At the moment, regulations governing online poker have been passed only in Delaware, Nevada, and New Jersey. Of the remaining 47 states that have yet to ratify state legislation, California may be the next follow suit. Presently, while online poker has not been legalized in California, there are currently no state laws that prohibit players from participating in online play.
Recently, the California legislature proposed bills SB 1366 and AB 2291, sponsored by California Senator Lou Correa and state representative Reggie Jones Sawyer, respectively. While both bills differ in content, they both share the goal of increasing state revenue by capitalizing from potential, substantial amounts of online poker tax revenue. Additionally, both bills seek to increase the available number of jobs in the state by creating occupations specifically for the purpose of regulating online poker rooms.
SB 1366 is labeled as an urgency statute, which means that the bill needs a two-thirds majority to pass. If acquired, SB 1366 will immediately go into effect. SB 1366 is directed at solely regulating online poker within California state lines. Online casino games are expressly omitted from the bill. In order to operate an online poker site, applicants would first have to obtain a license. In order to qualify for the license, the applicant must have at least three years of casino experience. The license would be valid for a period of 10 years and carry a 10% tax rate on revenue earned from the respective site.
There are no limits on the number of licensees. Employees, servers, banks and all others involved with the operation of the site must be located in California. Municipalities will be strictly prohibited from engaging in any form of regulatory manner over the sites, including imposing taxation. Internet cafes will be prohibited and SB 1366 will also target offshore poker sites by subjecting them to law enforcement penalties. If players are found participating on unregulated sites (i.e. sites that failed to obtain the mandatory license), their funds will be confiscated. The bill will promote federal online poker networks and interstate online poker networks.
SB 1366 carries a provision that provides separate regulation for Native American tribes that have already established poker gaming. Such tribes will not be required to apply for additional state licensing for online poker, and partnerships and affiliated sites that have nothing to do with the operation of the online poker room would be permitted.
SB 1366 also carries a provision known as the “Bad Actor Clause.” This clause mandates that any online poker room that accepted illegal bets beginning January 1, 2007, will not be able to attain licensing. Marketing affiliates are permitted, provided they have not violated the Bad Actor Clause. While the bill is directed towards California, residents from other states are encouraged to partake in the online poker rooms. Players must be at least 21 and complete all the necessary security checks. The sites must hold segregated accounts, and any player winnings exceeding $600 are subject to a 5% state tax.
AB 2291, also known as the Internet Poker Consumer Protection Act of 2014, also seeks to regulate online poker game in California and prohibits all games that are banked by the house-online casino games. The bill plans to establish two funds: (1) the Internet Poker Fund; and (2) the Unlawful Internet Gambling Enforcement Fund. The Internet Poker Fund would collect shares of taxable profits from social programs, while the Unlawful Internet Gambling Enforcement Fund would collect a percentage of the revenues gained from prosecuting illegal offshore operators and Internet cafes that offer online poker games.
Similar to SB 1366, AB 2291 would require online poker sites to obtain a 10 year license. The sites must pay a $5 million deposit that will act as security towards future taxation. AB 2291 is also characterized as an urgency statute. Should the bill achieve the requisite two-thirds majority, state regulators will have 270 days to enact the regulation. If enacted, licensed poker sites will go live January 1, 2015, but this date is subject to change. The bill also incorporates a Bad Actor Clause, but the applicable cut-off date has yet to be determined.
Applicants must have at least five years of gaming experience in the state of California, and applications are limited to official tribes and card clubs only. All representatives, employees, addresses, and banking information must be located in California. As seen in SB 1366, municipalities will be prohibited from engaging in the regulation of online poker. However, unlike SB 1366, California will be barred from engaging in interstate online poker agreements.
AB 2291 stipulates the minimum age for participation in online poker rooms be 21; the rooms are required to validate a player’s identity through the use of an online government database. All earnings will be taxable and players must file the necessary tax forms needed thereto. Online sites will be required to utilize separated accounts and credit facilities are expressly prohibited. All licensed sites will be required to display gambling information at login pursuant to the requirements listed in the bill.