california — internet poker legislative analysis
TRANSCRIPT
Research Services
California
Internet Poker Legislative Analysis
A research note that highlights key UKOKNCTKVKGU�CPF�FKźGTGPEGU�DGVYGGP�VYQ�PGYN[�KPVTQFWEGF�+PVGTPGV�RQMGT�DKNNU�
California: Internet Poker Legislative Analysis
Contents
February 2014
Overview
Tribal Gaming Coalition Membership Map
Summary: AB2291
Summary: SB1366
Comparison: AB2291 And SB1366
Chris Krafcik
Research Director North America
Author
1
2
3
4
5
1
California: Internet Poker Legislative Analysis
Overview
February 2014
On February 21, two new Internet poker
bills were introduced, paving the way for
continued stakeholder discussion and,
potentially, compromise.
7KH�ƧUVW�ELOO��AB2291, is sponsored by
Democratic Assemblyman Reginald Jones-
Sawyer. Jones-Sawyer is working with a
tribal gaming coalition, comprising eight
politically powerful tribal governments,
headed by the Pechanga Band of Luiseño
Indians. The second bill, SB1366, is sponsored
by Democratic Senator Lou Correa. Correa
is working with a tribal gaming coalition,
FRPSULVLQJ�ƧYH�SROLWLFDOO\�SRZHUIXO�WULEDO�governments, headed by the San Manuel
Band of Mission Indians.
7KH�WZR�ELOOV��DOWKRXJK�EURDGO\�VLPLODU��GLƦHU�in four key respects.
Firstly, AB2291 would take a narrower
approach than SB1366 to operator license
eligibility, partly in an attempt to preclude
eligible California tribes and California card
rooms from becoming so-called “false fronts”
IRU�FHUWDLQ�RXWVLGH�HQWLWLHV��6SHFLƧFDOO\��XQGHU�AB2291, a California tribe or California card
room would be eligible for operator licensure
only if it had operated its land-based gaming
IDFLOLW\�IRU�WKH�ƧYH�\HDU�SHULRG�LPPHGLDWHO\�preceding its Internet poker license-
application date. SB1366, by contrast, has no
such restriction.
6HFRQGO\��WKH�WZR�ELOOV�WDNH�GLƦHUHQW�approaches to the treatment of so-called “bad
actors,” or entities that formerly accepted or
facilitated the acceptance of unauthorized
U.S. Internet wagers. AB2291 would prohibit
entities that accepted California Internet
wagers, prior to a date still to be determined,
from contracting with licensed operators.
SB1366, meanwhile, would prohibit entities
that knowingly and willfully accepted U.S.
Internet wagers after December 31, 2006,
from contracting with licensed operators.
$OWKRXJK�QRW�UHƨHFWHG�LQ�$%������WKH�Pechanga coalition has agreed to use
'HFHPEHU�����������DV�LWV�EDG�DFWRU�FXW�RƦ�date, GamblingCompliance has learned.
Thirdly, AB2291 would take a narrower
approach than SB1366 to the number of
Internet poker websites a licensed operator
could deploy, partly in an attempt to limit
prospective competition from certain
outside entities. AB2291 would limit licensed
operators to deploying a still-to-be-
determined number of websites. SB1366, by
contrast, expressly permits licensed operators
to deploy an unlimited number of websites.
)RXUWKO\��WKH�WZR�ELOOV�VHW�RXW�GLƦHUHQW�license-fee and ongoing-fee schedules for
licensed operators and suppliers. AB2291
would require licensed operators to pay a
one-time license fee of $5m, plus 5 percent
of their Internet poker gross gaming revenue
on a quarterly basis. Fees for licensed
suppliers have still to be determined. SB1366,
meanwhile, would require licensed operators
to pay a one-time license fee of $10m, plus
a still-to-be-determined percentage of their
Internet poker gross gaming revenue on a
monthly basis. Fees for licensed suppliers,
likewise, have still to be determined.
The two coalitions met twice in January to
UHVROYH�WKHVH�GLƦHUHQFHV�DQG�RWKHUV��%XW�IRXU�San Manuel coalition members declined to
attend a February meeting, cooling relations
that were perceived to be warming. Still,
AB2291 is expected to be taken up this spring
by the Assembly Governmental Organization
Committee. All bills must pass by August 31.
2
California: Internet Poker Legislative Analysis
Tribal Gaming Coalition Membership Map
February 2014
5QWTEG��)CODNKPI%QORNKCPEG�4GUGCTEJ�5GTXKEGU�Ŭ�(GDTWCT[������.QECVKQPU�#RRTQZKOCVG�
1
2
4
5
3
76
8
21
3
4
5
Pechanga Coalition Gaming Facilities
1. Pechanga Band Of Luiseño Indians
2. Agua Caliente Band of Cahuilla Indians
3. Yocha Dehe Wintun Nation
4. Lytton Rancheria
5. Barona Band Of Mission Indians
6. Sycuan Band Of The Kumeyaay Nation
7. Viejas Band Of Kumeyaay Indians
8. Paskenta Band Of Nomlaki Indians
San Manuel Coalition Gaming Facilities
1. San Manuel Band Of Mission Indians
2. Morongo Band of Mission Indians
3. United Auburn Indian Community
4. Rincon Band Of Luiseño Indians
5. Pala Band Of Mission Indians
1
2
3
4
Cities
1. Sacramento
2. San Francisco
3. Los Angeles
4. San Diego
Regulatory Authority • The California Gambling Control Commission (CGCC) would regulate Internet poker and license operators
• 7KH�&DOLIRUQLD�'HSDUWPHQW�RI�-XVWLFH��&'2-��ZRXOG�XQGHUWDNH�VSHFLƧF�LQYHVWLJDWRU\�DQG�HQIRUFHPHQW�GXWLHV�• “Tribal Regulatory Authorities” would assist the CGCC and the CDOJ with the licensing and oversight of tribal Internet poker businesses under their jurisdiction
Types Of Games Poker, including poker tournaments
Authorized Operators • 4XDOLƧHG�IHGHUDOO\�UHFRJQL]HG�&DOLIRUQLD�,QGLDQ�WULEHV• California card rooms
• Consortia comprising any of these entities
Operator Licensing • :LWKLQ�����GD\V�DIWHU�WKH�ELOOƊV�HƦHFWLYH�GDWH��WKH�&*&&��DV�ZHOO�DV�RWKHU�VWDWH�DJHQFLHV�ZLWK�GXWLHV�SXUVXDQW�WR�WKH�ELOO��VKDOO�DGRSW�UHJXODWLRQV• All entities seeking licensure to operate Internet poker must apply to the CGCC
• All entities seeking licensure to operate Internet poker must have operated their land-based gaming facilities for 5 years prior to their application dates
• The CGCC shall determine an applicant’s eligibility within 90 days of receiving its application
• Licenses shall be issued for a term of 10 years and be automatically renewable at the expiry of the 10-year period
Operator Fees And Taxation A one-time license fee of $5m; additionally, all licensees shall pay 5 percent of their gross gaming revenue (GGR) to the state on a quarterly basis
Supplier Licensing • “Subcontractors,” or entities that, among other things, provide goods and services to a licensed Internet poker operator, must apply to the CGCC
• Licenses shall be issued for a term TBD, with renewal requirements TBD
Supplier Fees A one-time license fee of TBD
Go-Live Date $OO�OLFHQVHV�VKDOO�WDNH�HƦHFW�RQ�-DQXDU\����������DOO�OLFHQVHV�LVVXHG�DIWHU�-DQXDU\����������VKDOO�WDNH�HƦHFW�RQ�WKH�GDWH�LVVXHG
Age Restrictions Persons 21 years of age or older located in California
Interstate Gambling The bill would require California to opt out of, and decline to opt into, any federal Internet poker scheme; additionally, the bill would bar California from
participating in any Internet poker agreements with other states and foreign nations, in the event such agreements are authorized under federal law
Bad-Actor Provisions Licensees shall not enter contracts or agreements with entities that have accepted wagers from persons in California on any form of Internet gaming prior to a
date TBD; intellectual property used in the acceptance of such wagers prior to a date TBD would also be banned
No. Of Websites Authorized Licensed Internet poker operators may deploy a TBD number of websites
Problem Gambling The regulations adopted by CGCC shall address underage and problem gambling
California: Internet Poker Legislative Analysis February 2014
3
Summary: AB2291
Regulatory Authority • The California Gambling Control Commission (CGCC) would regulate Internet poker and license operators
• 7KH�&DOLIRUQLD�'HSDUWPHQW�RI�-XVWLFH��&'2-��ZRXOG�XQGHUWDNH�VSHFLƧF�LQYHVWLJDWRU\�DQG�HQIRUFHPHQW�GXWLHV�• “Tribal Regulatory Agencies” would assist the CGCC and the CDOJ with the licensing and oversight of tribal Internet poker businesses under their jurisdiction
Types Of Games Poker, including poker tournaments
Authorized Operators • 4XDOLƧHG�IHGHUDOO\�UHFRJQL]HG�&DOLIRUQLD�,QGLDQ�WULEHV• California card rooms
• Consortia comprising any of these entities
Operator Licensing • :LWKLQ�����GD\V�DIWHU�WKH�ELOOƊV�HƦHFWLYH�GDWH��WKH�&*&&��DV�ZHOO�DV�RWKHU�VWDWH�DJHQFLHV�ZLWK�GXWLHV�SXUVXDQW�WR�WKH�ELOO��VKDOO�DGRSW�UHJXODWLRQV• All entities seeking licensure to operate Internet poker must apply to the CGCC and, if applicable, a Tribal Regulatory Agency
• Ownership changes in an entity seeking licensure to operate Internet poker do not disqualify it from seeking such licensure if (i) the changes were made
GXULQJ�WKH���\HDUV�LPPHGLDWHO\�SUHFHGLQJ�LWV�DSSOLFDWLRQ�GDWH�DQG�LI��LL��WKH�FKDQJHV�GR�QRW�DOWHU�LWV�RZQHUVKLS�TXDOLƧFDWLRQV• Licenses shall be issued for a term of 10 years and be automatically renewable at the expiry of the 10-year period
Operator Fees And Taxation A one-time license fee of $10m; additionally, all licensees shall pay TBD percent of their gross gaming revenue (GGR) to the state on a monthly basis
Supplier Licensing • “Service Providers,” or entities that, among other things, provide goods and services to a licensed Internet poker operator, must apply to the CGCC
• Licenses shall be issued for a term of 10 years and be automatically renewable at the expiry of the 10-year period
Supplier Fees A one-time license fee of TBD
Go-Live Date ƌ,QLWLDO�/LFHQVHVƍ�VKDOO�WDNH�HƦHFW�RQ�WKH�VDPH�GDWH��7%'�E\�WKH�&*&&��EXW�QRW�ODWHU�WKDQ���\HDU�DIWHU�WKH�ELOOƊV�HƦHFWLYH�GDWH
Age Restrictions Persons 21 years of age or older located in California
Interstate Gambling The bill would preserve the authority of California to opt out of or into any federal framework for, or any interstate agreements for, Internet poker
Bad-Actor Provisions Licensees shall not enter into contracts or agreements with entities that have knowingly and willfully accepted U.S. wagers on any form of Internet gambling after
December 31, 2006; intellectual property used in the acceptance of such wagers after December 31, 2006 would also be banned
No. Of Websites Authorized Licensed Internet poker operators may deploy an unlimited number of “Poker Rooms” and “Skins”
Problem Gambling The regulations adopted by CGCC shall address underage and problem gambling
California: Internet Poker Legislative Analysis February 2014
4
Summary: SB1366
Regulatory Authority CCGC, CDOJ, Tribal Regulatory Authorities CCGC, CDOJ, Tribal Regulatory Agencies
Types Of Games Poker, including poker tournaments Poker, including poker tournaments
Authorized Operators • 4XDOLƧHG�IHGHUDOO\�UHFRJQL]HG�&DOLIRUQLD�,QGLDQ�WULEHV• California card rooms
• Consortia comprising any of these entities
• 4XDOLƧHG�IHGHUDOO\�UHFRJQL]HG�&DOLIRUQLD�,QGLDQ�WULEHV• California card rooms
• Consortia comprising any of these entities
Operator Licensing Stipulations All entities seeking licensure to operate Internet poker must have operated
their land-based gaming facilities for 5 years prior to their application dates
Ownership changes in an entity seeking licensure to operate Internet poker do
not disqualify it from seeking such licensure if (i) the changes were made during
the 3 years immediately preceding its application date and if (ii) the changes do
QRW�DOWHU�LWV�RZQHUVKLS�TXDOLƧFDWLRQV
Operator License Term 10 years, automatically renewable 10 years, automatically renewable
Operator Fees And Taxation One-time $5m license fee; 5 percent of GGR One-time $10m license fee; TBD percent of GGR
Supplier License Term TBD 10 years, automatically renewable
Supplier Fees TBD TBD
Go-Live Date January 1, 2015 ,QLWLDO�/LFHQVHV�WR�WDNH�HƦHFW�QRW�ODWHU�WKDQ���\HDU�DIWHU�ELOOƊV�HƦHFWLYH�GDWH
Age Restrictions Persons 21 years of age or older located in California Persons 21 years of age or older located in California
Interstate Gambling Would prohibit California from opting into any federal framework for, or any
interstate or international agreements for, Internet poker
Would preserve the authority of California to opt out of or into any federal
framework for, or any interstate agreements for, Internet poker
Bad-Actor Provisions Unsuitable if accepted unauthorized California Internet wagers prior to a date
TBD; bans intellectual property used in such wagering
Unsuitable if accepted unauthorized U.S. Internet wagers after December 31,
2006; bans intellectual property used in such wagering
No. Of Websites Authorized TBD Unlimited
Problem Gambling To be addressed by CGCC in regulation To be addressed by CGCC in regulation
California: Internet Poker Legislative Analysis February 2014
5
AB2291 SB1366
8�6��2ƝLFH1250 Connective Ave NW, Suite 200
Washington, D.C. 20036
Tel: +1 202 261 3567
Fax: +1 202 261 3508
8�.��2ƝLFH91 Waterloo Road
London SE1 8RT
Tel: +44(0)207 921 9980
Fax: +44(0)207 960 2285
www.gamblingcompliance.com
GamblingCompliance Research Services
is a full-service provider of legal,
regulatory, political and business insight
for the global gambling industry.
Based in London, Washington D.C.,
6DQ�)UDQFLVFR�DQG�7DLSHL��ZH�RƦHU�existing market participants, regulators,
governments and investors easily
accessible and up-to-date information
on market realities, and a reliable and
independent listening post to monitor
legislative developments at a local level.
Tracking regulatory change across the
global gambling industry is our core
business, which means we can provide
you with immediate access to an
LQGHSHQGHQW��FRVW�HƦHFWLYH�DQG�VNLOOHG�team to deliver tailored research reports.
&RQWDFW�XV�WR�ƧQG�RXW�PRUH�� [email protected]