It is barely a surprise that California is once again pushing for the legalization and regulation of online poker. Numerous efforts have been introduced to the state Legislature over the past decade or so, but continuous bickering between local tribes, lobbyists, opponents, and legislators has killed any legislative measure prior to taking effect.
Late last week, California Assemblymember Reginald Jones-Sawyer presented a new bill – AB 1677 or the Internet Poker Consumer Protection Act of 2016 – that contains provisions for the legalization of online poker and the regulation and taxation of this type of gambling operations, once launched in the state.
Under AB 1677, federally recognized California-based tribes and card rooms around the state will be able to apply for seven-year licenses in exchange for a one-time licensing fee of $12.5 million. The deposit will immediately go into the state’s General Fund.
Operators and regulators will have to ensure that online poker operations are provided in a safe and responsible manner and that vulnerable people will be protected. Under the newly introduced bill, only people aged 21 or over and based within California’s borders will be able to engage in Internet poker activities.
Three main issues had prevented previous measures from advancing significantly into to the state Legislature – how the local horse racing industry would benefit from the legalization of online poker, how the newly established industry would be taxed, and whether certain “bad actors” would be prevented from operating in California.
The newly presented bill bans the state horse racing industry from participating in online poker operations. On the other hand, in order to appease racetrack operators, Assemblymember Jones-Sawyer’s legislative piece contains provisions under which horse racing would annually receive 95% of the first $60 million generated from online poker. The money would go to a specially created Horse Racing Internet Poker Account within the General Fund.
AB 1677 proposes full-year gross gaming revenue as a tax base. California-facing online poker operators would be taxed at a progressive rate. Businesses that annually generate up to $150 million would be taxed at 8.8% on gross gaming revenue. Operators with gross gaming revenue of between $150 million and $250 million would pay a 10% tax; those with revenue of between $250 million and $350 million would be taxed at 12.5%, and those with revenue of $350 million or over would pay an annual tax of 15%.
As for the “bad actor” provision, the new bill is leaving it to local gambling regulators to determine who would be eligible to run online poker operations within the state’s borders. The return of one particular “bad actor” has been highly opposed and feared by many in the state. Local tribes had previously argued that PokerStars should not be allowed to enter the local market, as it had violated the Unlawful Internet Gambling Enforcement Act of 2006 that banned the provision of real-money poker options at a federal level.
