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California gets first online poker bill for 2017

TAGs: ab 1677, California, reggie jones-sawyer

california-online-poker-bill-jones-sawyerCalifornia legislators are gearing up for yet another Sisyphean effort at passing online poker legislation, because it’s not like the state has any other serious issues worth tackling, like collapsing dams, wildfires or Trumpian forces targeting its sanctuary cities.

Friday saw the debut of AB 1677, the Internet Poker Consumer Protection Act, courtesy of longtime intrastate online poker proponent Assemblyman Reginald Jones-Sawyer (pictured). Full text can be read here but suffice it to say that the bill is something of a ‘greatest hits’ of previous online poker bills that the state has failed to pass in recent years.

As with those earlier California bills, AB 1677’s list of eligible online poker licensees is limited to the state’s cardrooms and tribal gaming operators. They’ll pay a $12.5m upfront license fee good for seven years and which will be credited against future tax obligations.

The tax rate will escalate according to cumulative annual online poker revenue by all the state’s licensees. Should revenue total less than $150m, operators will pay 8.847% tax to the state. This rises to 10% if annual revenue goes above $150m but less than $250m, then rises again to 12.5% if revenue is under $350m, while a sum above $350m means operators will pay 15%.

BAD ACTORS
The bill requires service providers to undergo a suitability assessment but leaves it up to state gaming regulators to answer the controversial question of what qualifies a service provider as a so-called ‘bad actor’ – i.e. a gambling site that continued to serve California residents after some date by which the practice was arguably illegal.

The ‘bad actor’ issue, particularly as it relates to Amaya Gaming’s PokerStars brand, remains the biggest issue preventing the state’s fractious tribes from getting on the same page. PokerStars’ California partners insist the company’s past sins were whitewashed when Amaya purchased Stars in 2014, while other tribes maintain that Stars must serve a multi-year ‘time out’ penalty before being allowed in.

RACING TO THE BANK
Racetracks that offer advance deposit wagering (ADW) sites could act as service providers for online poker licensees, but only if 50% of a licensee’s online poker revenue went to the service provider.

AB 1677 also contains the controversial subsidy that will divert 95% of the first $60m of the government’s annual share of online poker revenue to the state’s horseracing operators, in exchange for racing foregoing the opportunity to add poker to their ADW sites.

Trouble is, few observers expect the state to earn $60m annually from online poker taxes and fees, with the possible exception of year one, given licensees’ significant upfront initial payments. Even racing doesn’t believe it will actually earn $60m per year from this bribe, as evidenced by last year’s letter to legislators in which they sought to ensure that any annual shortfalls be carried over to subsequent years.

The subsidy also means the state will net zilch from regulating online poker, outside of reducing racing’s rationale for getting out its begging bowl at every opportunity. But proponents will have less of a fiscal incentive for convincing reluctant legislators to back the bill.

No doubt AB 1677 will be followed by other legislators’ efforts, which will be similarly well-meaning and equally incapable of bridging the tribal divide that keeps California online poker perpetually on the legislative backburner.

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