US state regulators in California are increasingly looking like they are moving towards regulating the online poker market. If this indeed takes place, it will be a bellwether for regulation in other states. All signs are certainly positive that regulated online gaming in California will take place in the not too distant future. A big part of the reason why people are so confident this will occur is the revenue that California stands to gain from it. The proof of the pudding is in the numbers: California has 38 million people and that makes it the biggest intrastate online gambling market. And when the GDP of California is taken into account, the $2.2 trillion figure is massive.
Massive Tax Revenue Potential
Recently a report was commissioned by Capitol Matrix Consulting which estimated that iGaming in the Golden State could yield a total of $729 million in terms of GGR (Gross Gaming Revenue) during its first year alone. During April 2014, a representative from the LAO (Legislative Analyst Office) provided information at the California Assembly Committee on Governmental Organization. It was revealed that all those online poker rooms operating illegally in California earned between $300 million and $400 million from players in the state. A GamblingCompliance representative estimates that some $317 million can be generated in Gross Gambling Revenue during the first year of intrastate poker online.
All reports on the value of the California online poker market dwarf what other regulated markets in the US are capable of producing. The California online poker market is estimated to be 300% greater than the NJ iGaming market. And that market includes casino games too. In terms of online poker numbers alone, California is 10 times larger than the Garden State and it is 30 times bigger than the Nevada online gaming market too. These figures are substantial and estimates of close to $1 billion are not too far removed from reality.
California Market Dwarfs New Jersey Market
The fact that New Jersey lawmakers inflated the value of the iGaming sector in the state to get it pushed through is hardly reason to believe the same is being done in California. The number of players in California, the popularity of online poker in the state and the improved situation vis-à-vis payments options in California are likely to bode well for players. Another consideration is the tax rate.
In NJ, the current tax of 15% is 50% higher than what was originally anticipated. This may explain the higher poker rake and even sub-optimal VIP programs that are far behind Nevada, Delaware and foreign poker operators. California can be seen as a late player to act in this online poker game, and with 20/20 hindsight it can obviate many of the problems that NJ, NV and DE faced when they regulated iGaming. These types of problems include geolocation errors, payments processing glitches, online gaming site mishaps and the like.
Payments Processing and Geolocation Services
There are many opponents of online gaming including casino mogul Sheldon Adelson. While he feels that the iGaming industry is a lost cause, California online poker advocates are looking to setup the ideal framework to prevent the failure of online poker. California will not be the last state to pursue online poker regulation, but many other states will be looking to California to see what becomes of legislation before pursuing the same course of action. This is largely due to the issues of geolocation services and payments processing.
Since there are restrictions on where banks can transfer money in terms of online gaming sites, the sheer numbers of players in California will bring pressure to bear on the banking sector. If a conservative estimate is taken into account, online poker could yield up to $40 million in taxes during the first year. But there is tremendous growth potential, job creation prospects and licensing revenue that can be collected. California is certainly the benchmark for what happens in other markets, and time will tell if the bills under consideration in 2014 will make it through the state legislature.