5 Reasons Online Poker Legalization Would Help Fix California’s Budget Mess and Is a Good Idea in General

Prohibition of online poker in California has been a general failure. Here are a few reasons why lawmakers should wake up to reason and legalize it.

California is rightly viewed as a fiscal nightmare. Entire towns have gone bankrupt to the point where public services ceased to function. The state is perpetually staggering under the weight of a colossal debt burden estimated to hover around $1 trillion.

What’s to blame? Without getting into a political analysis of the state which I’m not qualified to make, year after year the government spends more money than it receives in tax revenue.

Online poker has been offered up as a politically palatable source for additional public revenue. For that reason and others, two bills have been submitted to the California state legislature which would make it the second US state to legalize online poker sites in America.

While former mayor of San Francisco Willie Brown has withdrawn support for the movement, plenty of political figures and citizens are behind it. Here are a few reasons, both fiscal and non, why it should be legalized:

It would raise significant amounts of revenue

A recent report from Capital Matrix Consulting estimated that over the first five years the online poker industry would produce $1.91 billion in total economic output, $845 million of which would flow into public coffers.

Surprisingly, the state achieved a budget surplus of $850 million last year, its first surplus in recent memory. However, it still has a long ways to go in reducing its trillion dollar debt overhang.

If the report is accurate (and it should be, because Capital Matrix is a reputable consultancy) online poker would raise an additional $70 million annually. In addition to other deficit-reducing measures, California could be on its way to, to use an overused phrase, “fiscal sanity.”

It would create jobs

Due to an excessive housing bubble and above-average labor costs the financial crisis and ensuing recession hit California harder than most other US states. This is reflected in high budget deficits and drastically reduced housing prices but even more so in employment statistics.

California’s unemployment rate currently stands at 7.8 percent. That is significantly higher than the national rate of 6.3 percent, with only three states listing higher figures. What residents need more than anything is job opportunities.

The same report estimated that online poker would create 2,657 jobs over the five year span, 1,900 of which would be created during the first year. That may not be much in a state with a population of roughly 40 million, but it is a step in the right direction.

It’s a game of skill

Critics of online casinos in America often argue that website operators take advantage of players by hosting games of chance in which the rules are rigged in their favor. That claim requires some qualification but is correct on the whole.

However, when talking about online poker, that line of reasoning simply doesn’t apply. Poker is a game of skill, not chance. There is no conceivable way to stack the rules against a given player.

More importantly, players compete against each other, not the house. The website merely rakes a certain percentage (usually 5 percent) off of the pot after each hand. So it has no incentive to tweak the rules. Regardless of who wins and loses, the house rakes the same percentage.

Californians already play poker online

While American gambling laws are highly restrictive by Western standards, they aren’t very effective in preventing citizens from gambling or playing poker with foreign-licensed operators.

• A recent study from Capital Matrix estimated that online poker would raise $845 billion in public revenue over the first five years
• In addition to positive fiscal effects, it would also create more than 2,000 jobs
• While online gambling is illegal in most of the US, Americans wagered an estimated $4 billion online in 2013

Americans simply create e-wallet accounts to get around restrictions on financial transactions with online gambling sites. The American Gaming Association estimated that in 2013 Americans wagered $4 billion online, most of it with foreign sites.

California is not an exception to the rule. Instead of playing poker with domestically-licensed, tax-paying sites, they either play with foreign sites which don’t pay taxes to the US government or to sites which aren’t licensed or regulated in any jurisdiction.

Passing online poker legislation would help protect Californians from using unsafe poker sites as well as keep revenues at home where they can be taxed and put back into the state economy.

The majority of voters support it

This is the icing on the cake. On top of all of the practical benefits of legalization, the majority of Californians already want the state to have legal online poker.

A separate report from consultancy Tulchin Research found that when respondents were given no information about the economic benefits of legalization, 62 percent responded that they would support it and 28 percent expressed opposition. When they were given information on economic effects, 68 percent approved and only 27 percent opposed. While the issue won’t be decided by referendum, lawmakers should consider public opinion in this case. And public opinion is overwhelmingly in favor of legalization.

Conclusion

In almost every industry, regulation works better than outright prohibition. The authorities in the US and California in particular are unable to prevent people from playing poker online, so they might as well take steps to maximize the benefits and minimize the negative effects of the activity.

There are many reasons why California would benefit from regulating rather then prohibiting online poker. This article mentioned just a few of them. Let’s hope that lawmakers and voters treat the issue with some common sense in the near future.