On Tuesday, California gaming attorney David Fried (@calgaminglaw) posted proposed new amendments to AB 2863, the Assemblyman Adam Gray-sponsored legislation on which the state’s slender online poker hopes rest.
The amendments (viewable here), which have reportedly not yet been officially added to the bill’s text, aim to flesh out some of the bill’s known unknowns, including tax rates, license fees and a new benchmark for determining who is or isn’t a so-called ‘bad actor’.
The latter is the most notable among the amendments, proposing the adoption of a new unsuitability standard for any operator that accepted wagers from US residents after December 31, 2011. Most previous ‘bad actor’ clauses in other bills of this sort put this cutoff at December 31, 2006 to reflect the passage of the Unlawful Internet Gambling Enforcement Act a few months earlier that year.
The new proposed benchmark – which fits within the US Department of Justice’s revised opinion that the Wire Act didn’t apply to poker – would allow participation by a company like PokerStars, which stayed in the US market post-UIGEA but exited after the April 15, 2011 Black Friday indictments of online poker operators.
The amendments state that even operators that fail to clear this lowered hurdle could still qualify if they can prove that key individuals who ignored this cutoff were “no longer affiliated with the applicant” or if the wagers in question “occurred within a reasonable time period in order to cease those activities in the United States.”
PokerStars’ participation is widely considered to be the main stumbling block for AB 2863’s passage, now that the racetracks have been bought off with a $60m bribe. This lowering of the barriers to Stars’ entry won’t likely sit well with the so-called Pechanga/Agua Caliente coalition of tribes that stridently oppose Stars’ participation.
In an apparent bid to placate these opponents, the amendments prohibit licensed service providers from using “any list of customers or database containing customer information” that was developed prior the adoption of California’s regulations. The use of such ‘tainted assets’ would be prohibited until January 1, 2019.
TAXES, FEES, ETC.
Other notable amendments include the imposition of an initial online poker license fee of $12.5m, up from $10m in previous drafts, while the new fee is no longer credited against future tax payments, making it a straightup cash grab.
Operators would now pay a variable tax based on the size of California’s regulated online poker market. If the combined annual gross gaming revenue of all licensed operators is less than $150m, a rate of 8.847% will apply. This rises to 10% if revenue falls between $150m–$250m, rises again to 12.5% for a market worth $250m–$350m, while a total exceeding $350m will trigger a 15% rate.
The amended bill would also lower the hurdle for the length of time – from five years to three – that the state’s land-based casinos and cardrooms need to have been operating in order to qualify to operate online poker.
AB 2863 is expected to have a date with the Assembly Appropriations Committee sometime soon, possibly as early as next week. Time is of the essence, as August 31 marks the deadline by which the Assembly and state Senate need to approve the plan if Gov. Jerry Brown is going to sign this puppy into law.