Bill Text: CA SB40 | 2011-2012 | Regular Session | Amended

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Internet poker.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Introduced - Dead) 2012-01-31 - Returned to Secretary of Senate pursuant to Joint Rule 56. [SB40 Detail]

Download: California-2011-SB40-Amended.html

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BILL NUMBER: SB 40	AMENDED
	BILL TEXT

	AMENDED IN SENATE  MAY 16, 2011
	AMENDED IN SENATE  MARCH 31, 2011

INTRODUCED BY   Senator Correa

                        DECEMBER 6, 2010

   An act to add Chapter 5.2 (commencing with Section 19990) to
Division 8 of the Business and Professions Code, relating to Internet
gambling  , and decla  ring the urgency thereof, to
take effect immediately  .



	LEGISLATIVE COUNSEL'S DIGEST


   SB 40, as amended, Correa. Internet poker.
   The Gambling Control Act provides for the licensure of certain
individuals and establishments that conduct controlled games, as
defined, and for the regulation of these gambling activities by the
California Gambling Control Commission. Existing law provides for the
enforcement of those regulations by the Department of Justice. Any
violation of these provisions is punishable as a misdemeanor, as
specified.
   This bill would establish a framework to authorize intrastate
Internet poker, as specified. The bill would require the department
to adopt regulations, in consultation with the California Gambling
Control Commission, governing the intrastate play of poker games on
the Internet, and would provide for licensed entities to operate up
to 5 intrastate Internet poker Web sites, as described below. The
bill would make it a misdemeanor for any person or entity to offer or
participate in any form of illegal Internet gambling, as defined, or
to process any financial transaction arising out of participation in
illegal Internet gambling. By creating new crimes, this bill would
impose a state-mandated local program.
   This bill would permit these Internet Web sites to conduct a live
online nonbanked, nonpercentage version of the card game poker within
the borders of the State of California under the same rules, and
with the same manner of compensation, as apply to poker games
currently conducted in licensed gambling establishments and tribal
class II gaming facilities. The bill would require the department to
issue up to 3 licenses to own and operate intrastate Internet poker
Web sites to eligible entities, as specified. The bill would require
the department to report to the Legislature within 3 years if it has
the capacity to regulate up to 2 additional Internet poker Web sites,
and would authorize the department to issue licenses for up to 2
additional Internet poker Web sites upon subsequent legislative
authorization.
   The bill would authorize the department to assess fees on licensed
entities in an amount reasonably necessary to reimburse the
department for its costs in implementing and administering these
provisions, including a registration fee. The bill also would require
a licensed entity to pay a license fee equal to 10% of the fees
collected by the licensed entity from players participating in poker
games conducted on its Internet Web site.  By imposing this
fee, the bill would constitute a change in state statute that would
result in a taxpayer paying a higher tax within the meaning of
Section 3 of Article XIII     A of
the California Constitution, and thus would require for passage the
approval of   2/3   of the
membership of each house of the Legislature.  The bill would
provide for all fees to be remitted to the Internet Gambling Fund,
as established by this bill and administered by the Controller,
subject to annual appropriation by the Legislature.
   The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason. 
   This bill would declare that it is to take effect immediately as
an urgency statute. 
   Vote: 2/3. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  The Legislature finds and declares all of the
following:
   (a) Leading gaming consultants estimate that in 2005, United
States citizens illegally wagered four billion dollars
($4,000,000,000) online at off-shore, non-United States Internet
gambling Web sites, and that every week more than 1,000,000
California citizens play poker on the Internet.
   (b) Currently, 2,300 Internet gambling Web sites operate outside
the United States, unregulated by any United States governmental
entity and in violation of United States laws. Questions often arise
about the honesty and the fairness of the games played on these
Internet Web sites, and about the true purpose for, and use of,
proceeds generated by these unregulated Internet Web sites.
   (c) In 2006, Congress passed, and the President signed, the
Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA). While
UIGEA prohibits the use of banking instruments such as credit cards,
checks, or fund transfers for interstate Internet gambling, the
statute has not eliminated illegal, unregulated Internet gambling,
nor has it provided any increased protection for participants from
game operators and others who would impair the integrity of online
gambling activity.
   (d) Congress included specific provisions in the UIGEA for
individual states to permit intrastate Internet gambling, provided
that state laws permitting and regulating that activity could impose
reasonable protections against participation by underage persons or
by persons located outside the boundaries of the states authorizing
that activity.
   (e) It is in the best interest of the state and its citizens to
permit operation of government-regulated intrastate Internet poker
wagering Web sites because only through that authorization and
regulation can Californians be ensured that the games they are
playing are honest, that winners are paid when and in amounts due,
and that the state and its citizens, rather than illegal off-shore
companies operating outside the reach of, and contrary to, state and
federal laws, will benefit from economic activity in the state.
Further, it is in the interest of the state to adopt a statutory
basis for the regulation of intrastate Internet poker adequate to
shield the state and players from organized crime and other
corrupting influences, ensure that intrastate Internet poker is
conducted fairly and honestly by both licensed entities and the
players, confirm the integrity of all activities conducted pursuant
to this act, and protect the public health, welfare, and safety of
all Californians.
   (f) The California Constitution provides that "slot machines" can
only be played if located on Indian lands and offered by an Indian
tribe pursuant to a tribal-state gaming compact, and thus, the use of
the devices connected to the Internet for gambling would violate the
California Constitution unless those devices are solely used for the
conveyance of information related to the play of nonbanked,
nonpercentage poker games.
   (g) The only practical and economically feasible way to ensure
that Internet poker conducted entirely within California's borders
receives governmental oversight adequate to ensure that the Internet
Web site offering the gaming remains honest, safe, and in compliance
with all applicable state and federal laws, and that the State of
California receives the economic benefits from that activity to which
the state is entitled, would be to limit that activity to up to five
Internet Web sites owned and operated by entities formed under the
laws of this state, or otherwise qualified to do business in this
state, and owned and operated by business entities licensed under the
Gambling Control Act to own and operate gambling establishments in
this state as of January 1, 2011, and the governments or wholly owned
subentities of federally recognized California tribal governments.
Because California law permits the operation of poker and other
nonbanking, nonpercentage card games, those tribal governments are
entitled under the federal Indian Gaming Regulatory Act (IGRA), to
operate poker and other nonbanking and nonpercentage card games
without having to enter into class III gaming compacts with the State
of California.
   (h) There is statutory precedent for the state to authorize
existing entities to form associations or corporations to offer
simulcast wagering and advance deposit wagering over the Internet on
live horse racing meetings.
   (i) Because the game of poker will be played live over the
Internet pursuant to this act, it is the intent of the Legislature
that similar authorization be given to California's existing poker
industry to form business entities that may be licensed to conduct
the live online play of poker under this act.
   (j) There are 109 federally recognized tribal governments in
California and 91 California licensed gambling establishments. To
provide the broadest distribution of these Internet poker licenses,
recognize the large number of establishments and tribal governments
offering or authorized to offer the game of poker in land-based
operations, and maximize revenue to the State of California, the
eligible entities that include the greatest numbers of licensed
gambling establishments and federally recognized California tribal
governments shall be selected for licensure to own and operate
intrastate Internet poker Web sites pursuant to this act.
   (k) The purpose of this act is to provide persons over 21 years of
age who are physically present within the State of California and
desire to use the Internet to play poker games that are not
prohibited by California law, and in a manner consistent with
existing law, with a lawful, highly regulated means of doing so in
conformity with all applicable laws and regulations. Therefore,
nothing in this act, which authorizes the intrastate use of the
Internet to conduct poker games, shall be construed to expand the
term "gambling," as used in Article 13 (commencing with Section
19960) of Chapter 5 of Division 8 of the Business and Professions
Code.
   (l) It is in the interest of the state and its citizens to
increase sources of nontax, nonstate revenue for tribal governments
to enhance their ability to provide services to their communities.
   (m) By enacting this act, the Legislature is expressly authorizing
intrastate Internet poker within the State of California only in the
limited and regulated form provided herein. This express
authorization does not authorize any other form or type of gambling
over the Internet.
  SEC. 2.  Chapter 5.2 (commencing with Section 19990) is added to
Division 8 of the Business and Professions Code, to read:
      CHAPTER 5.2.  INTRASTATE INTERNET POKER


   19990.  The following terms shall have the following meanings:
   (a) "Department" means the Department of Justice and the entity
within the department that is responsible for fulfilling the
obligations imposed upon the department by this chapter.
   (b) "Eligible entity" means a business entity formed under the
laws of this state, or qualified to do business in this state, that
is owned by persons or entities licensed by the California Gambling
Control Commission to own gambling establishments as of January 1,
2011, or by the government or governments of federally recognized
California Indian tribes, or the wholly owned subentities of those
tribes, or by any combination of those gambling establishment
licensees and California tribal governments or wholly owned
subentities of those tribes.
   (c) "Gambling" has the same meaning as set forth in subdivision (
 l  ) of Section 19805.
   (d) "Gambling establishment" has the same meaning as set forth in
subdivision (o) of Section 19805.
   (e) "Illegal gambling" means participating in, or engaging in
conduct that materially aids, any form of gambling that is not
conducted pursuant to a tribal-state gaming compact or not otherwise
authorized by the laws of this state or the laws of the United
States.
   (f) "Illegal Internet gambling" means illegal gambling conducted
over the Internet.
   (g) "Internet" means the international computer network of
interoperable packet switched data networks.
   (h) "Intrastate" means within the geographical borders of the
State of California.
   (i) "Intrastate Internet poker" means any nonbanked, nonpercentage
poker game approved for play through use of the Internet within the
state by the department, and that is conducted in accordance with
this chapter.
   (j) "Licensed entity" means an eligible entity to which the
department has issued a license pursuant to this chapter for the
purpose of operating an Internet Web site offering persons over 21
years of age who are physically present within the State of
California the opportunity to play approved poker games on the
Internet within the geographical boundaries of the State of
California.
   (k) "Person" means an individual, partnership, corporation,
limited liability company, or other business entity, including a
federally recognized California Indian tribe or a subentity of such a
tribe that is wholly owned by the tribe.
   (l) "Web site" means the unique Uniform Resource Locator of a
licensed entity through which the licensed entity is authorized to
operate intrastate Internet poker games.
   19991.  (a) No person or other entity may operate, for
consideration, poker games over the Internet in California unless
licensed to provide those games by the department pursuant to this
chapter and any regulations adopted thereunder. Intrastate Internet
poker is hereby authorized, but only to the extent, and in the
manner, prescribed in this chapter.
   (b) Any person or entity that offers or participates in illegal
Internet gambling, or processes any financial transactions arising
out of, or in connection with, participation in illegal Internet
gambling, is guilty of a misdemeanor, and shall be punished by a fine
of up to ten thousand dollars ($10,000) and imprisonment in a county
jail for up to one year.
   19992.  (a) Within 90 days of the effective date of the act adding
this chapter, the department shall adopt regulations, in
consultation with the California Gambling Control Commission,
governing the intrastate play of poker games on the Internet to
provide persons over 21 years of age who are physically present in
California with the same protections enjoyed by persons playing in
gambling establishments or in tribally owned gaming facilities. The
department may issue licenses and promulgate regulations as it
determines may be necessary to implement the provisions of this
chapter, protect that gaming from criminal influences, and protect
the public health, welfare, and safety of the people of California,
but shall give priority in the adoption of regulations to the
licensing of the three categories of entities enumerated in paragraph
(1) of subdivision (b). However, persons licensed by the California
Gambling Control Commission to own or operate a gambling
establishment, the governments of California Indian tribes recognized
by the United States Department of the Interior, Bureau of Indian
Affairs, or the wholly owned subentities of those tribal governments
shall not be required to apply for or obtain licenses to own
interests in a licensed entity.
   (b) The regulations adopted pursuant to subdivision (a) shall
provide both of the following:
   (1) Procedures by which an entity may apply for a license to
operate an Internet Web site through which persons over 21 years of
age and physically present within the state may play intrastate
Internet poker, with the objective of facilitating the commencement
of operation of the licensed entity's authorized Internet Web site as
quickly as possible, thereby accelerating the receipt of revenues by
the state.
   (2) Procedures by which persons over 21 years of age who are
physically present in the state may register to lawfully engage in
intrastate Internet poker games through an Internet Web site owned
and operated by a licensed entity.
   (c) The intrastate Internet poker games shall be honestly and
fairly run.
   (d) A licensed entity may offer intrastate Internet poker games
pursuant to this chapter only on a network approved by the department
containing an Internet Web site that is registered with the
department to offer that service. A licensed entity shall not offer,
for consideration, any form of Internet poker game independent of
that network.
   (e) A person desiring to play intrastate Internet poker shall
register with a licensed entity by presenting documentation, upon
logging on to the licensed entity's intrastate Internet poker Web
site, that the person is at least 21 years of age and is physically
present within the state. After verifying the validity of the
proffered documentation and confirming the person's physical presence
within this state, the person may be permitted to play any
intrastate Internet poker game provided by the licensed entity,
subject to the licensed entity's right to exclude from participation
in intrastate Internet poker games any person reasonably determined
to be unsuitable to participate in those games, or whose
participation would be contrary to requests concerning self-exclusion
or limits on losses, amounts wagered, or playing time.
   (f) A licensed entity's intrastate Internet poker Web site shall
use the services of an independent third party licensed by the
department to perform identification, physical presence in the state,
and age verification services for persons registering to play
intrastate Internet poker games.
   (g) A licensed entity's intrastate Internet poker Web site shall
use personal identification numbers and other technology so that only
the registered person has access to his or her wagering account, and
that games can be played only from within the geographical borders
of the state.
   (h) A licensed entity shall provide for withdrawals from the
wagering account only by check, made payable to the account holder
and sent to the address of the account holder in the state, or by an
electronic transfer to an account held by the verified account holder
at a financial institution located within the state. The account
holder also may withdraw funds from the wagering account at a
licensed gambling establishment or tribal gaming facility
participating in a licensed entity by presenting valid identification
and verifiable personal and account information.
   (i) A licensed entity's intrastate Internet poker Web site shall
provide information on problem gambling, including a problem gambling
hotline telephone number that a person may call to seek information
and assistance for a potential gambling addiction, and shall offer
responsible gambling services, such as self-exclusion, limits on
losses, amounts wagered, and playing time, and other services as the
department reasonably may determine are appropriate.
   (j) A licensed entity shall allow the department access to its
operating premises at any time and without notice to visit,
investigate, and place expert accountants and other persons it deems
necessary to ensure strict compliance with its regulations concerning
game integrity, credit authorization, account access, and other
security provisions, if those activities do not interfere with the
normal lawful functioning of the licensed entity's operations.
   (k) A licensed entity shall offer, at the time of registration,
the option to place a limitation on the amount of funds that may be
transferred into a wagering account within any 24-hour period. The
licensed entity shall adopt procedures to ensure that the player may
not deposit more funds into the account than the amount specified.
If, after the wagering account is opened, a person wishes to increase
the amount of funds that may be transferred, the licensed entity may
increase the amount after obtaining and verifying the validity of
identification and personal information. However, that increase shall
not be effective until at least 48 hours after the change is
requested.
   (  l  ) A licensed entity shall conduct intrastate
Internet poker games in the same manner as those games are conducted
in licensed gambling establishments or tribally owned gaming
facilities in the state, except that the games shall be played with
computers, rather than with tangible cards and chips, and the virtual
cards shall be shuffled and dealt by the licensed entity's computer
system, rather than by a natural person. Only nonbanked,
nonpercentage poker games approved for play within the state by the
department may be offered for play on a licensed entity's intrastate
Internet Web site. A licensed entity's intrastate Internet Web site
may collect fees from players in authorized poker games pursuant to
the same player fee collection methods approved by the department
under state law for use within nontribal licensed gambling
establishments in California.
   (m) The department shall assess fees on licensed entities in the
amounts reasonably necessary to reimburse the department for its
costs in implementing and administering this chapter, protecting that
gaming from criminal influences, and protecting the public health,
welfare, and safety of the people of California.
   19992.5.  (a) There shall be authorized up to five Internet Web
sites to conduct a live online nonbanked, nonpercentage version of
the card game poker pursuant to this chapter within the borders of
the State of California under the same rules, and with the same
manner of compensation, as apply to poker games currently conducted
in licensed gambling establishments and tribal class II gaming
facilities.
   (b) The department shall issue up to three licenses to own and
operate intrastate Internet poker Web sites pursuant to this chapter
to eligible entities consisting of any of the following:
   (1) Licensed gambling establishments and federally recognized
California tribal governments.
   (2) Federally recognized California tribal governments.
   (3) Licensed gambling establishments.
   (c) The department shall select the eligible entities that include
the greatest numbers of individual entities as specified  in
 subdivision (b).
   (d) Notwithstanding Section 10231.5 of the Government Code, within
three years of commencing the play of live online Internet poker
pursuant to this chapter, the department shall report to the
Legislature if it has the capacity to regulate up to two additional
Internet poker Web sites. The department may issue licenses for up to
two additional Internet poker Web sites upon subsequent legislative
authorization.
   19993.  After the regulations required by subdivision (a) of
Section 19992 are adopted pursuant to the Administrative Procedure
Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code), an entity seeking to
be licensed to offer intrastate Internet poker games shall apply to
the department for licensure to engage in that activity. The
department shall charge the entity a registration fee sufficient to
cover all costs associated with the issuance of the license,
including any necessary background investigation.
   19994.  In addition to any licensing or other administrative fees
that the department may assess as reimbursement for the costs of
implementing this chapter, a licensed entity shall pay to the state a
license fee equal to 10 percent of the fees collected by the
licensed entity from players participating in poker games conducted
on its Internet Web site.
   19995.  In the event that any federal statute now in effect or
hereafter enacted either affirmatively authorizes, or repeals
existing prohibitions against, the interstate or international play
on the Internet of house-banked or percentage games of chance, or
games such as poker in which there is an element of chance but a
player's skill predominates over the element of chance in determining
the outcome of the game, and the federal statute allows a state to
be excluded from application of that statute, the Governor and the
Legislature shall take any action necessary to opt out of the
application of that statute to persons physically present within the
geographical borders of the state.
   19996.  Nothing in this chapter shall be interpreted to authorize
the play of intrastate Internet poker in a manner that circumvents
the limitation on gambling establishments, or the limitation on
gambling tables, pursuant to Chapter 5 (commencing with Section
19800), and related state and local laws, or to authorize the
operation of public or private facilities the primary purpose of
which is the online play for consideration of poker or other forms of
gaming.
   19997.  If a court of competent jurisdiction determines that the
enactment or implementation of this chapter entitles any California
Indian tribe that is a party to a class III tribal-state gaming
compact with the state to terminate or reduce payments to the Indian
Gaming Revenue Sharing Trust Fund required by the compact on the
ground that the state has breached the compact by enacting or
implementing this chapter, all funds then on deposit in the Indian
Gaming Revenue Trust Fund shall continue to be distributed quarterly
in equal shares to all federally recognized California Indian tribes
entitled to receive disbursements from the fund until all funds on
deposit in the fund have been disbursed.
   19998.  (a) The state's percentage of player fees collected by
licensed entities, and any other fees paid by licensed entities,
shall be remitted to the Controller for deposit in the Internet
Gambling Fund, which is hereby created in the State Treasury. The
fund shall be administered by the Controller for the purposes of this
chapter, subject to annual appropriation by the Legislature.
   (b) On or before March 31 of each year, each state agency with
responsibilities imposed under this chapter shall submit a revenue
needs request to fulfill those duties for the next fiscal year to the
Senate Committee on Budget and Fiscal Review, the Assembly Committee
on Budget, the Senate and Assembly Committees on Governmental
Organization, and the Department of Finance. Each submission of
revenue needs shall specify the justification for those costs.
   (c) On or before March 31 of each year, the State Department of
Alcohol and Drug Programs, Office of Problem Gambling shall submit a
revenue needs request for programs to address problem gambling that
results from the offering of authorized games for the next fiscal
year to the Senate Committee on Budget and Fiscal Review, the
Assembly Committee on Budget, the Senate and Assembly Committees on
Governmental Organization, the Senate and Assembly Committees on
Human Services, and the Department of Finance. Each submission of
revenue needs shall specify the justification for those costs.
   (d) All remaining proceeds not allocated pursuant to subdivisions
(b) and (c) shall remain in the Internet Gambling Fund, subject to
appropriation by the Legislature for purposes related to this
chapter.
   19999.  A city, county, or city and county shall not regulate,
tax, or enter into a contract with respect to any matter related to
this chapter.
  SEC. 3.  No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.
   SEC. 4.    This act is an urgency statute necessary
for the immediate preservation of the public peace, health, or safety
within the meaning of Article IV of the Constitution and shall go
into immediate effect. The facts constituting the necessity are:
 
   In order to ensure that California is able to provide consumer
gaming protections from illegal operators, it is necessary for this
act to take effect immediately.