According to reliable source Dave Palermo, a hearing of the Californian Assembly Appropriations Committee will discuss proposals for online poker on June 15.
Writing for OnlinePokerReport.com, Palermo claims that Assemblyman Adam Gray will present a
fully cooked version of his Internet Poker Consumer Protection Act of 2016 to the Assembly Appropriations Committee within a month, having resolved tax issues and suitability language. Palermo bases his claim on a meeting held earlier this week between Gray and tribal leaders in which both issues were discussed.
According to Palermo, the tribes are seeking a maximum 10% tax rate on Gross Gaming Revenues while Gray has pledged to revise the language of his proposals in order to accommodate those opposed to the participation of PokerStars in the Californian market. Palermo admits that Gray has a task ahead of him to keep tribal leaders happy while avoiding constitutional issues and legal challenges that might prevent his proposals from ever being enacted.
Is a 10% Tax Rate Enough?
Various industry observers have forecast what they believe a regulated Californian ipoker market will generate in revenues. The most accredited estimates of total gaming profits per year range from $200 million to $300 million; although, based on New Jersey´s mature regulated ipoker market, operators in California might struggle to surpass $120 million in Gross Gaming Revenues per year.
A 10% tax rate on even the highest accredited estimate would result in the state failing to generate anything near the (up to) $60 million subsidy promised to California´s horseracing industry. Should it look like online poker in California will follow the New Jersey model – and generate just $12 million in tax revenues per year – the horseracing industry might reconsider if it still wants to accept the subsidy, or whether it should reconsider its position on the Internet Poker Consumer Protection Act of 2016.
Members of the Appropriations Committee are hardly likely to be overjoyed at such a low tax rate and concerned about a net loss to the state. The tribes argue that a tax rate higher than 10% would make the industry unsustainable, but committee members are unlikely to forget the promises made by Adam Gray to the Department of Justice´s Bureau of Gambling Control and the California Gambling Control Commission to provide them with more resources to regulate online poker on California.
Another Twist in the Suitability Saga?
Only recently, language was added to the Internet Poker Consumer Protection Act of 2016 so that it would only become operative once a separate Act was passed establishing the criteria for who could – and who could not – be involved in the Californian ipoker market. The additional clauses were seen as an avoidance of the issue by many industry observers and just a desperate attempt by Adam Gray to steamroller his legislation through. Now it appears that Gray has woken up to the fact that the exclusion of a suitability clause from his Bill would make his proposals meaningless.
The main objectors to the participation of PokerStars in the Californian market are a coalition of six tribes led by the Pechanga Band of Luiseño Mission Indians and the Agua Caliente Band of Cahuilla Indians. The coalition claims that the PokerStars would have an unfair brand advantage in a regulated market because the company continued to provide a service to residents of California following the passage of UIGEA in 2006.
According to Steve Stallings from the California Nations Indian Gaming Association,
[Gray] needs to craft a bill that somehow restricts PokerStars and Amaya but at the same time allows them to apply for a license. Stallings has not suggested a resolution to the issue, but possibly PokerStars might agree to a twelve-month delay in processing their license application to redress the balance. The company´s late arrival in New Jersey certainly did not appear to hurt their market share.
Does “Fully Cooked” Include Player Protection?
Even if Adam Gray somehow manages to find an acceptable compromise on tax rates and operator suitability, there is still the issue of player protection to resolve. Currently the Internet Poker Consumer Protection Act of 2016 does not actually contain any
consumer protection. The Bill states that operators must keep players´ funds separate their own operating funds, but gives no indication of the safeguards that should be put in place to prevent another
Lock Poker scenario.
There is also an issue about the gap between the (assumed) passage of Gray´s proposals and the introduction of regulated online poker in California. Under the existing language of the Act, it would become a felony to play online poker at unregulated poker sites from the date of passage – leaving online players with nowhere to play for in excess of eighteen months. This particular clause has been described as “[geolink href=”https://www.usafriendlypokersites.com/california-online-poker-bill-terrible-for-players/”]terrible[/geolink]” for poker players, although not by the industry body supposed to be representing them – the Poker Players Alliance.
With less than four weeks to go until the rumored hearing of the Assembly Appropriations Committee, Assemblyman Gray has a lot of work to do!