One of the two major issues that have held up online poker regulation in California is the bad actor clause.
While the clause essentially targets PokerStars it's being presented as a way to protect citizens from certain undesirable online poker sites from becoming licensed in California.
Over the next two weeks we will take a look at the bad actor clause and the arguments both for and against it. This week we start with the arguments supporting the clause.
What is the Bad Actor Clause?
For those new to iPoker regulation a "bad actor" clause is a legal clause that will prevent a company from operating in the state if it took bets anywhere in the United States after the passage of the Unlawful Internet Gambling Enforcement Act (UIGEA) in 2006.
Any company that took a bet in the U.S. from January 1, 2007 and forward would not be allowed to apply for a license in California. At present the only company that this has impacted is PokerStars.
PokerStars was one of numerous poker sites operating in the United States post-UIGEA. It was indicted by the Department of Justice in April 2011 and ultimately settled with the DOJ while claiming no wrongdoing.
In June 2014 PokerStars was sold to Amaya Inc. for $4.9 billion. Many feel this makes PokerStars a new company for California iGaming while others say it's the same company merely with new owners.
Bad Actors Pose a Risk to California Citizens
One of the primary arguments regarding bad actors is that they pose a risk to citizens looking to play safe and legal online poker. Every site that was indicted by the DOJ "violated" U.S. laws and used backdoor methods to fund online poker accounts and to pay those players when they cashed out.
Some companies such as Lock Poker, Absolute Poker, UB and Full Tilt Poker went out of business without paying players. Full Tilt players were only paid as a condition of the PokerStars settlement with the DOJ.
It is believed that companies that took bets post-UIGEA have proven themselves untrustworthy and that citizens risk their deposits by playing on these sites, even if regulated.
Bad Actors Have Unfair Advantage Over Regulated Sites
Some argue that bad actors have an unfair advantage over regulated sites because they already know which players to market to in each state.
Bad actors have player lists from when they operated in the United States and can use those lists to market their sites. This gives them a head start over regulated sites trying to build their product fairly.
These sites can also use their brand to draw in players over regulated sites. For example if PokerStars were allowed in California it would have an advantage in both its player lists but also by being one of the most recognized names in the world.
If you were to play online poker in California would you play at PokerStars or deposit on an unknown website?
Finally, let's not forget that these sites had years to make money off U.S. players and can use that money to reinvest in the new market. New regulated sites will not have that cash cushion.
PokerStars Primary Target of Such Clause
As stated earlier PokerStars is the main site that would be targeted under a bad actor clause. it is the only company that took bets after the passage of the UIGEA that has attempted to become licensed in the regulated market.
While a bad actor clause would block all UIGEA violators presently it is viewed as a way to block PokerStars. Next week we'll discuss the reasons that a bad actor clause should not be included in California iPoker.