Editorial: Banking on Internet poker is a bad bet for California's budget
02/11/2010 Contra Costa Times
ONCE AGAIN, state legislators are taking a look at a plan that backers say will help reduce California's $20 billion budget gap without raising taxes or cutting spending. It is a proposal by the Morongo Band of Mission Indians to have the state license and tax intrastate Internet poker.
Even if we thought that an expansion of legalized gambling was a good way to raise state revenues — which we do not — this ill-considered idea would not pass muster.
Specifically, the proposal would permit Internet poker in California by establishing a single "licensed entity," including an Indian tribe or tribes, to provide and operate Internet poker within the state. The state would collect an unspecified percentage of the "commissions" or "rake" collected from players.
We understand that trying to balance California's budget is a frustrating process that too often has spawned unsound solutions. Internet poker is among the worst of them and should be rejected by the Legislature.
Global Betting and Gaming Consultants estimate that the gross gaming yield from computer terminals now located in California by those playing Internet poker in the international market is $536 million. If the state were to charge a 10 percent fee, it could collect $53.6 million, assuming all Californians who now play Internet poker would play through a state licensed operator.
That is not likely, considering the experience of Sweden's government poker Web site. It has been in operation for several years, but has garnered only about 30 percent of the Swedish Internet market.
A similar percentage of success in California would net about $16 million a year from state-licensed Internet poker unless gambling were to substantially increase. Even then, it is not likely to raise huge amounts of revenues.
In fact, the proposal is more apt to lose money for the state because it appears it would violate the exclusivity compacts California has with Indian tribes.
The compacts state that the tribes have exclusive rights to gaming devices, including electronic or video devices that are used for gaming. It is likely that use of the Internet would be included in the tribal exclusivity rights.
Thus, the proposal could be a breach of contract and the tribes might no longer be obligated to pay the $365 million they now send to the state's general fund.
As a result, the state could forfeit $365 million for a chance to get a slice of the Internet poker market that would, at best, raise only a small percentage of what California could lose from the Indian gaming compacts.
The Legislature and Gov. Arnold Schwarzenegger should quickly make it clear they oppose the idea of getting California involved in Internet gambling and focus on more sensible and productive ways to close the state's budget deficit.