Why California Online Poker Would Be A Game Changer

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Wednesday, July 30th, 2014 | Written by Shane Larson

The state of California represents the jewel in the crown of online poker, with its huge population of 38 million people and $2.2 trillion economy considered the key to a more rapid expansion of ipoker in the USA. Home to some of the country’s wealthiest people as well as numerous high paying industries, including technology firms, all the experts agree its regulated online poker market would far outstrip that of others in the United States. But just how big would Californian ipoker actually be worth?

Worth at least $263m in its first year

According to a study conducted by Academicon and PokerScout, regulating online poker in California could generate revenues up to $263 million in its first year of operation, rising to $384 million by year ten. The year one figure was worked out by analyzing the data collected from the US unregulated ipoker market between 2009 and 2010 when 178,300 Californian poker players gambled on offshore poker rooms, earning an average of $867 for the websites. At the time California accounted for 16% of all ipoker revenue in the country, worth around $155 million at the time, which the study suggest would now rise to a maximum of $263 million several years later.

Comparing Italy to California

Although Italy’s population of 61 million people is almost twice that of California’s, the countries gross domestic products are nearly identical, providing a useful model as to what a future Californian ring-fenced ipoker market might look like.

Presently, the mature Italian market is dominated by PokerStars.it, which accounts for more than 50% of the country’s online poker revenue. In terms of cash games, the site enjoys an average of 1,100 players over a seven day period, with a 24 hour peak of 2,962 players. PokerStars.it also is able to offer numerous tournaments with guaranteed prize pools as high as €300,000, and in April a SCOOP tournament managed to attract enough players to create a prize pool worth €551,025.

In comparison, the biggest regulated US site, WSOP (New Jersey), has just 140 cash game players over seven days, a peak of 379 players, while tournament guaranteed prize pools run as high as $10,000. Its nearest rival Party Borgata offers the highest guaranteed tournament prize pool of $50,000.

Weekly $500k tournament not out of the question

Considering California’s wealth and sizable population, analysts believe weekly tournaments offering $500,000 guarantees could be attained relatively easily and that nightly tournaments with $50,000 prize pools would not be out of the question.

The prospect of such tournaments encouraging online poker tourism could become a reality, too, as already witnessed in both the New Jersey and Nevada regulated markets. In addition, online poker pros who have taken up residency in Mexico and Canada post Black Friday
could be encouraged to move to California on the strength of these tournaments. The overall effect would then be a self-perpetuating poker environment leading to attractive and growing tournament prize pools.

Tax rate unlikely to be a burden on site

California’s proposed tax rate of 10% on ipoker would appear to be a reasonable figure and unlikely to be a burden on the sites’ operations, as opposed to more restrictive markets such as Italy (25%) or New Jersey (15%). Some of the savings are then likely to be passed on to players in the form of large poker tournament schedules and guaranteed prizes.

A catalyst for US ipoker expansion

The potential revenue figures for Californian ipoker relate only to a ring fenced market, while that number would subsequently rise if The Golden State ever decided to share its market with other US jurisdictions. As the Academicon and PokerScout study’s co-author Dr. Ingo Fiedler, explains:

“The size of the market depends strongly on the decision to either limit the player pool to in-state residents or participate in a federal or international network of players.”

Under such circumstances, other US states would have greater motivation to join those already regulated markets of Nevada, Delaware and New Jersey, which have been struggling with revenue shortfalls since Internet poker and gambling legislation was introduced.

Still some challenges ahead

Online poker legislation has been debated in California since 2007, and currently two poker bills are sitting in the state assembly and senate. While disparate gaming interests, such as Indian Tribes, California poker rooms, and race tracks have effectively stymied attempts to pass legislation, the Iipay Nation of Santa Ysabel has already invoked its sovereign rights to open up a play money poker site called PrivateTable.com, hoping to offer real money games a little down the line.

Nevertheless, a unified Californian ipoker market still has some major challenges ahead if it is to become a reality, and as Poker Players Alliance (PPA) Director John Pappas, said recently:

“A horse track representative spoke at the conference (GiGse) and made it clear that they still have powerful allies in the assembly and senate, and that it would be wholly unacceptable to have a bill that excluded them. Some tribal representatives made it clear that it’s wholly unacceptable to them that the tracks be included. Without some accommodation made, the bill will probably sit shelved.”