BILL ANALYSIS
AB 293
Page 1
Date of Hearing: April 1, 2009
ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
Curren D. Price, Chairman
AB 293 (Mendoza) - As Introduced: February 13, 2009
SUBJECT : Gambling Regulation
SUMMARY : This bill would make numerous technical and
substantive changes to the Gambling Control Act as it relates to
cardrooms and restructures the licensing requirements for
partnerships and other entities, and allows limited liability
companies (LLCs) to secure gambling licenses subject to
specified requirements. Specifically, this bill :
1. Provides that, except for preliminary injunctions, no
order may be effective for more than 15 calendar days, and
no preliminary order may be effective for more than 45
days, except by stipulation of the Department of Justice
(DOJ) or the California Gaming Control Commission (CGCC)
[Government Code Section 19804 (b)].
2. Defines the term "gambling enterprise" to mean any
person that owns a gambling operation and makes conforming
changes throughout the Act [Government Code Section 19805
(m)].
3. Authorizes CGCC to condition, restrict, discipline, or
take action against the license of an individual owner
endorsed on the license certificate of the gambling
enterprise whether or not the commission takes action
against the license of the gambling enterprise [Government
Code Section 19824 (b)].
4. Deletes the requirement that CGCC adopt regulations to
require copies of all dishonored or uncollectible checks
shall be sent to DOJ [Government Code Section 19841 (q)].
5. Requires CGCC to adopt regulations by December 21, 2010,
to provide procedures, criteria, and timelines for the
processing and approval of applications for the licensing,
temporary or interim licensing, or findings of suitability
for receivers, trustees, beneficiaries, executors,
administrators, conservators, successors in interest, or
security interest holders for a gambling enterprise so that
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gambling enterprises may operate continuously in cases
including, but not limited to, the death, insolvency,
foreclosure, receivership, or incapacity of a license
[Government Code Section 19841 (s)].
6. Requires the chief of the Bureau of Gambling Control
(BOGC) within DOJ to file with CGCC the reasons for his or
her recommendation if he or she recommends approval of the
license with restrictions or conditions. Requires the
chief, prior to filing his or her recommendation, and not
less than 10 business days prior to CGCC's meeting at which
the application is to be considered, to inform the
applicant in writing generally of the basis for any
proposed recommendation, including the legal and factual
grounds on which the recommendation is based. Does not
require DOJ to divulge any confidential information
[Government Code Section 19868 (c)].
7. Requires a corporation, in order to obtain a gambling
license, to supply specified supplemental forms and
information with the initial application, and thereafter
only on request, to DOJ [Government Code Section 19880
(d)].
8. Requires CGCC, if at any time it denies a license to, or
revokes the license of, an individual owner of any security
issued by a corporation that applies for, or holds an owner
license, to immediately notify the individual and the
corporation of that fact. Requires the owner of the
security to sell the security for an amount not greater
than fair market value within 60 days, or upon a showing of
due diligence, CGGG may extend the time for selling the
security. Provides that upon the date when DOJ serves
notice of the denial to the corporation, it is unlawful for
the denied security owner to receive any dividend, income,
or interest upon any security, except dividends equal to
the good faith estimate of the owner's personal share of
any income tax due on the ownership interest until the date
of the sale, as determined in writing by an independent
certified public accountant, or as may be necessary to
protect the election of the gambling enterprise to be
treated as an "S corporation" [Government Code Sections
19882 (a) and 19882 (b) (1)].
9. Imposes on all partnerships the requirements for
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obtaining a gambling license that are applicable to limited
partnerships, and requires a partnership to be registered
as may be required under the laws of this state, instead of
being formed under the laws of this state. Requires
partnerships to supply specified supplemental forms and
information with the initial application, and thereafter
only on request, to DOJ, as is required for a corporation
(as noted in point number 7). Requires limited liability
companies (LLCs) to comply with specified parallel
requirements in order to obtain a gambling license
[Government Code Sections 19890 and 19890.5].
10. Imposes on all partnerships and LLCs that hold a
gambling license the same requirements applicable to
limited partnerships that hold gambling licenses that the
purported sale, assignment, transfer, pledge, or other
disposition of any interest in a partnership or LLC that
holds a gambling license, or the grant of an option to
purchase the interest, is void unless approved in advance
by the commission [Government Code Section 19882 (a)].
11. Requires CGCC, if at any time it denies a license to, or
revokes the license of, an individual owner of any security
issued by a partnership or LLC that applies for or holds an
owner license, to immediately notify the individual and the
partnership or LLC of that fact. Requires the owner of the
security to sell the security for an amount not greater
than fair market value within 60 days, or upon a showing of
the due diligence, CGCC may extend the time for selling the
security. Provides that upon the date when DOJ serves
notice of the denial to the partnership or LLC, it is
unlawful for the denied security owner to receive any
dividend, income, or interest upon any security, except
dividends equal to the good faith estimate of the owner's
personal share of any income tax due on the ownership
interest until the date of the sale, as determined in
writing by an independent certified public accountant
[Government Code Sections 19892 (b), 19892 (c), and 19892
(d)].
12. Requires general partners, limited partners, lenders,
members, managers, holders of evidence of indebtedness,
underwriters, agents, or employees of a partnership or LLC
that holds or applies for a license to own a gambling
enterprise to be licensed individually. Provides that a
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person who is required to be licensed by this section as a
partner, manager, or member shall not hold that position
until he or she secures the required approval of, or a
temporary license issued by CGCC. Requires a person who is
required to be licensed to apply for a license within 30
days after CGCC requests him or her to do so [Government
Code Section 19893].
13. Prohibits the enforcement of a security interest with
prior approval of CGCC, except as provided by regulations
adopted by CGCC instead of DOJ to adopt said regulations
[Government Code Section 19900].
14. Permits the passage of a person under 21 years of age
through the gaming floor by way of a designated pathway if
accomplished by a person over 21 years of age or an
employee of the gambling establishment, and deletes the
requirement for a separate entrance [Government Code
Section 19921 (a) (4)].
15. Authorizes, if a gambling establishment is located in an
unincorporated area annexed by a city without a local
election other than the election to approve the annexation,
the city acquiring jurisdiction to adopt an ordinance
permitting and regulating controlled gaming in the existing
gambling establishment, providing hours of operation, the
games to be played, wagering limits, and the maximum number
of gambling establishments and tables permitted in each
gambling establishment, the same as those limits in any
ordinance or resolutions that formerly applied to the
gambling establishment [Government Code Section 19966].
EXISTING LAW
1. Existing law, the Gambling Control Act, provides for the
licensure and regulation of various legalized gambling
activities and establishments by the California Gambling
Control Commission (CGCC) and the enforcement of
those activities by the Bureau.
2. Existing law requires CGCC to ensure that licenses,
approvals, and permits are not issued to, or held by,
unqualified or disqualified persons, or by persons whose
operations are conducted in a manner that is inimical to
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the public health, safety, or welfare. CGCC has the
authority to require any person to apply for a license,
permit, or approval as specified in the Act and for any
cause deemed reasonable by CGCC, deny any application for a
license or approval provided for in the Act, and limit,
condition, or restrict any license, permit, or approval, or
impose any fine upon any person licensed or approved.
3. Existing law requires the Bureau to investigate the
qualifications of applicants before any license or other
approval is issued and, if necessary, recommends the denial
or the limitation, conditioning, or restriction of any
license or other approval. The Bureau is also required to
monitor the conduct of all licensees and other persons
having a material involvement, directly or indirectly, with
a gambling operation or its holding company, for the
purpose of ensuring that licenses are not issued or held
by, and that there is no direct or indirect material
involvement with, a gambling operation or holding company
by ineligible, unqualified, disqualified, or unsuitable
persons, or persons whose operations are conducted in a
manner that is adverse to the public health, safety, or
welfare. The Bureau may investigate suspected violations
of the Act and relevant provisions of the Penal Code to
investigate complaints that are lodged against licensees,
or other persons associated with a gambling operation, by
members of the public, and to initiate, where appropriate,
disciplinary actions as provided in the Act.
4. Existing law requires every person who, either as owner,
licensee, or employee, either solely or in conjunction with
others operates any controlled game in this state, or who
receives any compensation or share of the money or property
played, for carrying on any controlled game in this state,
to apply for and obtain from CGCC a valid state gambling
license, key employee license, or work permit.
5. Existing law defines "person" for purposes of the Act's
licensing requirements as a natural person, corporation,
partnership, limited partnership, trust, joint venture,
association, or any other business organization, and
provides that an owner of a card club that is not a natural
person is not eligible for a state gambling license unless,
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defined persons individually apply for and obtain a
state gambling license.
FISCAL EFFECT : Unknown
COMMENTS : The Gambling Control Act, the law governing licensed
card clubs, was enacted in 1997 and has not undergone any
comprehensive updates since then. This bill makes a number of
procedural changes relating to licenses and licenses where
shortcomings in the law have become evident during the
intervening years.
According to the materials provided by the author's office, This
bill streamlines the procedures of the California Gambling
Control Commission and the Bureau of Gambling Control (GCB)
within the Department of Justice. This bill amends the Gambling
Control Act (Chapter 5 of Division 8 of the Business and
Professions Code commencing with Section 19800).
This bill officially recognizes Limited Liability Companies by
explicitly including the licensing category in the act. The
Gambling Control Act already requires various types of owners
(natural persons, corporations, publicly traded racing
associations, qualified racing associations, partnerships, and
trusts) to apply for a license to operate a gambling enterprise.
Other key provisions of the bill (1) require the Commission to
develop licensing regulations to allow continuous operation of a
cardroom in cases including, but not limited to, the death,
insolvency, foreclosure, receivership, or incapacity of a
licensee and (2) clarify that the Commission can take
disciplinary action against an individual owner without
affecting the licenses of other endorsed owners.
Suggested Technical Amendments : To establish consistency
throughout the Business and Professions Code, as it applies to
the Gambling Control Act, the author may want to consider
technical amendments in AB 293 that will clarify the meaning of
the terms "Gambling enterprise" (Page 8, line 32) and "License"
(Page 10, line 37) and make additional technical conforming
changes in this bill.
Related Legislation : AB 2627 (Mendoza), 2008 Session, Vetoed
September 27, 2008; SB 730 (Florez), Chapter 438, Statutes of
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2007; AB 2421 (Assembly Governmental Organization Committee),
Chapter 738, Statutes of 2002; SB 8 (Lockyer), Chapter 867,
Statutes of 1997.
Veto Message :
On September 27, 2008, Governor Schwarzenegger issued the
following message for AB 2627:
"To the Members of the California State Assembly:
I am returning Assembly Bill 2627 without my signature.
The historic delay in passing the 2008-2009 State Budget has
forced me to prioritize the bills sent to my desk at the end of
the year's legislative session. Given the delay, I am only
signing bills that are the highest priority for California.
This bill does not meet that standard and I cannot sign it at
this time."
REGISTERED SUPPORT / OPPOSITION :
Support
California Gaming Association (sponsor)
Opposition
None listed
Analysis Prepared by : Rod Brewer / G. O. / (916) 319-2531