California bill targets companies offering Internet gambling

A bill making Internet gambling a crime both for Californians and for online companies targeting them was approved Wednesday by the California Assembly in Sacramento.

The bill, sent to the Senate by a 61-2 vote, would make it illegal to offer over the Internet any games that are otherwise not legal in California, such as dice, blackjack and baccarat.

There has been “an explosion in Internet gambling,” mostly run by companies located in other countries, said the bill’s author, Assemblyman Dario Frommer, D-Los Angeles.

A Californian convicted of gambling online would be guilty of an infraction punishable by a fine of $25 per transaction for the first offense and $100 per transaction for later ones.

Internet companies convicted of offering prohibited Internet gambling to Californians would be guilty of a misdemeanor. The maximum penalty would be 90 days in jail and a fine of $1,000 per transaction.

Frommer said his bill would let state and local prosecutors “go after offshore gaming interests and make sure they are not taking advantage of our residents here.”

With just a few days left in its legislative session, it’s still unclear whether Nevada lawmakers will act on a bill that would allow Nevada casinos to offer Internet gambling.

State gaming regulators believe California’s action won’t derail those efforts, but say it does emphasize the difficulties Nevada faces if it wants to offer Internet gambling. In particular, Nevada companies will be expected to present technology that allows them to block access from any jurisdiction where Internet gambling is illegal.

“If California is saying, we’ll prosecute anyone allowing Internet gambling to be used by citizens of California here, and we’ve adopted a system here, California would have a difficult time prosecuting a Nevada licensee, because they’re operating within the guidelines of Nevada,” said Bobby Siller, member of the state Gaming Control Board. “Then the burden is right on us from the start to ensure that the technology assures us this won’t happen. We have to raise that bar so high that it would not be a subject.”

“Assuming it passes, I think it just creates another issue for us to ensure there’s technology to block someone in California from accessing a Nevada website,” said Nevada Gaming Commission Chairman Brian Sandoval. “It just focuses on another jurisdiction that would have to be blocked from access, albeit the 800-pound gorilla jurisdiction.”

California is currently the most important market for Nevada casinos, accounting for a quarter of all visitors to Las Vegas. Despite this, Bear Stearns gaming analyst Marc Falcone said he doesn’t believe California’s actions make Internet gaming any less attractive for Nevada casinos. The bigger risk, he said, is the possibility California Indian tribes would receive the exclusive right to offer Internet gaming to state residents.

“Internet gambling is still in its nascent stages, and it’s a pretty big learning curve,” Falcone said. “(Californians) understand and know the Nevada casino environment … but what they don’t understand is the Internet gaming market, both domestically and internationally. I don’t think (California) is critical for the Internet (gaming market).”

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