SB40 Online Poker Bill

California Senate Bill 40 – known as California First: The State Funding, Job Creation and Online Gaming Accountability Act – was introduced by State Senator Lou Correa on December 6, 2010. The bill (SB40 pdf) is designed to “establish a framework to authorize intrastate Internet poker” by issuing licenses that would allow designated groups to operate intrastate Internet poker sites. In other words, the sites allowed under SB 40 would only be available to California residents, and would only be able to offer poker, not other casino games.

SB 40 would allow sites to spread the same poker games that are offered in casinos and card rooms throughout the state of California – which includes all common and popular forms of poker. The number of sites allowed under the bill has changed several times; originally, the bill was written to allow only three licenses to be awarded. An amendment to the bill then allowed for the possibility of up to two additional sites to be licensed within three years of the bill going into law. Finally, more recent changes to the bill have eliminated the cap on the number of licenses entirely; it would now be up to the state-appointed commission to grant licenses on an individual basis.

In order to apply for an operator’s license under SB 40, potential operators would be required to pay a “licensing fee” of 10% of the income they make on the site – essentially, 10% of the rake and tournament fees. However, an interesting wrinkle is that operators would have to pay the first $5 million of this fee up front as an application fee; the idea being that this will both help generate revenue for California immediately, as well as limit applications to serious operators who were not afraid of losing that $5 million.

Other aspects to SB 40 include making it a misdemeanor crime to participate or offer illegal Internet gambling, which could result in fines of up to $10,000 and other penalties.

SB 40 has found a number of supporters in California, but none are more prominent than the California Online Poker Association (COPA), which has strongly advocated for the bill. COPA is made up of approximately 30 Native American tribes and 30 card rooms, and is led by the Morongo Band of Mission Indians. The card rooms that have come out in support of the bill include some of the state’s largest, including the Commerce Casino, the Bicycle Club, Hollywood Park and Ocean’s Eleven.

Supporters of SB 40 have made a point of emphasizing several aspects of their bill that they believe make it right for the state of California. Perhaps most importantly, SB 40 requires that all bank accounts, servers and operating personnel that are associated with the operation of the online poker sites must be location in California. This would lead to the online poker sites (at least at first) being run by either card rooms or Native American groups in the state, rather than by out-of-state or offshore corporations. COPA also estimates that SB 40 would generate about $1.4 billion in new revenues for the state over the first ten years of operation, as well as creating over 1,000 new jobs for Californians.