BILL NUMBER: SB 40 INTRODUCED
BILL TEXT
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, and to amend Section
330b of the Penal Code, relating to Internet gambling.
LEGISLATIVE COUNSEL'S DIGEST
SB 40, as introduced, 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 a licensed entity to operate an
intrastate Internet poker Web site. 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. The bill would authorize the seizure of any money
or property used in or derived from illegal Internet gambling, as
specified, and would provide for any money or property that has been
seized to be forfeited to the Internet Gambling Fund, as established
by this bill. By creating new crimes, this bill would impose a
state-mandated local program.
The bill would authorize the department to assess fees on the
licensed entity 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
the licensed entity to pay a license fee equal to an unspecified
percentage 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,
which would be administered by the Controller subject to annual
appropriation by the Legislature.
Existing law, subject to exceptions, generally prohibits the
possession and use of a slot machine or device, as defined, and
prohibits certain other acts and transactions pertaining to slot
machines or devices. Existing law provides varying definitions of
slot machine or device for these purposes. Violations of these
provisions are punishable by varying misdemeanor penalties.
This bill would provide that personal, networked, or server
computers are not included within the term slot machine or device,
for purposes of these provisions, if operated pursuant to a valid
license or permit to operate an intrastate Internet poker Web site,
as defined.
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.
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 a government-regulated intrastate Internet poker
wagering Web site 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, 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 a licensed entity 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 the
Internet Web site owned and operated by a licensed entity formed
under the laws of this state and owned and operated by business
entities licensed under the Gambling Control Act to own and operate
gambling establishments licensed to operate 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 on their Indian
lands without having to enter into class III gaming compacts with the
State of California.
(h) 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
"gambling," as used in Article 13 (commencing with Section 19960) of
Chapter 5 of Division 8 of the Business and Professions Code.
(i) 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.
(j) 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) "Gambling" has the same meaning as set forth in subdivision (
l ) of Section 19805.
(c) "Gambling establishment" has the same meaning as set forth in
subdivision (o) of Section 19805.
(d) "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.
(e) "Illegal Internet gambling" means illegal gambling conducted
over the Internet.
(f) "Internet" means the international computer network of
interoperable packet switched data networks.
(g) "Intrastate" means within the geographical borders of
California.
(h) "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.
(i) "Licensed entity" means a legal entity formed under the laws
of the State of California by gambling establishments licensed to
operate in this state as of January 1, 2011, and the governments of
federally recognized California Indian tribes eligible to operate
poker games on their Indian lands, or wholly owned subentities of
those tribes, 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.
(j) "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.
(k) "Web site" means the unique Uniform Resource Locator of the
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 or other card 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.
(c) Any money, other representative of value, or real or personal
property used in, or derived from, illegal Internet gambling shall be
subject to seizure by the department or any peace officer. Upon a
finding by the Superior Court that the money, other representative of
value, or real or personal property was used in, or derived from,
illegal Internet gambling, that money or property shall be forfeited
to the Internet Gambling Fund established in Section 19998.
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.
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 a licensed 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 the licensed entity.
(c) The intrastate Internet poker games shall be honestly and
fairly run.
(d) The 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. The 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 the 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) The 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) The 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) The 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 the licensed entity by presenting valid
identification and verifiable personal and account information.
(i) The 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) The 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) The 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 ) The 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 the licensed entity's
intrastate Internet Web site. The 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 the licensed entity in the
amount 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.
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, the licensed entity shall pay to the state
a license fee equal to ____ 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.
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 the
licensed entity, and any other fees paid by the licensed entity,
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. Section 330b of the Penal Code is amended to read:
330b. (a) It is unlawful for any person to manufacture, repair,
own, store, possess, sell, rent, lease, let on shares, lend or give
away, transport, or expose for sale or lease, or to offer to repair,
sell, rent, lease, let on shares, lend or give away, or permit the
operation, placement, maintenance, or keeping of, in any place, room,
space, or building owned, leased, or occupied, managed, or
controlled by that person, any slot machine or device, as defined in
this section.
It is unlawful for any person to make or to permit the making of
an agreement with another person regarding any slot machine or
device, by which the user of the slot machine or device, as a result
of the element of hazard or chance or other unpredictable outcome,
may become entitled to receive money, credit, allowance, or other
thing of value or additional chance or right to use the slot machine
or device, or to receive any check, slug, token, or memorandum
entitling the holder to receive money, credit, allowance, or other
thing of value.
(b) The limitations of subdivision (a), insofar as they relate to
owning, storing, possessing, or transporting any slot machine or
device, do not apply to any slot machine or device located upon or
being transported by any vessel regularly operated and engaged in
interstate or foreign commerce, so long as the slot machine or device
is located in a locked compartment of the vessel, is not accessible
for use, and is not used or operated within the territorial
jurisdiction of this state.
(c) The limitations of subdivision (a) do not apply to a
manufacturer's business activities that are conducted in accordance
with the terms of a license issued by a tribal gaming agency pursuant
to the tribal-state gaming compacts entered into in accordance with
the Indian Gaming Regulatory Act (18 U.S.C. Sec. 1166 to 1168,
inclusive, and 25 U.S.C. Sec. 2701 et seq.).
(d) For purposes of this section, "slot machine or device" means a
machine, apparatus, or device that is adapted, or may readily be
converted, for use in a way that, as a result of the insertion of any
piece of money or coin or other object, or by any other means, the
machine or device is caused to operate or may be operated, and by
reason of any element of hazard or chance or of other outcome of
operation unpredictable by him or her, the user may receive or become
entitled to receive any piece of money, credit, allowance, or thing
of value, or additional chance or right to use the slot machine or
device, or any check, slug, token, or memorandum, whether of value or
otherwise, which may be exchanged for any money, credit, allowance,
or thing of value, or which may be given in trade, irrespective of
whether it may, apart from any element of hazard or chance or
unpredictable outcome of operation, also sell, deliver, or present
some merchandise, indication of weight, entertainment, or other thing
of value.
(e) Every Any person who violates
this section is guilty of a misdemeanor.
(1) A first violation of this section shall be punishable by a
fine of not less than five hundred dollars ($500) nor more than one
thousand dollars ($1,000), or by imprisonment in a county jail not
exceeding six months, or by both that fine and imprisonment.
(2) A second offense shall be punishable by a fine of not less
than one thousand dollars ($1,000) nor more than ten thousand dollars
($10,000), or by imprisonment in a county jail not exceeding six
months, or by both that fine and imprisonment.
(3) A third or subsequent offense shall be punishable by a fine of
not less than ten thousand dollars ($10,000) nor more than
twenty-five thousand dollars ($25,000), or by imprisonment in a
county jail not exceeding one year, or by both that fine and
imprisonment.
(4) If the offense involved more than one machine or more than one
location, an additional fine of not less than one thousand dollars
($1,000) nor more than five thousand dollars ($5,000) shall be
imposed per machine and per location.
(f) Pinball and other amusement machines or devices, which are
predominantly games of skill, whether affording the opportunity of
additional chances or free plays or not, are not included within the
term slot machine or device, as defined in this section.
(g) Personal, networked, or server computers are not included
within the term "slot machine or device," as defined in this section
or Section 330.1, or as used in subdivision (f) of Section 19 of
Article IV of the California Constitution or Section 330a of this
code, if operated pursuant to a license or permit in compliance with
Chapter 5.2 (commencing with Section 19990) of Division 8 of the
Business and Professions Code, solely for the purpose of, or in
connection with, allowing participation in nonbanked, nonpercentage
poker games authorized and regulated pursuant to Chapter 5.2
(commencing with Section 19990) of Division 8 of the Business and
Professions Code, and not for the purpose of participating in any
other form of gaming activity.
SEC. 4. 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.