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Old 02-25-2012, 12:07 AM   #1
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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, 04:27 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, 10:51 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, 11:14 AM   #4
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Re: California Senate leader co-sponsors Internet gambling bill

Quote:
Originally Posted by Russ Fox View Post
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, 11:27 AM   #5
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Re: California Senate leader co-sponsors Internet gambling bill

Quote:
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, 11:27 AM   #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, 11:33 AM   #7
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Re: California Senate leader co-sponsors Internet gambling bill

Quote:
Originally Posted by TheDarkElf View Post
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, 12:09 PM   #8
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Re: California Senate leader co-sponsors Internet gambling bill

Quote:
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, 12:25 PM   #9
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Re: California Senate leader co-sponsors Internet gambling bill

Quote:
Originally Posted by Russ Fox View Post
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, 12:48 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, 12:59 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, 01:00 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 01:27 PM.
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Old 02-25-2012, 01:11 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 01:28 PM.
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Old 02-25-2012, 01:37 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, 02:08 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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