This blog has been closely following the development of Internet poker and gambling in Illinois over the past several months; focusing on the Internet poker bill that was introduced earlier this month, along with the country’s first online lottery program.  The bill, called the Chicago Casino Development Authority Act, has undergone several revisions in recent weeks, which are worth discussing in greater detail.

853125_26326491Internet Poker Operator License

According to the bill, in order to operate an Internet poker or online gambling room within the State of Illinois, a business entity must be licensed by the Illinois Lottery’s Division of Internet Gaming.  The licenses will have five-year, renewable terms and require a $250,000.00 application fee.  If the company or individual is granted a license, they will be required to pay the State of Illinois an additional $20 million as a licensing fee, which shall be considered an upfront payment to be deducted from future taxes.

Softening of Restrictions on Established Internet Poker and Gambling Companies

The original incarnation of the bill refused to offer licenses to Internet poker and gambling companieswho ha[ve] accepted wagers via the Internet in contravention of this Section or United States law in the 10 years preceding the application date.”  In other words, any Internet poker or gambling company that offered services to US residents after the 2006 passage of the Unlawful Internet Gambling Enforcement Act (UIGEA) would be barred from obtaining a license in Illinois.  This would essentially cover all Internet poker and gambling companies currently in existence, including Party Poker, Ongame, iPoker, 888, Microgaming and Boss Media.

Last week, the Illinois legislature revised the bill to soften restrictions on established Internet poker and gambling companies by requiring, instead, that operators and licensees not be “convicted of accepting” wagers in violation of US law.  This revision ensures that most of the experienced and established Internet poker operators would not be immediately barred from obtaining an operator’s license in Illinois.

Online Gambling Taxes

It is worth noting that Internet poker and gambling rooms will be subject to Illinois State taxes.  Specifically, the first $200 million of the annual gross revenue received by Internet poker operators will be taxed at 7.5% for the initial five-year license term, and at 15% in subsequent years.  Games played against the house, such as blackjack, will be assessed a tax of 10% for the initial five-year term on the first $200 million, and at 20% in subsequent years.

Internet poker and gambling players will also be subject to taxation on winnings.  Detailed records of all winnings must be maintained and players will be responsible for paying the associated taxes based on their winnings.

Future of Internet Poker Bill in Illinois

Even though the bill was introduced almost three weeks ago, it is still unclear whether it will ever be signed into law.  On Monday, Illinois Governor Pat Quinn was interviewed on WUIS 91.9 Radio, and this is what he had to say regarding the Internet poker and online gambling bill:

“I think that [it]’s problematic.  It’s a brand new idea and there hasn’t been much review on that at all. Anytime you have something brand new it shouldn’t just be thrown into a bill at the last minute.”

Governor Quinn has not hesitated to veto several bills attempting to expand gambling operations within the State of Illinois.  While it may be difficult to predict the success of the current bill, we can take Governor Quinn at his word and be certain that the gambling industry, both Internet-based and brick and mortar, will be heavily regulated with “strong ethical standards [and] comprehensive oversight.”

The development of federal and state interpretations of Internet poker and gambling remains a significant topic for all gaming attorneys and those interested in Internet poker and gambling in general.

If you are interested in learning more about this topic or pursuing an Internet poker or gambling venture in Illinois, please e-mail us at info@kleinmoynihan.com, or call us at (212) 246-0900.

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