Here we go again. Does anybody have any doubt that online poker will ever be regulated in California? It’s been ten years since the first attempt to pass legislation allowing online poker in the nation’s largest gambling market was defeated. And every year thereafter up to 2017, internet poker legislation has been defeated again and again.
This year, legislators are off to an early start. On Feb. 24, 2017, California State Assemblyman Reginald Byron Jones-Sawyer, Sr. introduced Assembly Bill 1677 (AB 1677). And as before, this bill will (hopefully) regulate and legalize online poker in California.
Not much has changed over previous year’s efforts. Eligibility for online poker licensees will be limited to tribal gaming operators and the state’s cardrooms. As a carrot to the tribes, by way of curtailing competition, racetracks will be left out of the licensing process. That was attempted last year as well, and we know how that went over. So, try again. As far as racetracks are concerned, they’re actually better off being left out of online poker because of the tremendous trade-off the state is giving them. By agreeing to it, horseracing operators will get a subsidy that diverts 95% of the first $60m of the government’s annual share of online poker revenue. But no one really expects the state to earn $60m in poker taxes, least of all, the race tracks. Track operators already addressed that issue last year when they requested annual shortfalls to be carried over to subsequent years.
So, the state would be left with no revenue, other than the first year’s licensing fees. The race tracks wouldn’t get the full subsidy they agreed to. And the tribes haven’t agreed to anything for the last ten years. What incentive do the legislators have for even spending time on a no-win piece of legislation?
What about those licensing fees and tax rates? The license requires an upfront payment of $12.5m, but is good for seven years and part of the fee will be credited to future tax obligations. Gross gaming revenue would be taxed on a progressive schedule as follows:
– Gross revenue less than or equal to $150m taxed at 8.84%.
– Gross revenue greater than $150m and less than $250m taxed at 10%.
– Gross revenue greater than $250m and less than $350m taxed at 12.5%.
– Gross revenue greater than $350m taxed at 15%.
Despite a lack of fanfare coming from the state legislature, the real problem with trying to move this bill forward is the giant elephant in the room, also known as, Indian casino tribes. The hardline Native American tribes that have been notoriously negative in previous legislative negotiations are the Agua Caliente Band of Cahuilla Indians, the Pechanga Band of Luiseno Mission Indians, the Barona Band of Mission Indians, the Viejas Band of Kumeyaay Indians, the Table Mountain Rancheria of California, the Yoche Dehe Wintun Nation and the Lytton Rancheria Band of Pomo Indians.
The perennial excuse that the tribes have used to defeat online poker legislation, is the inclusion of Amaya Gaming’s PokerStars brand. After the federal UIGEA bill was passed in 2006 that banned online gambling, PokerStars was one of the gambling sites that defied the ban and continued to offer online gambling in the U.S. In 2012, PokerStars settled criminal charges imposed by the feds with a payment of $731m. In 2014, Amaya purchased PokerStars. Accordingly, most people feel that Amaya/PokerStars has a clean slate and should be allowed to operate in the U.S.
But not the “Pechanga coalition”. Their belief is that any operator that defied the UIGEA should serve a multi-year ‘time out’ penalty before being allowed in. For PokerStars, the tribes feel that “time out” should be a period of ten years, plus a $60m fine.
The tribes don’t have the only say-so because the online poker market will be open to more than just the Indian casino tribes. But they will do everything in their power to scuttle legislation if they don’t get their way. Last year, they did say that they would present no obstacles to legislation if the proposed bill contained language addressing the suitability issue (also known as banning PokerStars).
This year will be more of the same. Don’t hold your breath for online poker in California.