On April 18, 1906, a high-magnitude trembling of the inner earth triggered the great San Francisco earthquake and fires. It was a huge natural disaster that ultimately changed the way America structured buildings, created emergency plans for cities and developed transportation. Since then, geologists and planners have been planning for the next "big one," a similar large-scale earthquake in the Golden State, which could be felt along fault lines throughout the state.

There is another "big one" that is starting to rumble in California these days – an amplified and accelerated attempt to legalize Internet gambling. This fault line runs throughout the state's existing gambling industry, which is among the most diverse in the nation today. American Indian casinos, local card rooms, horse racing and the lottery are all big business in the state, and critical providers of jobs and state revenue. These entities are keenly watching – and in some cases, trying to influence – the emergence of an online element to gambling in California.

At the same time, these industries are reflective of the uniqueness of California's political landscape – they are entrenched "incumbents" with cadres of lobbyists and advertising agencies and political action committees that all work the system. Or in the case of the horse racing industry, they can't get along and develop a unified voice to take to Sacramento, which just muddies the waters even more.

The stakes are high for online gambling in California. With a population of nearly 40 million and among the highest household incomes in North America, gambling experts predict that the online market is bigger than that of England, France and Spain combined, where the online business has been flourishing for years.

Our analysts at U.S. Digital Gaming have concluded that the California gambling market could generate tax revenue to the state of more than $5 billion over a 10-year period. Worse, we have concluded that in any given year, California is losing more than $600 million in state tax revenue to illegal online gambling – largely through unlawful offshore operators. This is not an insignificant amount of annual revenue – it could fund UCLA each year, the state's largest public institution of higher education.

Then, there is the state's desperate need for revenue. Gov. Jerry Brown's recently adopted budget tackled a budget deficit of more than $26 billion, a jaw-dropping amount. To put that in perspective, the state of Indiana's two-year operating budget was about $28 billion.

California is desperate for new revenue and the state is motivated to avoid new cuts or more traditional tax increases. In the last couple of years, a host of legislators have floated online gambling bills, held high-profile hearings and have made the talk-show circuits. Many would align the interests of California's bricks-and-mortar industries with an online presence, crafting a nearly seamless operating and marketing system for the Golden State gambling operators of various types. But no single piece of legislation has crystallized among the fragmented stakeholders or generated strong support from the governor or legislative leaders.

If any state should be motivated by the potential in Washington, D.C., to create a national online gambling system that is regulated and taxed at the federal level, it is California. The lost revenue to the feds would be enormous. But so, too, would the prospective impact on its local gambling industries, their investments and their jobs. The federal efforts are being pushed by some of the Nevada partisans, who want a system that insulates the large casino resort operators along the Las Vegas Strip. No federal bill will equitably protect local American Indian operations or card rooms. And with no horse racing political stalwarts in Nevada to help nudge Sen. Harry Reid and his congressional allies, that industry doesn't have a voice in the federal process, let alone a seat at the table.

With the debt-ceiling debate consuming all of Washington today, the federal Internet gambling efforts have been sidelined for a few weeks. With Sacramento in recess until mid-August, you won't hear much on legislation to legalize online gambling from there, either. But when the dust settles later this summer, both the feds and the state politicos will turn their attention to the potential epicenter of our new online industry – California. Who will be able to manage "the big one" – the feds who want to make a revenue grab, or the Californians and their divergent interests?

Either way, the magnitude will be enormous.

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Richard D. Bronson is the chairman and co-founder of Beverly Hills-based U.S. Digital Gaming.

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