One of two issues stalling online poker regulation in California is whether to license the horse racing industry. The industry believes it should be allowed to participate while some stakeholders think it is an illegal expansion of gambling for it.
For years the Pechanga Coalition has been blamed for shutting out the horse racing industry but earlier in the year they were ones to come up with a pair of reasonable compromises to allow racetracks to participate.
The industry rejected these proposals and is steadfast in demanding a license to operate online poker. We believe that this position is a bit unreasonable and that they should reconsider the compromise options.
Below are some thoughts on how the horse racing industry could be convinced to accept the compromise options provided by the Pechanga.
Show Them The Costs vs. The Revenue
It is time for someone to sit down with the horse racing industry and crunch the numbers regarding iPoker, both as an operator and under current compromise proposals.
First, start with estimates regarding the amount of money that it will take for the industry to operate online poker sites in California.
Looks at the startup costs and the operating costs and then compare them to the estimated revenue expected from online poker.
Such an estimate needs to be done by a third party with zero connections to the horse racing industry and one that has no interest in California iPoker. Otherwise, you will end up with numbers skewed in favor of the industry.
After figuring out the numbers for running a site, figure out the potential income the industry would receive through one of the compromise scenarios.
Under the revenue sharing agreement, racetracks would incur zero startup costs and would simply receive a check annually from the iPoker industry for its cut. For the affiliate scenario startup costs would be greatly reduced compared to operating a site on its own.
Next, the industry could choose which site or possibly sites it wants to affiliate with. We naturally assume PokerStars, assuming they are licensed.
It is our belief that hard numbers will give a better idea of the benefits from each option and could help move towards one of the compromises.
Provide a Realistic Picture of California iPoker
Someone needs to sit down with the industry and explain the realities of what will be a regulated iPoker market in the state.
Odds are that only a limited number of online poker sites will be successful in the state and any site that's run by the racing industry will be at a distinct disadvantage on its own.
State-run card rooms and Tribal casinos either have the experience or will hire those with the experience to operate an efficient iGaming setup. The horse racing industry will be expanding into the area.
Assuming that PokerStars is licensed we think that between three and five main sites will be in operation with many card rooms using skinned versions. The All-American Poker Network is one example.
Out of the three to five sites, does the industry really believe it can compete with established card rooms and operators that will hired experienced companies like PokerStars, bwin.party and 888 Holdings?
Odds are it will be at the bottom of state earnings and likely operating at a loss.
Option to Renegotiate Position in the Future
Regardless of what compromise that the industry agrees to it should have the option to renegotiate the deal at some point in the future.
This option would likely coincide with the renewal period for iPoker licenses, which is likely to be either five or ten years.
While it is unlikely that the industry will back out of a compromise completely it could request an adjustment depending on the success of the industry or who it partners with.
Are There Other Options?
There are two options on the table for the horse racing industry and both are solid ones. Are there other options to explore?
If so, it is time to put them on the table and start working out the numbers. Also, if there changes to the current options that can make the deal more appealing, it is time to explore those changes.
It is our belief that the horse racing industry will not be able to operate online poker profitably in California and no amount of stalling is going to change that.
However, the compromises presently available will guarantee participation and provide guaranteed income.