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Intrastate Online Gambling Gets Hearing In California

by Mike Godfrey, Tax-News.com, Washington

18 December 2009


A consortium including the Morongo Band of Mission Indians and the Commerce Casino want to set up and operate poker websites in California and the chair of the Governmental Organization Committee, state Sen. Roderick Wright (D-Inglewood, Los Angeles County), said that he wants hearings to take place in February 2010.

California Internet poker games could yield a potential USD1bn annually. Using the same 25% tax rate as that for slot machines at Indian casinos, that would mean an extra USD250m in tax revenue.

Although federal and state laws do not expressly ban online games, restrictions are placed on payment systems servicing the websites; this is not enough to stop punters from using the 1,000+ existing Internet poker sites based abroad, unregulated and untaxed. California would be exempt from federal restrictions if the businesses were operated entirely within state lines and served only Californians.

Patrick Dorinson, a spokesman for the Morongo Band of Mission Indians, estimates that one million Californians are already playing poker offshore. He told the LA Times that the state should regulate such games in California to ensure their legitimacy and protect players' privacy.

Senator Wright said that he is expecting to receive up to 400 requests for permission to operate Internet card games, among whom would be the 67 Indian tribes who already operate state gambling licenses, California's 89 non-Indian card clubs, and charitable groups.

The tribes enjoy a gaming monopoly, and if the market were opened up to competition in this way, there might be a case for renegotiation of the tax compacts. The Californian press has expressed doubts about the overall scheme on the grounds that the social costs are too high.

A comprehensive report in our Intelligence Report series examining the new possibilities that offshore e-commerce open up for business, and analysing the offshore jurisdictions that have led the way in offering professional e-commerce regimes for international business, with a particular focus on e-gaming, is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report6.asp

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