SB 1366 Poker Bill

Update: A newer version of the bill has been introduced as AB 9.

 

By John Mehaffey

The California Senate has a new online poker bill to consider. SB 1366, titled The Internet Poker Consumer Protection Act of 2014, was released on February 21. It is sponsored by California Sen. Lou Correa. He also sponsored last year’s SB 678, which was nearly an identical bill to SB 1366.

The bill is considered an urgency statute. It requires a two-thirds vote to pass. The bill would become law immediately after passage.

Poker Only

SB 1366 would only regulate online poker to players located within California at the time of play. Casino games banked by casinos would be forbidden. Online poker operators and providers would receive a license for 10 years and pay a tax rate of 10 percent. Card clubs and tribal casinos would be permitted to offer online poker. Racetracks are not included in the bill.

Licensing Requirements

There would be no limit to the number of licensees in the state. Owners may operate more than one site in the state. Site owners, operations and employees must be based in California. Bank accounts and accounting records must be kept in the state. Operators must have at least three years of casino experience in California to receive approval.
SB 1366 would allow the state to enter into interstate and federal online poker networks in the future. The only requirement is that the agreements comply with California law, including this bill.

Illegal Operations

Internet cafes would be banned by this bill. Municipalities would be forbidden from regulating or taxing the industry.

Illegal offshore sites are targeted in two ways. The businesses would be declared illegal with potential law enforcement penalties. Players would also risk having finds seized if caught playing on unregulated sites.

Special Tribal Section

SB 1366 recognizes tribes as a special situation that requires separate regulation. Federally recognized tribes could be set up under a different regulatory regime than commercial card clubs. This leaves the state government out of some of the approval process. For example, a tribe that already has a gaming compact does not have to go through an additional licensing process for online poker.

Skins Permitted

SB 1366 would allow licensed operators to network operations. This would include skins and partnerships. All skin owners must be able to pass the same licensing process as primary operators. Skins would be nothing more than glorified affiliates that would only provide a brand and logo and not have any involvement in the actual operations of the network or site.

The fee schedule for skins was intentionally left blank. This would be a point up for debate.

Bad Actor Clause

Any company that accepted illegal or unlicensed bets from Americans after December 31, 2006, would be barred from participating in the regulated California online poker market. This includes those that “knowingly facilitated or otherwise provided services with respect to bets or gambling games using the Internet”. Individuals and companies that fall under this clause could not work with licensed operators, provide promotional material or receive permits.

Marketing Affiliates Permitted

Marketing affiliates are specially permitted under SB 1366 as long as they do not fall under the bad actor clause.

Out of State Access

SB 1366 allows players outside California to access accounts for purposes other than gaming. This may include contacting support or initiating banking transactions.

Player Verification

Players must be at least 21 years of age to play. Verification must be performed on every player by using a database provided by regulators. A player that cannot get verified through the automated system must complete an age verification kit. Any player caught forging documents is subject to substantial fines.

Banking

Sites must hold player funds in a segregated account. Players may deposit by credit card and bank account transfer. Cash and money order deposits are specifically forbidden.

Problem Gambling

Problem gambling is addressed in SB 1366. A self-exclusion feature must be displayed when players register and login. Players may set deposit limits, loss limits and a maximum time per session. The software must remind a player once per hour how long the session is and the results. This feature allows players to immediately quit the games.

Support

Phone support must be available 24 hours a day, seven days a week. It must be staffed by California-based employees.

Player Taxes

Players that win more than 300 times the buy-in when the total win is $600 will see 5 percent of the win withheld for state taxes. This withholding occurs regardless of the player’s previous losses. An annual report is filed with the state that discloses a player’s total deposit amount that includes total wins and losses. Players also receive a copy of this document.

Full text of SB 1366