BILL NUMBER: AB 54 CHAPTERED 10/14/01 CHAPTER 941 FILED WITH SECRETARY OF STATE OCTOBER 14, 2001 APPROVED BY GOVERNOR OCTOBER 14, 2001 PASSED THE ASSEMBLY SEPTEMBER 13, 2001 PASSED THE SENATE SEPTEMBER 10, 2001 AMENDED IN SENATE SEPTEMBER 6, 2001 AMENDED IN ASSEMBLY MARCH 13, 2001 INTRODUCED BY Assembly Member Wesson DECEMBER 4, 2000 An act to amend Section 19805 of the Business and Professions Code, to amend Sections 330.11 and 337j of the Penal Code, and to amend Section 1 of Chapter 1023 of the Statutes of 2000, relating to gambling clubs. LEGISLATIVE COUNSEL'S DIGEST AB 54, Wesson. Gaming clubs. Existing law provides that every person who deals, plays, carries on, opens, or conducts, or who plays or bets at or against any banking game is guilty of a misdemeanor. A "banking game" or a "banked game" is one in which the bank is involved in play and serves as the ultimate source and repository of funds, dwarfing that of all other participants in the game. This bill would change the definition of "banking game" or "banked game" by no longer requiring that the bank serve as the ultimate source and repository of funds or dwarf all other participants. By changing the definition of a crime, this bill would impose a state-mandated local program. With respect to the collection of player fees in gambling establishments, existing law provides that no fee may be calculated as a portion of wagers made or from winnings earned. Existing law provides that fees charged for all wagers be determined and collected prior to the start of play of any hand or round. Violation of these provisions is punishable by imprisonment in a county jail for not more than one year, or by a fine of not more than $5,000, or by both that imprisonment and fine. Existing law also provides that its provisions codify the holding in Sullivan v. Fox (1987) 189 Cal.App.3d 673, as to the collection of player fees. This bill would provide that no fee may be calculated as a fraction or percentage of wagers or winnings earned. This bill would provide that fees must be determined before the start of play, but may be collected before or after the start of play. This bill also would remove provisions concerning codification of court decisions. This bill would further revise statements of intent. 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. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 19805 of the Business and Professions Code is amended to read: 19805. As used in this chapter, the following definitions shall apply: (a) "Affiliate" means a person who, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, a specified person. (b) "Applicant" means any person who has applied for, or is about to apply for, a state gambling license, a key employee license, a registration, a finding of suitability, a work permit, a manufacturer' s or distributor's license, or an approval of any act or transaction for which the approval or authorization of the commission or division is required or permitted under this chapter. (c) "Banking game" or "banked game" does not include a controlled game if the published rules of the game feature a player-dealer position and provide that this position must be continuously and systematically rotated amongst each of the participants during the play of the game, ensure that the player-dealer is able to win or lose only a fixed and limited wager during the play of the game, and preclude the house, another entity, a player, or an observer from maintaining or operating as a bank during the course of the game. For purposes of this section it is not the intent of the Legislature to mandate acceptance of the deal by every player if the division finds that the rules of the game render the maintenance of or operation of a bank impossible by other means. The house shall not occupy the player-dealer position. (d) "Board" means the California Gambling Control Board. (e) "Commission" means the California Gambling Control Commission. (f) "Controlled gambling" means to deal, operate, carry on, conduct, maintain, or expose for play any controlled game. (g) "Controlled game" means any controlled game, as defined by subdivision (e) of Section 337j of the Penal Code. (h) "Director," when used in connection with a corporation, means any director of a corporation or any person performing similar functions with respect to any organization. In any other case, "director" means the Director of the Division of Gambling Control. (i) "Division" means the Division of Gambling Control in the Department of Justice. (j) "Finding of suitability" means a finding that a person meets the qualification criteria described in subdivisions (a) and (b) of Section 19848, and that the person would not be disqualified from holding a state gambling license on any of the grounds specified in subdivision (a) of Section 19850. (k) "Game" and "gambling game" means any controlled game. (l) "Gambling" means to deal, operate, carry on, conduct, maintain, or expose for play any controlled game. (m) "Gambling enterprise employee" means any natural person employed in the operation of a gambling enterprise, including, without limitation, dealers, floormen, security employees, countroom personnel, cage personnel, collection personnel, surveillance personnel, data-processing personnel, appropriate maintenance personnel, waiters and waitresses, and secretaries, or any other natural person whose employment duties require or authorize access to restricted gambling establishment areas. (n) "Gambling establishment," "establishment," or "licensed premises" means one or more rooms where any controlled gambling or activity directly related thereto occurs. (o) "Gambling license" or "state gambling license" means any license issued by the state that authorizes the person named therein to conduct a gambling operation. (p) "Gambling operation" means exposing for play one or more controlled games that are dealt, operated, carried on, conducted, or maintained for commercial gain. (q) "Gross revenue" means the total of all compensation received for conducting any controlled game, and includes interest received in payment for credit extended by an owner licensee to a patron for purposes of gambling, except as provided by regulation. (r) "House" means the gambling establishment, and any owner, shareholder, partner, key employee, or landlord thereof. (s) "Independent agent," except as provided by regulation, means any person who does either of the following: (1) Collects debt evidenced by a credit instrument. (2) Contracts with an owner licensee, or an affiliate thereof, to provide services consisting of arranging transportation or lodging for guests at a gambling establishment. (t) "Institutional investor" means any retirement fund administered by a public agency for the exclusive benefit of federal, state, or local public employees, any investment company registered under the Investment Company Act of 1940 (15 U.S.C. Sec. 80a-1 et seq.), any collective investment trust organized by banks under Part Nine of the Rules of the Comptroller of the Currency, any closed-end investment trust, any chartered or licensed life insurance company or property and casualty insurance company, any banking and other chartered or licensed lending institution, any investment advisor registered under the Investment Advisors Act of 1940 (15 U.S.C. Sec. 80b-1 et seq.) acting in that capacity, and other persons as the board may determine for reasons consistent with the policies of this chapter. (u) "Key employee" means any natural person employed in the operation of a gambling enterprise in a supervisory capacity or empowered to make discretionary decisions that regulate gambling operations, including, without limitation, pit bosses, shift bosses, credit executives, cashier operations supervisors, gambling operation managers and assistant managers, managers or supervisors of security employees, or any other natural person designated as a key employee by the division for reasons consistent with the policies of this chapter. (v) "Key employee license" means a state license authorizing the holder to be associated with a gambling enterprise as a key employee. (w) "Licensed gambling establishment" means the gambling premises encompassed by a state gambling license. (x) "Limited partnership" means a partnership formed by two or more persons having as members one or more general partners and one or more limited partners. (y) "Limited partnership interest" means the right of a general or limited partner to any of the following: (1) To receive from a limited partnership any of the following: (A) A share of the revenue. (B) Any other compensation by way of income. (C) A return of any or all of his or her contribution to capital of the limited partnership. (2) To exercise any of the rights provided under state law. (z) "Owner licensee" means an owner of a gambling enterprise who holds a state gambling license. (aa) "Person," unless otherwise indicated, includes a natural person, corporation, partnership, limited partnership, trust, joint venture, association, or any other business organization. (ab) "Player" means a patron of a gambling establishment who participates in a controlled game. (ac) "Player-dealer" and "controlled game featuring a player-dealer position" refer to a position in a controlled game, as defined by the approved rules for that game, in which seated player participants are afforded the temporary opportunity to wager against multiple players at the same table, provided that this position is rotated amongst the other seated players in the game. (ad) "Publicly traded racing association" means a corporation licensed to conduct horse racing and simulcast wagering pursuant to Chapter 4 (commencing with Section 19400) whose stock is publicly traded. (ae) "Qualified racing association" means a corporation licensed to conduct horse racing and simulcast wagering pursuant to Chapter 4 (commencing with Section 19400) that is a wholly owned subsidiary of a corporation whose stock is publicly traded. (af) "Work permit" means any card, certificate, or permit issued by the division or by a county, city, or city and county, whether denominated as a work permit, registration card, or otherwise, authorizing the holder to be employed as a gambling enterprise employee or to serve as an independent agent. A document issued by any governmental authority for any employment other than gambling is not a valid work permit for the purposes of this chapter. SEC. 2. Section 330.11 of the Penal Code is amended to read: 330.11. "Banking game" or "banked game" does not include a controlled game if the published rules of the game feature a player-dealer position and provide that this position must be continuously and systematically rotated amongst each of the participants during the play of the game, ensure that the player-dealer is able to win or lose only a fixed and limited wager during the play of the game, and preclude the house, another entity, a player, or an observer from maintaining or operating as a bank during the course of the game. For purposes of this section it is not the intent of the Legislature to mandate acceptance of the deal by every player if the division finds that the rules of the game render the maintenance of or operation of a bank impossible by other means. The house shall not occupy the player-dealer position. SEC. 3. Section 337j of the Penal Code is amended to read: 337j. (a) It is unlawful for any person, as owner, lessee, or employee, whether for hire or not, either solely or in conjunction with others, to do any of the following without having first procured and thereafter maintained in effect all federal, state, and local licenses required by law: (1) To deal, operate, carry on, conduct, maintain, or expose for play in this state any controlled game. (2) To receive, directly or indirectly, any compensation or reward or any percentage or share of the revenue, for keeping, running, or carrying on any controlled game. (3) To manufacture, distribute, or repair any gambling equipment within the boundaries of this state, or to receive, directly or indirectly, any compensation or reward for the manufacture, distribution, or repair of any gambling equipment within the boundaries of this state. (b) It is unlawful for any person to knowingly permit any controlled game to be conducted, operated, dealt, or carried on in any house or building or other premises that he or she owns or leases, in whole or in part, if that activity is undertaken by a person who is not licensed as required by state law, or by an employee of that person. (c) It is unlawful for any person to knowingly permit any gambling equipment to be manufactured, stored, or repaired in any house or building or other premises that the person owns or leases, in whole or in part, if that activity is undertaken by a person who is not licensed as required by state law, or by an employee of that person. (d) Any person who violates, attempts to violate, or conspires to violate this section shall be punished by imprisonment in a county jail for not more than one year, or by a fine of not more than five thousand dollars ($5,000), or by both that imprisonment and fine. (e) (1) As used in this section, "controlled game" means any game of chance, including any gambling device, played for currency, check, credit, or any other thing of value that is not prohibited and made unlawful by statute or local ordinance. (2) As used in this section, "controlled game" does not include any of the following: (A) The game of bingo conducted pursuant to Section 326.5. (B) Parimutuel racing on horse races regulated by the California Horse Racing Board. (C) Any lottery game conducted by the California State Lottery. (D) Games played with cards in private homes or residences, in which no person makes money for operating the game, except as a player. (f) This subdivision is intended to be dispositive of the law relating to the collection of player fees in gambling establishments. No fee may be calculated as a fraction or percentage of wagers made or winnings earned. Fees charged for all wagers shall be determined prior to the start of play of any hand or round. The actual collection of the fee may occur before or after the start of play. Ample notice shall be provided to the patrons of gambling establishments relating to the assessment of fees. Flat fees on each wager may be assessed at different collection rates, but no more than three collection rates may be established per table. SEC. 4. Section 1 of Chapter 1023 of the Statutes of 2000, is amended to read: Section 1. The Legislature finds and declares as follows: (a) In 1983 and 1984 California card clubs played games with cards involving a player-dealer position in which players were afforded the temporary opportunity to wager against multiple players at the table where the player-dealer position continuously and systematically rotated among the players, prior to the amendment of Section 19 of Article IV of the California Constitution by the California State Lottery Act in 1984. This method of play was not found to be inconsistent with current law by the Courts of Appeal in Sullivan v. Fox (1987) 189 Cal.App.3d 673, Walker v. Meehan (1987) 194 Cal.App.3d 1290, City of Bell Gardens v. County of Los Angeles (1991) 231 Cal.App.3d 1563, and Huntington Park Club Corp. v. County of Los Angeles (1988) 206 Cal.App.3d 241. (b) The amendment to Section 19 of Article IV of the Constitution declared: "The Legislature has no power to authorize, and shall prohibit casinos of the type currently operating in Nevada and New Jersey." Casinos operating in 1983 and 1984 in the States of Nevada and New Jersey did not include card games featuring a player-dealer position which continuously and systematically rotates among the players. In Nevada and New Jersey, comparable games are banked only by the house, which is a participant in the game, with an interest in its outcome, and which covers all bets in the game, paying all winners and collecting from all losers. (c) In Hotel Employees & Restaurant Employees v. Davis (1999) 21 Cal. 4th 585, the California Supreme Court recently stated at page 605 that: "...(t)he type" of casino "operating in Nevada and New Jersey" presumably refers to a gambling facility that did not legally operate in California; something other, that is, than "the type" of casino "operating" in California." SEC. 5. No reimbursement is required by this act pursuant to Section 6 of Article XIIIB 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 XIIIB of the California Constitution.