California Online Poker Back in Sacramento as State Legislature Reconvenes

Posted on August 8th, 2016 by Jon Pineda
California online poker Adam Gray

State Assemblyman Adam Gray is expected to push California online poker legislation to end the card game’s prohibition on the Internet, but a lengthy road ahead likely remains. (Image: Andrew Kuhn/Merced Sun-Star)

California online poker bill AB 2863 has been on the Assembly floor since it passed the state’s Appropriations Committee on June 22. Now following the Summer Recess and legislature reconvening, the Internet poker law is once again lurking for consideration.

Introduced by Assemblymen Adam Gray (D-District 21) and Reggie Jones-Sawyer (D-District 59), AB 2863 would allow card rooms and federally recognized California Indian tribes that have operated land-based facilities for at least three years to offer online poker.

Licenses would cost $12.5 million, plus a $6 million deposit that would be credited for future taxes. Gross gaming revenues would be taxed at a maximum rate of 15 percent, with reduced rates for companies pulling in less than $350 million annually.

Horse tracks would be forced to sit on the sidelines, but they’ll be rewarded for doing so. In exchange, up to $57 million stemming from Internet poker taxes will be directed towards the horse racing industry.

AB 2863 is one of over 100 pieces of legislation listed on the Assembly Daily File for August 8. The state will adjourn for the year on August 31.

Gray and Jones-Sawyer’s plan is one that on paper seems to finally satisfy the complicated gaming environment in the Golden State. In reality, it’s far from over.

Tribes Make the Call

Between lawmakers in Sacramento, the powerful Native American communities, card clubs, and racetracks, passing any gaming expansion in California is one difficult task. Several years in the making, it finally appears there is some hope on the horizon for California online poker advocates and players.

So-called “bad actor” language is at the center of the debate.

Powerful Indian governments want bad actors, specifically PokerStars, to be banned from the market in California. The bad actor label refers to sites that operated after the 2006 passage of the Unlawful Internet Gambling Enforcement Act (UIGEA) until their domains were seized by the Department of Justice in 2011.

Native Americans currently hold a land-based monopoly on gambling in California, though the state is home to dozens of card rooms.

Compromise Ahead?

Per Gray and Jones-Sawyer’s latest version of AB 2863, an effort to reach across to the tribes in opposition over PokerStars seems to have been realized.

Instead of a $12.5 million fee, bad actor sites trying to enter the California online poker market will be charged $20 million per license. If they don’t want to pay the $7.5 million surcharge, they’ll need to wait until January 1, 2021, to apply for a $12.5 million permit.

The statute reads, “An organization that knowingly facilitated or otherwise provided services with respect to bets, or engaged in a financial transaction related to those bets, after December 31, 2006 . . . shall not be granted a license until January 1, 2021.”

In early June, six tribal leaders including the Pechanga, Aqua, and Barona bands of Mission Indians cosigned a letter to Gray in opposition to AB 2863. The group said in the letter, “Our coalition remains committed to the policy principle that unlawful online gaming, whether in the past, present, or future, must not be incentivized.”

It’s unclear whether the coalition will find $7.5 million a worthy restitution for PokerStars’ unlawful past.

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