednesdays. So if you want me to referee the fight, it has to be on Wednesday. Again, let me welcome all of the people who have come—the members of the public, people who are going to testify on panels, members of the California gaming industry for your being here this morning, and let me welcome the first panel, and I think we’ll just go ahead and get started because we have such a long day and I don’t want to influence the betting pool by starting late because we are trying to make that 4 o’clock cutoff. So thank you. And Senator Harman, do you have an opening? 3 SENATOR TOM HARMAN: I think you’ve pretty much covered it, Mr. Chairman. I’d just assume, go ahead and start the hearing. SENATOR WRIGHT: Okay. Well, let me welcome our first panel. This panel is on background and the relative issues to Internet poker. Since it is all guys, I can say, gentlemen, welcome aboard. And Mr. Soderborg from the Legislative Analyst’s Office, if you would start us off. Did I pronounce that right? MR. DREW SODERBORG: That’s correct, yeah. SENATOR WRIGHT: Okay. Thank you. MR. SODERBORG: Mr. Chair, Members, Drew Soderborg, Legislative Analyst’s Office. If you turn to the first page in the handout we’ve distributed, you’ll see a discussion of what federal law currently allows with respect to online gaming. Under the Federal Unlawful Internet Gambling Enforcement Act of 2006, it is generally unlawful to place or receive gambling bets through the Internet. However, the act allows states to authorize online, intrastate gambling under certain conditions. For example, the type of bet or wager must be authorized by state law and cannot violate certain federal laws. In addition, rules and regulations must be adopted to prevent minors or non-state residents from participating in online gambling. At this time, we know, however, there are bills pending in Congress to legalize online gambling across all the states which would likely impact the revenues that states could obtain from legalizing intrastate, online gambling. If you turn to the next page in your handout, you’ll see a discussion of some of the broad categories of areas that we would feel would influence how much revenue the state could achieve from authorizing online poker. One of the first issues that we feel would impact the level of benefit the state would receive from authorizing online poker would be the possible legal issues regarding tribal-state compacts. Another important factor would be the details surrounding how legal poker websites would be implemented in California. Another important factor would be the number of people who would 4 play online poker, as well as the amount those individuals would wager on a legal website. And finally, we feel that it would be important to note the extent to which legal websites are able to capture monies that are currently being wagered on illegal websites. If you turn to the next page in your handout, we have a discussion of the possible legal issues regarding tribal-state compacts.