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    EXPLAINED: Here’s the Gist of the New California Online Poker Bill [Full Bill Attached]

    Posted by PokerXanadu May 16, 2013

    Among the points of greater interest are a strict bad actor’s clause and a resistance to interstate or federal player pooling.

    Click here to view the full 57-page bill that is being circulated by the tribes, or read on to get the gist of it.

    A group of eight California Indian tribes has released a draft of a new bill to license and regulate online poker in California. The bill would qualify any existing licensed card room or tribal casino in California that has been in operation for at least five years prior for an online poker license. The eight tribes have invited other California tribes to provide their input “to continue to shape legislation that is pragmatic, achievable, and fair for tribes.”

    Here is an outline of the draft bill provisions as they stand now.

    Who Will License and Regulate the Sites?

    The California Gambling Control Commission must issue regulations within 270 days of enactment of the bill. Tribal regulatory authorities may regulate their own sites using the same or more extensive regulations.

    The Commission will take applications and license the sites subject to a finding of eligibility. Site licenses must be issued within 90 days of a completed application. The tribes are required to give a limited waiver of sovereignty to the state for the purposes of licensing and enforcement of online poker regulations.

    Sites would be allowed to go live as early as January 1, 2015, although that date may be extended at the discretion of the Commission.

    Who is Eligible for a License?

    Only licensed card rooms or tribal casinos in California which have been in operation for the previous five years under the same ownership are eligible for a license from the Commission. This will prevent outside companies from buying up a card room or casino to gain entry to the market. Eligible parties can also form partnerships to apply for a single license. All of the poker site operations must be located within the state.

    In a very notable departure from previous efforts to legislate online gaming, horse racing associations are being excluded from eligibility, which may immediately set up a political block of opposition to the bill.

    Subcontractors for the sites must be extensively vetted by the Commission as well. A full investigation of the suitability of subcontractors will include “personal history, prior activities and associations, credit history, civil litigation, past and present financial affairs and standing and business activities” of everyone including all officers, owners, affiliates and persons “deemed… to have significant influence over the license applicant or its subcontractors or their respective operations.”

    A site license is good for 10 years, and automatically renewable upon application every 10 years thereafter, as long as the licensee is in good standing.

    All employees of a licensee who will be involved in the operation of online poker must apply for an employee work permit for online poker from the Commission, renewable every two years. No one with a misdemeanor conviction involving dishonesty or moral turpitude within the last 10 years or with any felony conviction is eligible.

    Bad Actor’s Clause

    Excluded from eligibility for a license or suitability as a subcontractor is any person or entity which took any wager for Internet gaming from anyone in California prior to enactment of this bill. This includes a prohibition on the use of any trademarks, software, brand names, player database, etc. from such entities. This means that any current or past online poker site which ever took any play from California will be excluded.

    (While this is a severe provision of the bill, I doubt that it will stand as is. Many of the stakeholders, including some of the California Indian tribes, are looking to existing technology holders, including the current offshore poker sites, to bring their site to market. Sites like PokerStars which operated post-UIGEA in the U.S. are unlikely to be allowed as service providers in California, but those that left the U.S. market in 2006 or prior could be allowed in.)

    Who is Eligible to Play on Licensed Sites?

    To register an account, players must be at least 21 years of age and provide an address which matches their identification. Their address does not need to be within California, but players must be within the borders of California at the time of play. The address provided must also match the address on their check or credit card.

    Licensed sites may pool their players. Players are only allowed one account per licensee, but could have an account on each licensed site on a network of pooled sites. There is no authorization in the bill for interstate or international pooling of players. (More on this later.)

    Games Permitted

    Any poker game that is neither a banked game nor a percentage game may be approved by the Commission. All banked games including those where a player becomes the bank, such as Pai Gow and Three-Card Poker, are prohibited. As is usual for California, percentage games are prohibited as well, meaning that poker games cannot be raked for a percentage of the pot but only by a per-hand charge.

    All other Internet gambling is prohibited as a misdemeanor, both for players and sites. Per the definitions in the bill, “gambling” includes offering or playing any game for money, with a circular definition of “game” as any “gambling game”. This leaves open the question of the legality under this bill of skill games and fantasy games played on the Internet.

    Deposits and Withdrawals

    Players may make deposits by check or credit card. Players may also deposit in cash or money order at a licensee’s land-based location (casino or card room).

    Withdrawals are only by transfer to a player’s registered financial account. Player-to-player transfers are not allowed.

    No interest may be paid on player account balances.

    Player Protections

    Sites must keep all player account funds in a segregated account at a California financial institution. In the case of a site losing a license or going bankrupt, the California Department of Justice is charged with the protection of player funds.

    Sites must ensure the integrity of the games under regulations, including protections against cheating and fraud. Robotic play (bots) is forbidden.

    Sites are also required to have procedures in place for wager refunds to players for server interruptions, or equitable distribution of prizes for tournaments.

    Sites must provide 24/7/365 customer service, located within California. However, they may utilize expertise outside California “when necessary for diagnosing and addressing technological problems, investigating fraud and collusion, and supervising software and configuration changes.”

    The Commission will accept and investigate player complaints against licensed sites. Sites must comply with findings of the Commission. Sites must retain all records, including wager histories, for 12 months.

    The bill has self-exclusion provisions for problem gaming, including setting daily deposit limits, loss limits with the amount and period set by the player, time limits for play and the option to self-exclude from a licensee. It does not require sites to share these self-exclusions, so a player can have different settings site-to-site, or self-exclude themselves from some sites but not others.

    Fees and Taxes

    Site fees include an application fee to cover the costs of application processing; a yearly license fee to cover the costs of regulation and enforcement; and a quarterly percentage site tax on gross revenues (per hand charges and tournament fees). Sites will also pay an upfront five million dollar licensing fee, which is a deposit against future site revenue taxes. Sites cannot deduct promotional incentives from gross gaming revenues when figuring their site tax.

    Sites may charge players tournament fees and per-hand charges on cash games. This varies from the standard percentage rake model due to the California constitutional requirements, which forbid percentage games. There is leeway in the wording of the per-hand charges allowing for varying charges based on different stakes and possibly by the size of the pots. “A licensee may vary the per-hand charges to registered players based on betting limits or other factors.” The California card rooms operate on the same per-hand charges model.

    Sites will share player information with the California Franchise Tax Board and may pay state income tax owed from a player account as required. Sites may also share player information with the California Department of Child Support Services.

    No city or county may impose any additional taxes (nor are they allowed to impose any of their own regulations on licensed sites).


    Offering or playing all other forms of online gambling, as well as offering or playing unlicensed online poker, are prohibited as a misdemeanor, punishable by court-imposed fines. The amount of the fines are not yet specified in the bill.

    Clubs or public houses for playing licensed online poker are prohibited. There is also a section at the end of the bill which outlaws all the Internet sweepstakes cafes by defining the devices used as slot machines.

    Players can only use Internet devices such as computers or phones whose purpose is not solely for playing online poker.

    If a federal bill authorizing online poker or any online gambling is enacted, this bill requires California to be opted out unless the federal bill requires otherwise, leaving the state only with intrastate online poker as authorized by this bill. (This does not exclude the legislature from later voting to change the statutes to opt in to a federal system.)

    With the lack of authorizing language for interstate or international pooling, and the forced opt out from any federal system, this bill’s provisions will keep California ring-fenced from all other jurisdictions. Unlike Nevada, California has enough player liquidity to maintain a viable intrastate-only market for some time. But even the large economies of state-regulated jurisdictions like France, Italy and Spain have come to realize that ring-fencing their sites from pooling with other jurisdictions ultimately hurts rather than helps their revenues. Will market forces motivate California to eventually allow pooling as well?


    Overall, this bill is the best I have seen come out of California for intrastate online poker. If I had my druthers, I would qualify or eliminate the bad actors clause; eliminate player penalties on unlicensed play; authorize interstate and international player pooling; allow for an opt-in to a federal bill; and specify a site revenue tax of 10% or less. But I don’t consider any of these issues a deal-breaker as currently written in this bill.

    I also don’t expect the bill to move forward without changes. This looks like a bill put together by the tribes just to counter the other bills under consideration in CA. The biggest emphasis of this bill seems to be tribal sovereignty:

    1. Excluding licensing of any online gambling other than non-banked poker, thereby preserving existing state-tribal gaming compacts.

    2. Giving tribal gaming authorities self-regulation, just as they have for their casinos, which preserves tribal sovereignty as required under federal law (IGRA).

    3. Limiting the tribal waiver of sovereignty to the state only for the purposes of the provisions of this bill.

    4. Making all the existing tribal casinos eligible for a license, either individually or as a consortium.

    I don’t expect this bill to pass as-is, but rather all the bills to be reconciled. However, these four points above will probably have to be preserved in any final bill for it to pass the California legislature.

    QuadJacks – May 16, 2013

    About PokerXanadu

    PokerXanadu is an avid poker player as well as an advocate for poker player rights on the legislative and regulatory front. http://www.pokerloversunion.org

    View all post by PokerXanadu Visit author's website

    There are 4 Comments

    1. Tre Vindex
      - May 16, 2013
        -   Reply

      As a tribal member, I am astonished that a sovereign nation can legislate the rights of non-tribal members throughout California. Everyone prepare for Cal-Shark poker. I’ll stick with Merge, thanks.

    2. Royal Full House
      - May 18, 2013
        -   Reply

      This bill looks pretty good. I agree that I would like to see “a site revenue tax of 10% or less” specified in the bill. A final bill needs to be a win – win – win for the Tribes, the consumer, and the California state government. If it doesn’t bring enough tax and fee revenues into the state, then forget about it.

    3. Pingback CLIFFS: California Online Poker Bill SB-678 (The Lou Correa Bill) – QuadJacks

    4. - May 15, 2014
        -   Reply

      I’ve read a few good stuff here. Definitely value bookmarking for revisiting.

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