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Old 02-25-2012, 01:07 AM   #1
NDwon
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California Senate leader co-sponsors Internet gambling bill

http://latimesblogs.latimes.com/cali...ling-bill.html
thoughts?
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Old 02-25-2012, 05:27 AM   #2
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Re: California Senate leader co-sponsors Internet gambling bill

New CA iGaming bill confirmed in SB 1436 is great news I guess. But i'm holding my excitement until Monday when the details should be released online.
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Old 02-25-2012, 11:51 AM   #3
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Re: California Senate leader co-sponsors Internet gambling bill

The bill is now available. (Note that it is SB1463, not SB1436.) Here are the highlights:

1. $30 million non-refundable license fees; licenses are for a ten-year period. Application fee of between $1 and $5 million.

2. All Internet gambling that is not authorized by this law will be specifically illegal (a misdemeanor).

3.
Quote:
(b) The presence, operation, and expansion of offshore, unlicensed, and unregulated Internet gambling Web sites available to Californians endanger Californians because the current Internet gambling Web sites operate illegally and without regulation as demonstrated by criminal prosecutions of some Internet gambling purveyors, and questions often arise about the honesty and the fairness of the games played on these Internet gambling Web sites as well as about the true purpose for, and use of, proceeds generated by these unregulated Internet gambling Web sites.
4. It's all about the money:
Quote:
It is the intent of the Legislature in enacting this act to ensure that the state realizes a minimum of two hundred million dollars ($200,000,000) of General Fund revenue from licensing fees during the 2012–13 fiscal year.
5. Poker will be the only authorized game for the first two years; after that, other currently legal (in California) games may be allowed.

6. No limit to the number of licensees, but they must be either an authorized cardroom in the state (i.e. Commerce, Bike, etc.), an Indian tribe operating a casino in CA, a horse-racing track in CA, or an online entity taking bets on horse racing in CA.

7. Players must be 21 or older.

8. Money to the sites must be in checks or credit cards; no cash or money orders allowed.

9. Player funds must be segregated.

10. Player to player transfers allowed.

11. Businesses (including customer service) must be physically located within CA.

12. "Per hand charges are permitted." These can be varied by size of the game. It appears that the intent is that the rake structure match current cardroom policies (i.e. $1 if no flop; $5 otherwise).

13. No business dealings are allowed with any businesses that now, or in the past, have offered Internet gambling within the US unless they were specifically authorized to do so under US law.

14. State gets 10% of gross revenues.

15. 5% withholding to the FTB (California's tax agency) of net tournament winnings when they are at least 300 times the buy-in and more than $600. Withholding is on a tournament-by-tournament basis.

16. A 1099 form of some sort will be issued to all players.

17. Bill does not mandate opting out of federal Internet gambling but does allow it on a majority vote of the Legislature.

18. Bill allows for "Powerball" type interstate pooling if the US DOJ specifically states that it is legal; that must also be approved by a majority vote of the legislature.

A warning about the content of the bill: What this bill looks like today and what it might look like if adopted will be two very different things.

Still, I think this bill could have been a lot worse. Of course, the motive of Democrats is simple: A revenue source for the state. This bill has nothing to do with the players.

-- Russ Fox
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Old 02-25-2012, 12:14 PM   #4
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Re: California Senate leader co-sponsors Internet gambling bill

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15. 5% withholding to the FTB (California's tax agency) of net tournament winnings when they are at least 300 times the buy-in and more than $600. Withholding is on a tournament-by-tournament basis.


-- Russ Fox

Just to clarify, this means that scores over $600 will be taxed an additional 5% individually in addition to the normal yearly net tax rate? So in theory you can be a -EV player, score a few bigger scores, and pay more in taxes than you had net winnings for the year?

That sucks, but I guess better than every tournament taxed individually at the normal tax rate. Also seems like a low enough percentage that not many bad players will stop playing due to paying taxes and still net losing.

If I remember correctly, gambling winnings are taxed at, or at least around, the same rate as additional income in California, do you expect that to stay the same? Basically what I want to know is whether or not they're going to impose a "luxury" type tax.
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Old 02-25-2012, 12:27 PM   #5
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Re: California Senate leader co-sponsors Internet gambling bill

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Originally Posted by tbremer View Post
Just to clarify, this means that scores over $600 will be taxed an additional 5% individually in addition to the normal yearly net tax rate? So in theory you can be a -EV player, score a few bigger scores, and pay more in taxes than you had net winnings for the year?

That sucks, but I guess better than every tournament taxed individually at the normal tax rate. Also seems like a low enough percentage that not many bad players will stop playing due to paying taxes and still net losing.

If I remember correctly, gambling winnings are taxed at, or at least around, the same rate as additional income in California, do you expect that to stay the same? Basically what I want to know is whether or not they're going to impose a "luxury" type tax.
Withheld, not taxed.
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Old 02-25-2012, 12:27 PM   #6
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Re: California Senate leader co-sponsors Internet gambling bill

One more question, you said this bill could have been a lot worse. Would you go so far as to say that you "like" this bill not just to California standards, but overall?
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Old 02-25-2012, 12:33 PM   #7
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Re: California Senate leader co-sponsors Internet gambling bill

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Withheld, not taxed.
Excuse my ignorance, so that means basically it works the same as how it works on your paycheck? IE you may owe more taxes or get a refund depending on your net at the end of the year?

If so, that seems a lot better, and really not a big deal.
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Old 02-25-2012, 01:09 PM   #8
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Re: California Senate leader co-sponsors Internet gambling bill

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Originally Posted by tbremer View Post
Excuse my ignorance, so that means basically it works the same as how it works on your paycheck? IE you may owe more taxes or get a refund depending on your net at the end of the year?

If so, that seems a lot better, and really not a big deal.
Yes, the same.
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Old 02-25-2012, 01:25 PM   #9
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Re: California Senate leader co-sponsors Internet gambling bill

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12. "Per hand charges are permitted." These can be varied by size of the game. It appears that the intent is that the rake structure match current cardroom policies (i.e. $1 if no flop; $5 otherwise).
The rake structure even in live CA card rooms is determined by game type, limit, # of players dealt in.

Also I believe no flop no drop is allowed in CA, its just that some casinos end up dropping $1 for the jackpot regardless.

So a Card Room actually determines there own drop structure independently. For example they could say $1-$2 NL with 2 players is a .50 cent drop, no flop no drop.

Unfortunately pot size is irrelevant. So its not done on a % basis...But it is possible competing sites could submit a fair structure to the california DOJ...Something like $1-$2 NL 2 players is a .25 cent drop, no flop no drop.
But of course card rooms won't do that. They dont understand the online poker ecosystem.

Hopefully before bill becomes law, they allow % based rake to be taken. If not this inflexibility will actually make it harder to pool with other states, and/or cause people from California (pros) to move and/or pretend to move to Nevada where a more fair rake structure (same player pool) is allowed.
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Old 02-25-2012, 01:48 PM   #10
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Re: California Senate leader co-sponsors Internet gambling bill

Hopefully, some bright site will learn the internet model and just work same as live. I have to believe they will realize that online has tiny overhead compared to B&M, they are stupid but they all can't be that stupid. Like the interstate reference, maybe a few letters to committee, PPA etc can mod the rake structure to be in line with existing systems. 30 mil upfront can't be that hard for bigger casino/partners etc. That's 3 mil per year, plus interest on the loan money. Rev's got to a lot more than that, but I guess we will all see.

It's a scary world, and considering anything more than 5% is unbeatable unless the fish pool is very large and how long can rec players last with a bigger rake levels. Considering I'm living on borrowed time, until existing sites are crushed, kind of got to pass something and see if it can be reshaped over time to existing online standards or better.

Maybe player sanctions can be killed, illegal to offer not to play. I'm not certain the business model here is clearly legal also. Why can amazon sell stuff with no physical operation in state, but poker can't be offered. Though it can work for Vegas with partnerships and Harrah is in CA already. Shift the rake structure and pooling is clearly possible which alone is a big step forward.
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Old 02-25-2012, 01:59 PM   #11
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Re: California Senate leader co-sponsors Internet gambling bill

email Sen Wright (must provide Inglewood or Hawthorne zip code, 90250 should work).

Explain the need for % rake over current "drop" offered in Ca. Brick & Mortar is one topic that needs to be addressed!


http://legplcms01****.ca.gov/PublicLC...?district=SD25
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Old 02-25-2012, 02:00 PM   #12
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Re: California Senate leader co-sponsors Internet gambling bill

I've read through the bill and can say that I like it. I find the bill is very well written.

Contrary to Russ's comments, I find that there are numerous protections for players (protecting player funds, cheating, fraud, privacy, appealing site actions, bots, etc.) spelled out in the bill and that there is a good balance between players interests, site interests and government revenues. There are also provisions which specifically allow multi-tabling and allow combined player pools for liquidity. The bill authors obviously have an intimate and accurate understanding of player concerns.

My comments on a few specifics:

-------
Quote:
Originally Posted by Russ Fox
13. No business dealings are allowed with any businesses that now, or in the past, have offered Internet gambling within the US unless they were specifically authorized to do so under US law.
Actually, the bill specifies no such dealings with any business that offered unauthorized Internet gambling in the US after December 31, 2006, i.e. two and a half months after the UIGEA was signed into law. The bill provisions also prohibit any licensee from using any brand trademarks, customer information, etc. from any such business. But, considering the Dec 31, 2006 date, this leaves the door open for companies that stopped operating in the US after UIGEA, like PartyPoker, to be suppliers to the CA licensed sites.

-------

The definitions of gambling and game in the bill are circular:
Quote:
(i) “Gambling” means to deal, operate, carry on, conduct,
maintain, or expose for play any game for money.

(j) “Game” means any gambling game.
It seems like the bill will outlaw games like WOW, scrabble, chess, etc. when played online for money.

-------

Don't know why this provision is necessary:
Quote:
(i) No interest shall be paid by a licensee with respect to registered player accounts.
-------

Yay:
Quote:
A licensee shall establish a toll-free telephone customer service hotline that shall be available to registered players 24 hours per day, 365 days a year. All employees shall be physically present in the state while in contact with registered players.
------

The $1M to $5M license application fee is to cover actual expenses of application processing only. Any overage is refunded to the applicant.

The $30M advance payment by licensed sites is applied to the first three years of site revenue taxes. It doesn't say what happens if the taxes are less than $30M for the three years, but that means the state gets to keep it.

There will also be a regulatory fee on the sites (yearly, I assume, although not specified) which is to cover department operational costs for regulating the sites. The amount of the fee will be determined according to costs.

------

Until January 1, 2016 (or longer if extended by the legislature), a finding of suitability of a licensee or supplier by any US state gaming agency can be accepted provisionally by CA, and later issued a permanent okay. In other words, any company currently licensed or found suitable by any US state gaming agency can be provisionally allowed to operate in CA immediately. So, once regulations are in place, sites can go operational immediately instead of having to wait for the CA agency to complete processing of their applications.

------

Of course, I don't like the fact that the bill makes playing on an unlicensed site a misdemeanor, but at least this bill doesn't have the severe penalties and property seizure provisions like the last bill by Correa.

------

Personally, I support this bill in its current form. It has almost everything I look for in a state bill:

Player protections.
Reasonable site taxes, based on revenues.
Open market competition.
Inter-jurisdictional player pools.

Last edited by PokerXanadu; 02-25-2012 at 02:27 PM.
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Old 02-25-2012, 02:11 PM   #13
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Re: California Senate leader co-sponsors Internet gambling bill

Quote:
Originally Posted by DeNutza View Post
email Sen Wright (must provide Inglewood or Hawthorne zip code, 90250 should work).

Explain the need for % rake over current "drop" offered in Ca. Brick & Mortar is one topic that needs to be addressed!


http://legplcms01****.ca.gov/PublicLC...?district=SD25
Ain't going to happen. Under CA law, "percentage" games are not legal. This has already been interpreted by CA courts to mean a % rake is illegal. Cardrooms can only charge a fixed amount per hand (but no flop, no drop is allowed). The legislature is not about to open a can of worms by attempting to modify current law to allow online percentage games.

The online CA sites under this bill will be able to charge the same way the live cardrooms do. They can set whatever fixed charge they want per hand, based on each game (stakes, limits, etc.); and they can have a no flop, no drop policy if they choose.

Last edited by PokerXanadu; 02-25-2012 at 02:28 PM.
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Old 02-25-2012, 02:37 PM   #14
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Re: California Senate leader co-sponsors Internet gambling bill

This bill is better than what I expected in a lot of ways but I'm still very worried about the rake, I think we're very far from guaranteed that cash games will be anywhere close to beatable.

PX, what is your opinion on the level of true competition allowed by the bill?
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Old 02-25-2012, 03:08 PM   #15
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Re: California Senate leader co-sponsors Internet gambling bill

Quote:
Originally Posted by PokerXanadu View Post
Ain't going to happen. Under CA law, "percentage" games are not legal. This has already been interpreted by CA courts to mean a % rake is illegal. Cardrooms can only charge a fixed amount per hand (but no flop, no drop is allowed). The legislature is not about to open a can of worms by attempting to modify current law to allow online percentage games.

The online CA sites under this bill will be able to charge the same way the live cardrooms do. They can set whatever fixed charge they want per hand, based on each game (stakes, limits, etc.); and they can have a no flop, no drop policy if they choose.
I'm concerned that this will require a rake sheet that is the size of a large novel, given the diversity of games and stakes that can be offered online. Plus, it will make California players incompatible with other states later on down the road. Laws can always be changed. It's in both the casino's and player's interests to see this one changed. We should try to push for this, imo.

Aside from that, thank you PX as always for your thoughts and comments.
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Old 02-25-2012, 03:49 PM   #16
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Re: California Senate leader co-sponsors Internet gambling bill

Quote:
Originally Posted by DeNutza View Post
email Sen Wright (must provide Inglewood or Hawthorne zip code, 90250 should work).

Explain the need for % rake over current "drop" offered in Ca. Brick & Mortar is one topic that needs to be addressed!


http://legplcms01****.ca.gov/PublicLC...?district=SD25
I have to strongly disagree. From a player perspective a fixed charge per-hand is, by far, superior to percentages. Once you start entering into percentages, increments and caps you massively complicate the issue and open the door for sites to market 'low rake' that is actually some of the highest in the industry, as is currently happening in the unregulated online poker market. There's no room for BS when one site says we charge $5 per flop and the other says we charge $4 per flop.

If we want to even dream of competition we need players to be able to easily and effectively determine how much they will pay on one site versus another. Per-hand percentage systems make that impossible. The companies are in this game for the money. If the online rake is $5/flop and $1 for no flop hands then the sites will be ghost towns outside of very high stakes. I'm sure they'll figure out how to remedy that.
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Old 02-25-2012, 04:34 PM   #17
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Re: California Senate leader co-sponsors Internet gambling bill

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PX, what is your opinion on the level of true competition allowed by the bill?
It looks very good as it allows every current CA gambling licensee (cardroom, Indian casino, racetrack and OTB) to get an online license. Of course, the $30M prepayment will be a barrier to some. But really, you don't need a whole lot of licensees - probably on the order of ten - to generate a highly competitive marketplace that will benefit the consumers. Since many of the offshore sites, as well as those being acquired by the US slot makers, will be allowed to supply the hardware/software systems (especially those that get a NV license), there should be a good choice of networks to play on. And I can foresee deals where the network suppliers themselves front the lion's share of the $30M, enabling more licensees to enter the market.
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Old 02-25-2012, 04:37 PM   #18
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Re: California Senate leader co-sponsors Internet gambling bill

Thanks, I have to say it's very reassuring to have someone like you be that positive about the bill.

I just hope the player pool will be large enough to sustain good traffic or that we'll move in the direction of interstate iPoker soon; The fact that the bill has provisions to allow that to happen is definitely a great thing.
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Old 02-25-2012, 04:42 PM   #19
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Re: California Senate leader co-sponsors Internet gambling bill

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I'm concerned that this will require a rake sheet that is the size of a large novel, given the diversity of games and stakes that can be offered online.
Pretty much what we already have on the offshore sites. No reason to think that the CA system will be any more complex.

Quote:
Plus, it will make California players incompatible with other states later on down the road.
That's what computers are for - they'll be able to handle the disparities between jurisdictions. Of course, this is one of the strong arguments for a federal bill over state-by-state.

Quote:
Laws can always be changed.
In this case, such a change will pull the lynch pin of CA gambling laws. It will be very hard to say that percentage games are allowed online but not live. I doubt there will be any political will to pursue such a change in CA.

Quote:
It's in both the casino's and player's interests to see this one changed. We should try to push for this, imo.
That's arguable. As Do It Right points out, the percentage method is much more complex and liable to deceive the consumer. The per-hand charge is a lot more transparent, forcing sites to openly compete on equal terms.

Quote:
Aside from that, thank you PX as always for your thoughts and comments.
YW!
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Old 02-25-2012, 04:45 PM   #20
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Re: California Senate leader co-sponsors Internet gambling bill

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Originally Posted by 2DMB2LIV View Post
Thanks, I have to say it's very reassuring to have someone like you be that positive about the bill.

I just hope the player pool will be large enough to sustain good traffic or that we'll move in the direction of interstate iPoker soon; The fact that the bill has provisions to allow that to happen is definitely a great thing.
YW. Just be sure to keep an eye on updates. Amendments to the bill in legislative committee and/or floor debate are inevitable.
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Old 02-25-2012, 05:25 PM   #21
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Re: California Senate leader co-sponsors Internet gambling bill

Quote:
Originally Posted by pianospike View Post
I'm concerned that this will require a rake sheet that is the size of a large novel, given the diversity of games and stakes that can be offered online. Plus, it will make California players incompatible with other states later on down the road. Laws can always be changed. It's in both the casino's and player's interests to see this one changed. We should try to push for this, imo.

Aside from that, thank you PX as always for your thoughts and comments.
I think there is some confusion about pooling of players.

Let's say both CA and (say) FL pass intrastate poker bills. Initially CA players can only play on CA sites and FL players can only play on FL sites.

Now assume 4 years down the road, they decide to pool their players. This doesn't mean the the sites have to merge. All it means is that CA players would be free to play on FL sites and vice versa. The sites that had the best playing conditions would attract players from the other state (rake, volume, software, w/e). Suffice it to say, neither CA nor FL would do this if their own sites were non competitive with the other state's.
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Old 02-25-2012, 05:29 PM   #22
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Re: California Senate leader co-sponsors Internet gambling bill

Thanks for the analysis/cliffs. So how long until this passes, if it passes? Assuming it passes, how long until Californians can play a hand?

IIRC it's taking NV's regulators 6 months (Oct 2011 - April 8 2012) to approve regulations, then they will spend another few months licensing?
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Old 02-25-2012, 05:32 PM   #23
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Re: California Senate leader co-sponsors Internet gambling bill

Quote:
Originally Posted by Do it Right View Post
I have to strongly disagree. From a player perspective a fixed charge per-hand is, by far, superior to percentages. Once you start entering into percentages, increments and caps you massively complicate the issue and open the door for sites to market 'low rake' that is actually some of the highest in the industry, as is currently happening in the unregulated online poker market. There's no room for BS when one site says we charge $5 per flop and the other says we charge $4 per flop.

If we want to even dream of competition we need players to be able to easily and effectively determine how much they will pay on one site versus another. Per-hand percentage systems make that impossible. The companies are in this game for the money. If the online rake is $5/flop and $1 for no flop hands then the sites will be ghost towns outside of very high stakes. I'm sure they'll figure out how to remedy that.
When you say "per hand charge", I assume that you are suggesting the fee is "raked" out of the pot (and that is what most people would assume as well).

Idea (!?): charge every player per hand. So instead of taking, say, $2 out of the pot, take $0.25 from every player dealt in prior to the hand being played. Time instead of rake. You could never do this at a casino, but it could be done online.
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Old 02-25-2012, 05:46 PM   #24
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Re: California Senate leader co-sponsors Internet gambling bill

Quote:
Originally Posted by PokerXanadu View Post
I've read through the bill and can say that I like it. I find the bill is very well written.

Contrary to Russ's comments, I find that there are numerous protections for players (protecting player funds, cheating, fraud, privacy, appealing site actions, bots, etc.) spelled out in the bill and that there is a good balance between players interests, site interests and government revenues. There are also provisions which specifically allow multi-tabling and allow combined player pools for liquidity. The bill authors obviously have an intimate and accurate understanding of player concerns.

...

Personally, I support this bill in its current form. It has almost everything I look for in a state bill:

Player protections.
Reasonable site taxes, based on revenues.
Open market competition.
Inter-jurisdictional player pools.
I've now slowly re-read the measure. Overall, I agree with PokerXanadu: The legislation as currently written is about as good as we could hope for in California. But as PX mentioned, the legislation that eventually passes (assuming this passes) will likely look far different as amendments are inevitable.

Additionally, this legislation is marked as "urgency," so it requires a 2/3 vote of both houses of the legislature. That means some Republicans will have to come on board or the legislation won't go through.

Finally, just remember what the Democrats' motives are. This is a revenue-raising measure first and foremost. Do they care one iota about poker? No. They care about their constituents/backers (the unions and Indian tribes). It just happens that their goals (raising money) and our goal (legalized poker) happen to coincide.

-- Russ Fox
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Old 02-25-2012, 06:02 PM   #25
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Re: California Senate leader co-sponsors Internet gambling bill

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Originally Posted by Do it Right View Post
I have to strongly disagree. From a player perspective a fixed charge per-hand is, by far, superior to percentages. Once you start entering into percentages, increments and caps you massively complicate the issue and open the door for sites to market 'low rake' that is actually some of the highest in the industry, as is currently happening in the unregulated online poker market. There's no room for BS when one site says we charge $5 per flop and the other says we charge $4 per flop.

If we want to even dream of competition we need players to be able to easily and effectively determine how much they will pay on one site versus another. Per-hand percentage systems make that impossible. The companies are in this game for the money. If the online rake is $5/flop and $1 for no flop hands then the sites will be ghost towns outside of very high stakes. I'm sure they'll figure out how to remedy that.
Currently I play on a site where the cash games are raked at 5% up to a maximum of $3. That is generally the rake schedule for cash games, though the micros are raked a bit more at 6.67%. I'm not following how that very simple rake structure (to me, anyway) is more complex than a rake per hand structure, where you likely need a different per hand charge for every level or every two levels. $.02/$.05 would be raked at x per hand, $.05/$.10 would be raked as 2x per hand, and so on. I understand that you may not see a different per-hand charge at every level, but to be fair you should have that.

I also don't get how a fixed charge per hand is, by far, superior to percentages. Putting aside the fact that you would need to know the percentages charged versus the charges per hand to attempt to validate that statement, as a player, I don't think it is beneficial to have a $5 pot raked the same as a $60 pot. It's necessary live because percentages are hard to calculate on the fly.

Maybe this isn't a big deal. But every time I play live and I'm staring at a $10 or $15 pot on the flop and thinking about whether to cbet air, I think why bother when I'm only going to keep 1/3 to 1/2 of the pot and lose the rest to rake.
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