California Gets Closer to Latest Online Poker Bill

Assemblyman Adam Gray and Reggie Jones-Sawyer have introduced a bill that offers to regulate online poker in California. California’s Assembly Governmental Organisation Committee has voted 18-0 in favor of the Assembly Bill AB 2863 – An act to amend internet poker. The bill would need the approval of two-thirds of the Assembly to move forward to the California Senate and provided no further reconciliation is required between the Assembly and Senate versions, the bill would then be able to make its way to the Governor’s office via several legislative committees.

Revenue stream for racing

Under this bill, the states racing industry could stand to gain an annual income of $60 million, from a combination of licensing fees and tax revenues; rates for neither have yet been decided; however, an earlier versions of the bill featured a one-time license fee of $15 million, which could then be treated as credit against taxes owed by the company and a tax rate of 15% of gross gaming revenue.

The income generated would then have to be distributed as outlined in the bill; ongoing fees should be made payable to cover the “reasonable costs of license oversight, consumer protection, state regulation, problem gambling programs, and other purposes related to this chapter” with some put aside to “ensuring adequate resources for law enforcement charged with enforcing the prohibitions and protections of this chapter.”

Licensing overview

The bill, AB 2683, introduces two tiers of available licensing – firstly, for the operators, which are limited to the recognised Indian Tribe operators and authorised card rooms only and secondly, for the service providers, which would encompass all businesses associated with the industry.

Licenses for the operator would first be issued, on a temporary basis, for two years and upon successful suitability checks, will be made valid for seven years; this will automatically renew for qualifying operators at no extra cost.

The service providers will have to also have to pay for a suitability check and make sure they meet the criteria outlined in the bill.

It has been noted that the AB 2863 lacks an obvious bad actor clause, which The California Gaming Control Commission will most likely have to resolve.

Bill Regulations

The bill takes a modern approach towards regulating commercial gaming, it only highlights the minimum standards and minimum areas that regulators should take into consideration.

Firstly, none of the clauses of the bill will apply to any non-real money or free games, each licensed operator will be able to offer players a maximum of two authorised web sites and the bill clearly prohibits online poker cafes. Under the bill, it will also be considered a felony to pay poker on an unlicensed site and games will be restricted to players over the age of 2, with a valid social security number.

The poker operators will be required to keep player funds and operational funds segregated and at a California financial institution. However, in the instance of a bankruptcy, the bill will not be able to offer the player first dibs on the company’s remaining funds; other California laws may be able to offer the residents a better form of protection if such a scenario manifests. Gray said at the Committee hearing that the bill offers a host of consumer protection, especially to Californian poker players who currently access such services illegally.

California Gaming Control Commission and California Department of Justice will be jointy in charge of enforcing the online poker regulation.

Supporter of the Bill

Supporters of the bill include representatives from the state’s racing industry as well as the Rincon Band of Luiseño Indians, who own Harrah’s Resort in Southern California.

They praised the bill, calling it a “turning point” for online poker in the state. Steve Stallings, a representative of the Tribe said, “For the first time, we have moved closer to a consensus with Tribal governments, cardrooms, horse racing industry and labour groups supporting a safe and secure environment for Californians to use today’s technology to play poker. We know and understand the complexity of this issue and know that more work is needed. However, with the momentum established today, an internet poker bill can and will pass this year; we look forward to continued discussions with stakeholders and the legislature.”

Opposition to the Bill

Despite broad support on the bill, they will still have to deal with opposition from the Coalition to Stop Internet Gambling, which is headed by Sheldon Adelson, the Chief Executive of the Las Vegas Sands and the Pechanga Tribe, who own the Pechanga Resort and Casino on Temecula California and Agua Caliente Tribes, who own the Spa Resort Casino in downtown Palm Springs and the Agua Caliente Casino Roncho Mirage, located in Rancho Mirage, California.

Gray admitted that in order for the bill to pass the lack of a bad actor clause must be addressed and a compromise has to be reached between the supporters and opposition.

He is optimistic that this very much an achievable goal; he said, “While we have not yet come to a consensus on this issue, through recent meetings with Tribal leaders, we have made serious progress.”

In the broader context of online poker in California, the bill represents meaningful progress; however, we must remember that the bill is still a work in progress and faces a complex and unmotivated political climate.

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