Legislators in Pennsylvania and California are pushing to legalize interactive gaming (iGaming) in each state. iGaming is the conduct of gambling games using the internet and other communications technology. In California, the proposed legislation would legalize Internet poker only. In Pennsylvania, the proposed legislation would legalize iGaming generally, and the Pennsylvania Gaming Control Board will determine what games are allowed.
H.B. 649, introduced by Pennsylvania Gaming Oversight Committee Chair John Payne (R), seems to have gained the most traction in the state. The proposed legislation requires that those who offer authorized games and accept bets and wagers from authorized participants obtain a license at a fee of $5 million. The legislation also proposes a weekly gaming tax to be imposed against licensees at a rate of 14 percent of their gross iGaming revenue. Further, there will be significant financial consequences for unauthorized iGaming, with penalties ranging from $75,000 to $1.2 million.
H.B. 649 is currently being considered by the Gaming Oversight Committee. The committee has held hearings on the measure, most recently on April 16, and another hearing is planned for May 6.
In California, Assemblyman Mike Gatto (D) introduced A.B. 9 which would legalize Internet poker in the state. Similar to Pennsylvania, this proposed legislation requires that those who offer Internet poker and accept bets and wagers obtain a license. They would have to pay a license deposit of $5 million, but the proposed quarterly fee of 5 percent of the licensee’s gross iGaming revenue would be deducted from the deposit until it is depleted. Only then would licensees have to make the quarterly fee payments to the state.
In recent months, Gatto has discussed the improbability that iGaming will pass in California. At the iGaming Legislative Symposium in Sacramento, the Assemblyman said he thought there was only a 35 percent chance that an online poker bill would pass by the end of the 2016, according to a Pokernews.com article. Lack of interest from constituents and the potential for political backlash are reasons for his pessimism.
Additionally, states have to contend with the specter of federal legislation which, if passed, would make online gaming illegal. H.R. 707, called the Restoration of America’s Wire Act (RAWA), seeks to ‘‘restore longstanding United States policy that the Wire Act prohibits all forms of internet gambling.’’ RAWA was introduced by Rep. Jason Chaffetz (R-Utah), but is being aggressively pushed and lobbied for by billionaire casino magnate Sheldon Adelson.
A 2011 U.S. Justice Department opinion asserting that the Wire Act of 1961 only prohibits the transmission of communications related to bets or wagers on sporting events or contests has made RAWA necessary for those who oppose iGaming. Prior to the release of that opinion, the Wire Act was thought to extend to bets and wagers on all things.
Notable Democrats and Republicans have come out both in support and opposition of RAWA. If passed, not only would the efforts in Pennsylvania and California be null, the recent legalization of iGaming in Delaware, Nevada and New Jersey would also be in peril.
By: Jequetta Byrd
Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Should states or the federal government have the final say on iGaming?For more information about state tax issues, sign up for a free trial of the Bloomberg BNA Premier State Tax Library
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