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States Continue Move to Online Gaming

The absence of a federal bill to legalize any kind of online gaming has encouraged more states to consider legalization.

In Pennsylvania, a bill introduced in the House of Representatives would legalize online versions of most casino games, including poker, slot machines and a variety of online table games. However, as details of the bill become public, some experts are assailing its tax structure.

“The text of the bill as it currently stands may make the market unattractive to companies in the online gaming sector due to remarkably high application fees and tax rates,” wrote Griffin Finan, an associate of Ifrah, PLLC, a Washington, D.C.-based law firm specializing in i-gaming, in the blog “Under the bill, the license application fee would be a steep $5 million and the tax rate is an astronomical 28 percent.

“Neighboring states New Jersey and Delaware have both legalized online gaming within their borders without prohibitive fees and tax rates. For comparison purposes, New Jersey’s licensing scheme requires a $400,000 initial application fee and a tax rate of 15 percent.”

Finan added that the requirement that only existing casino licensees can hold an internet gaming license in Pennsylvania is another problem in the bill. “Companies that are interested in participating in the Pennsylvania online gaming market, but do not currently have a slot machine license in the state, would face significant hurdles to enter the market,” he wrote.

Notwithstanding Finan’s opinion, though, the online gaming laws in both New Jersey and Delaware require land-based casinos to host the online gaming servers.

In Illinois, the Senate approved in a 32-20 vote an expanded gambling bill, SB1739. Prior to the vote, lawmakers removed an online gambling provision from the bill. Senate President John Cullerton could introduce a separate online gambling measure later. Governor Pat Quinn said he believed the provision was a last-minute addition to the bill and requires further analysis. The bill has been sent to the House.

And Washington state is considering two new ballot initiatives involving online gaming.

Online gaming supporters have begun a grass-roots campaign to gather 300,000 signatures from state residents, which would force state lawmakers to act on the proposals or, barring that, force the question onto the November 2014 ballot.

Initiative I-582 would allow the establishment of online poker rooms. The Washington State Gambling Commission would be granted the ability to create a licensing process for online poker operators. Licenses would be issued for one year with one-year renewals. Online poker rooms would have to pay taxes, but the rate is not covered in the initiative. Players 21 years or older would be able to place wagers on poker through the internet or on mobile devices. Sports betting or other casino games would not be allowed.

Initiative I-583 would repeal criminal penalties for online poker players as long as they were not involved in the operation of the gaming platform. Washington law currently makes it a Class C felony to play online poker. Playing any online casino-type game in the state could subject a player to up to five years in prison and a fine of up to $10,000. The initiative is looking to repeal these penalties.

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