Money & Politics | Daily Report

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A group of legislators, casino owners and American Indian tribes are framing a state Senate bill that would legalize Internet poker as a way to address California's $25 billion budget gap. 

SB 40 would allow a licensed operator to run an online poker operation within California and would criminalize the participation in or profiting from illegal Internet gambling. Operators would pay a fee to the state, and all servers and personnel would have to be located in California.

Proponents claim the bill could bring in $1 billion in state revenue in the next decade at a time when most government programs are being scaled back or eliminated due to the budget crisis.

The bill was authored by Sen. Lou Correa, D-Santa Ana, and is supported by the California Online Poker Association, which includes 29 tribes.

All In For California, the ad hoc group in favor of the measure, summarized its position on its website:

SB 40 will help balance the state budget, create California jobs and regulate online poker. Right now, nearly two million Californians wager $13 billion playing unregulated online poker; 60 percent of all players in America. None of this money stays in California, going instead to support illegal, offshore interests.

While gambling issues have long been a mainstay of California politics, the debate in recent years has focused on whether or not to tax tribes on money made from online gaming operations.

As Capitol Weekly reported last month, the California Tribal Business Alliance opposes the bill because it does not clearly shield tribes from potential state taxes on Internet poker revenue:

Under this bill the 'legal entity' authorized to offer Internet poker would be subject to a state tax based on a 'percent of the fees collected by the licensed entity from players participating in poker games conducted on its Internet website.' By requiring tribes to offer Internet gaming only through such an entity, tribal governments would be required to consent to a state tax as a condition of participating in Internet poker.

This proposal is highly objectionable, as it is contrary to federal policy that Indian Tribal governments are not taxable entities. Consistent with federal law and policy, tribes should be permitted to offer Internet poker from their Indians lands free of state taxation and regulation.

SB 40 isn't the only poker-related legislation on the table. SB 45, introduced by state Sen. Rod Wright, D-Los Angeles, is an Internet gambling bill widely believed to be a placeholder for an amended poker measure, according to EGR Magazine.