In 2006, Congress effectively put a stop to the booming online poker industry. But now, a group of motivated online poker players, and Assemblyman Lloyd Levine, D-Van Nuys, are looking at exploiting a loophole in the federal law that could bring online poker back to California.

Levine’s bill, AB2026, would order a study on the federal law that banned Internet poker, and would explore whether a California-only online poker service might be legal. If it is, the state would be able to regulate the online games and presumably get a cut of the online action.

“Our understanding of the law is that so long as the player and server (hosting the online game) are in California, it would be legal,” said Levine. “But that’s what we are trying to find out.”

The bill is sponsored by a group called the Poker Players of America. According to its Web site, the group describes itself as “American as apple pie — free Americans joining together to fight for their right to play the All-American game of poker!”

“Founded and guided by experienced political professionals who also play poker, PPOA has been created to provide information, mobilization and coordination of legislative/political action programs necessary to make the voices of America’s millions of poker players heard.”

The federal government used its power to regulate interstate commerce to crack down on Internet poker in 2006. The feds decided to target credit card companies, restricting their ability to do business with online poker centers, many of which are not based on American soil.

Proponents of the crackdown said online gaming provided a convenient front for money-laundering while preying on children and gambling addicts. At the time the ban was adopted, it was estimated that 23 million poker players were among the Americans who bet $6 billion per year online, accounting for half the worldwide market, according to analysis by the Congressional Research Service.

The crackdown has had an impact on the growing poker boom, both on and off-line. In 2006, the main event at the World Series of Poker had more than 8,700 participants. A year later, after the Internet ban took effect, that number dropped to 6,358, reducing the grand prize of the tournament from $12 million to $8 million.

Sponsors of the event blamed Congress for the drop in attendance. Much of the world series boom had been fueled by online Internet players, who bought in to cheaper tournaments for a chance at winning a seat in the world series, which retails for $10,000. In 2007, the casino hosting the 2007 main event did not allow online poker Web sites to purchase main event seats to offer as prizes for online tournaments.

Levine said that if there is a California-only solution, online gamers might have to acquire a “GPS add-on” that will ensure that gamblers truly are located in California.

But it is unclear just who would be running these new, California-only Internet poker companies. Card club operators, who currently host legal live poker games, would probably want in on the online action. But other Internet entrepreneurs, some of whom have no history or background in gaming, could easily enter the fray.

And since poker is considered a Class 2 game, a game in which players play against each other instead of the house, Indian tribes would be able to operate these state-only online poker sites without renegotiating their compacts with the governor.

But Levine says the beauty of a one-state system is that the Legislature and the governor will ultimately be able to control those decisions.
“It would be regulated,” said Levine. “We don’t know what the state’s piece will be, but it will be a regulated entity.”

Levine said online gaming operated by California-based interests would also ensure consumer protection for Internet gamblers.

“If you’re gambling in California with one of these offshore sites, and they just decide not to pay you, you’re out of luck,” Levine said.

“If you play legally, then there is recourse.”

For now, Levine and his staff are trying to determine the legality and the feasibility of such a system. But Levine said if it seems viable, his bill could evolve from a “study bill” into an actual push to re-legalize Internet poker in California.

“It’s a study bill while we work out the details,” he said. “But we might put some teeth into it if it looks like we can do this.”