One of two major stumbling blocks for California iPoker legislation has been the participation of the horse racing industry in the regulated marketplace.
Some card rooms and tribes, specifically the Pechanga Coalition, do not want the horse racing industry involved. Race tracks want their spot in the new industry and the Governor has guaranteed a veto if they are not included.
While it is understandable that the horse racing industry wants their piece of the pie, it may be time for them to accept a compromise and let lawmakers move forward with the regulation process.
Most Race Tracks Will Not Be Able to Turn a Profit with iPoker
As operators have learned in Nevada, Delaware and New Jersey, operating an iGaming site is an expensive endeavor.
Some iPoker sites still have not made a profit and in the case of Delaware it's unlikely they'll make a profit for the first five years. Ultimate Gaming went out of business in less than a year.
New Jersey currently supports four online poker sites and that's because they combine player pools. Let's assume California can double that total.
That would be eight online poker sites in California that could feasibly run profitably. There are over a dozen horse racing facilities in the state.
Unless the industry were to pick a single source provider like Delaware the odds of an individual track being able to compete with one of the major card rooms are long.
Did we mention that Delaware won't be profitable for the first five years?
Revenue Sharing Would Give Industry Guaranteed Money at Minimal Expense
There are a couple of potential alternatives that the industry could take rather than becoming an operator.
The first would be that the industry accepts a revenue sharing agreement with tribes and card rooms. This would provide the horse racing industry a guaranteed subsidy each year from the iPoker industry and they wouldn't have to lift a finger.
Another alternative would be to make race tracks affiliates for licensed sites in California. Under this proposal each race track could negotiate a contract with their preferred online poker site and receive a fee for every player signed up through them. They would likely also receive a cut of the rake.
The second option would require some marketing by the race tracks but would allow them to get involved without actually having to build and maintain iPoker equipment in California.