Introduced last Friday, the proposed Internet Poker Consumer Protection Act of 2014 looks to legalize intrastate internet poker in California with January 1, 2015 as the date to shuffle up and deal.
The legislation is supported by “a wide-ranging consortium of tribes” according to the Online Poker Report.
Under the proposed legislation, 10-year intrastate Internet Poker licenses would be open to card rooms operated under California’s Gambling Control Act or federally recognized California tribes that operate gaming facilities and offer poker. All licensees must be in operation for at least 5 years prior to submission of an application for the intrastate Internet Poker license. Additionally, any tribe that ran a non-state sanctioned internet gaming site would not be eligible to apply for a state license. Tribal applicants would also required to waive sovereign immunity for the limited purpose of enforcing the Act.
The legislation allows 270 days for the California Gambling Control Commission to adopt regulations to oversee internet gaming in California. Any applications approved prior to January 1, 2015 will be eligible to go live on January 1, 2015. Application determinations must be made within 90 days of submission of a completed application and requisite fee (discussed below).
The legislation also calls for all “facilities, with the exception of redundant servers, bank accounts, and accounting records of the license applicant related to intrastate Internet poker [to be] located in California.”
Bad Boy Provisions
The draft legislation contemplates two bad boy provisions to prevent companies that previously accepted internet wagers from Californians. The two provisions, however, are not complete and the length of the look back period is left blank in the introduced version of the legislation.
Section 19990.63(b) of the legislation provides that a licensee or subcontractor shall not enter into a contract or agreement with a person or entity “that has accepted a wager from any person in California on any form of Internet gaming prior to ____, or has been the holder of a direct or indirect financial interest in a person or entity that has accepted that wager.” The “_____” is operative look back time frame which will have to be addressed on future drafts of the legislation.
Similarly, Section 19990.46(c) of the legislation dealing with marketing agreements states that licensees cannot utilize brand names of any company “that has accepted a wager from any person in California on any form of Internet gaming prior to ____.” Again, the “_____” is operative look back time frame which will have to be addressed on future drafts of the legislation.
The draft legislation has other missing holes including pertinent parts of the section on the Unlawful Gambling Enforcement Fund (Section 19990.77) established to ensure the State has adequate resources for law enforcement to enforce the prohibitions and protections under the legislation.
Taxes and Fees
$5 million is the proposed initial license fee. Licensees would also be subject to a 5% tax on gross gaming revenue. Under the proposed legislation, the initial $5 million fee would be credited against the 5% tax until the $5 million is depleted at which point the licensee pays a the 5% tax on an ongoing quarterly basis.
In addition, licensees would be subject to an annual regulatory fee although no amount for the regulatory fee was set under the bill. The proposed bill intended to set a maximum limit on the regulatory fee but such limit was left blank in the introduced version of the legislation.
Intrastate Internet Poker license would be non-transferable and if a licensee sought to transfer ownership in land-based gaming facility, the intrastate Internet Poker license would become void, thus requiring new ownership to apply for new internet license.
Federal Opt Out and Ban on Interstate Compacts
The draft legislation also calls on California to opt out of any federal scheme instituted to regulate Internet poker and similarly prevents California from opting into any such federal scheme.
The legislation also prohibits California from participating in any interstate agreement or compact.
That hits the hight points of the bill but if you have any other questions, don't hesitate to contact me. Many experts consider California to be the next state to watch for Internet poker. If and when this bill progresses, we’ll keep you up to date on the changes. Additionally, if SB 1366, the other "newly" introduced California Internet poker bill (I use quotes because SB 1366 is just the reintroduction of a previously submitted bill), progresses, we’ll keep you up to date as well.