California, Pennsylvania and a few other states are getting close to joining New Jersey, Nevada and Delaware as players in the US online gambling industry. To ensure its residents are protected, and enjoying a safe and secure experience, there are currently two bills which are awaiting votes by the California state legislature which include “bad actor” clauses. A bad actor clause in a contract penalizes companies that are currently involved in ongoing relationships with companies or individuals which have been indicted for industry-specific illegalities in the past.
How that affects the online poker industry in California involves global poker giant PokerStars. That company has partnered up with the Golden State’s three biggest physical card rooms, as well as the Morongo Band of Mission Indians, in an online poker agreement. Basically, the partnership would allow PokerStars to provide Internet poker if and when California decides to regulate and offer state sanctioned cyber poker.
PokerStars last week was sold to the Amaya Gaming Group for a total of $4.9 billion. The move was seen as a way to guarantee entry into the United States marketplace, since Amaya enjoys a sterling reputation as a global gambling company with no black marks on its resume.
How California’s Bad Actor Clause Affects PokerStars
However, two current bills sitting before the state legislator, as well as one California Indian tribal proposal, would disallow PokerStars from joining the California online poker party. In 2011 PokerStars was one of the three largest Internet poker rooms in the world. On what is now known as Black Friday in the poker community, in April of that year, PokerStars was shut down, with player accounts and money frozen.
The charge from the US Department of Justice was that executives working for PokerStars were engaged in laundering money and in direct violation of several US banking statutes. Since then, PokerStars has complied with all DOJ mandates, and is currently a company in good standing with US authorities. But that indictment would disallow PokerStars from benefiting by any involvement in a future California online poker industry, because of the bad actor clause in the legislation.
Does California’s Bad Actor Clause Violate the U.S. Constitution?
The problem lies in the legislative wording which makes up the bad actor clauses in California AB 2291 and SB 1366. These bills were put forth by state Assemblyman Reggie Jones-Sawyer and Senator Lou Correa. But all is not lost for PokerStars. Professor Laurence H. Tribe teaches at the Harvard University Law School, and has helped nations shape their constitutions. The renowned and respected professor has reviewed both of those pieces of California legislation, and finds them in direct violation of the United States Constitution.
Even though PokerStars continued offering its virtual product to US citizens after the formation of the UIGEA in 2006, whether that Internet gambling law has any legal rights has not been determined in any court. Because of this, Tribe believes that PokerStars has a right to trial representation before judgment from a bad actor clause is passed.
A third proposal by a group of 13 influential California Indian tribes also contains bad actor wording which would affect PokerStars negatively. The triumvirate of PokerStars, their California card room partners and the Morongo Indians have vowed to fight any bad actor legislation, and it appears that Tribe’s opinion on the matter provides them with a powerful ally.