BILL ANALYSIS Ó
Bill No: SB
1390
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2011-2012 Regular Session
Staff Analysis
SB 1390 Author: Wright
As Amended: April 19, 2012
Hearing Date: April 24, 2012
Consultant: Paul Donahue
SUBJECT
Sports Wagering
DESCRIPTION
This bill legalizes sports betting in California by
authorizing a currently licensed owner or operator of a
gambling establishment, horse racing track, or satellite
wagering facility to conduct wagering on professional and
collegiate sports or athletic events by applying to its
respective licensing authority to add sports wagering to
the gambling activities for which they are currently
licensed.
This bill also authorizes a federally recognized Indian
tribe to conduct sports wagering, consistent with the
requirements of the federal Indian Gaming Regulatory Act of
1988 (IGRA). Specifically, this bill :
1)Authorizes the persons or entities described above to
offer sports wagering on professional and collegiate
sports or athletic events at their facilities.<1>
2)States that sports wagering may be conducted only at the
gambling establishment, horse racing track, satellite
facility (or Tribal gaming facility) of the licensed
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<1> This bill defines "sports event" to include any
professional sports or athletic event, and any collegiate
sports or athletic event.
SB 1390 (Wright) continued
PageB
operator.
3)Specifies that a licensed operator shall not accept
wagers on sports events from any person who is not
physically present at the facility where the sports
wagering is conducted.
4)Allows licensed operators of horse racing tracks,
satellite wagering facilities, and gambling
establishments to enter into an agreement to jointly
conduct a sports wagering operation. Any joint sports
wagering operation would be authorized only at a horse
racing track.
5)Defines "sports wagering" to mean the business of
accepting wagers on a sports event by any legal system or
method of wagering, including, but not limited to,
exchange wagering, parlays, over and under, money line,
and straight bets.
6)States that an authorized sports betting operator shall
establish the odds it will pay on wagers placed on sports
events.
7)Provides that, in order to obtain authorization to
conduct sports wagering:
a) The owner or operator of a gambling establishment
shall apply to the California Gambling Control
Commission (CGCC) for authorization;
b) An owner or operator of a horse racing track or
satellite wagering facility shall apply to the
California Horse Racing Board (CHRB) for
authorization; and
c) A federally recognized Indian tribe may conduct
sports wagering on Indian lands consistent with the
requirements of IGRA, and under terms no more
stringent than those applicable to any other owner or
operator in the state.
8)Directs the CGCC or the CHRB, as the case may be, to hear
and decide promptly, and in reasonable order, all
applications to conduct sports wagering from owners and
operators of licensed gambling establishments and
SB 1390 (Wright) continued
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licensed horse racing tracks and satellite wagering
facilities.
9)Specifies that permission to conduct sports wagering
shall not be unreasonably withheld for any applicant that
is in good standing and has a current license.
10)Requires the regulators to develop an application form,
and provides that the application to conduct sports
wagering shall include specific information, including
the name and location of the gambling establishment,
horse racing track, or satellite wagering facility and
the names of all persons directly or indirectly
interested in the business, and the nature of the
interest.
11)Directs the CHRB and the CGCC to adopt implementing
regulations governing recordkeeping, methods for issuing
wagering tickets, and the like.
12)Directs the Department of Justice (DOJ) to investigate a
request for authorizations to conduct sports wagering
made by the CGCC or the CHRB.
13)Makes it a misdemeanor to violate any provision of this
sports wagering authorization law, and directs DOJ to
monitor the conduct of all operators and other persons
having a material involvement, directly or indirectly,
with a sports wagering operation.
14)Authorizes DOJ to investigate violations and complaints
lodged against sports wagering operators, initiate
disciplinary actions, and seek license revocations and
other sanctions when warranted. DOJ may file
administrative enforcement actions and seek penalties.
Penalties cannot exceed $20,000 for each separate
violation.
15)Exempts sports wagering conducted under the auspices of
this bill from existing laws that prohibit a person from
making a betting pool or placing a bet or wager on the
result of any contest or event, including a sporting
event.
16)Clarifies existing law governing investigations of
applicants for licensure under the Gambling Control Act,
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providing that the DOJ, if recommending denial of or
restrictions on a license, shall include relevant
documents and information in its report to the CGCC.
EXISTING LAW
Existing California statutes prohibit a person from making
a betting pool or placing a bet or wager on the result of
any contest or event, including a sporting event.
The California Constitution provides that the Legislature
has no power to authorize casinos of the type currently
operating in Nevada and New Jersey.
BACKGROUND
1)Author's purpose : The author wants to allow Californians
to be able to place a bet on a sporting event without
having to travel to Nevada to do so. The author states
that passage of this bill will capture significant
economic activity that has historically been transferred
out of the state. About $2.6 billion is bet on sports
legally in Nevada each year. Instead, a significant
amount of revenue could be captured and infused into
local economies throughout the California.<2> The author
also notes that this bill legitimizes an activity that
has been illegal in the state. The money illegally spent
on sports betting in California is a significant
contributor to California's underground, non-taxed
economy. Finally, the author notes that this bill
authorizes sports wagering only for individuals who have
already been deemed suitable by state law enforcement
officials to conduct other forms of legalized gambling.
2)Federal sports betting law : Federal law prohibits sports
wagering, except in 4 states: Nevada, Oregon, Montana and
Delaware. This prohibition was enacted by Congress in
the Professional and Amateur Sports Protection Act
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<2> It has been reported that, in January 2012 alone, over
$75 million was spent in Nevada on sports betting - all of
it spent on one football game - the Super Bowl. It is
reasonable to assume that a significant portion of that
money was wagered by Californians.
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(PASPA) of 1992.<3> PASPA makes it unlawful for a person
or governmental entity to sponsor, operate, advertise,
promote, license, or authorize wagering or gambling based
on competitive sporting events. The original PASPA
provided a one-year window of opportunity from its
effective date for states to pass laws permitting sports
wagering, and therefore falling outside the reach of
PASPA's sports wagering prohibitions.
In 2009, several parties in New Jersey sued the federal
government, seeking to invalidate PASPA on several
constitutional grounds, including violations of the
Commerce Clause, the Equal Protection Clause, and the
Tenth Amendment.<4> However, the U.S. District Court in
New Jersey granted the motion to dismiss filed by the
government because the plaintiffs lacked standing to
bring the action. New Jersey lacked "standing" because
the State had no law on the books allowing sports
betting; therefore they could not be harmed by the
statute they sought to overturn.<5>
In response to this ruling, the State of New Jersey enacted
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<3> 28 U.S.C. § 3701 et seq.
<4> At the time of the enactment of PASPA, the United
States Department of Justice (US DOJ) strongly opposed the
passage of PASPA based, in part, upon its belief that the
legislation was a substantial intrusion on states' rights.
The US DOJ outlined three fundamental concerns in a letter
to the Senate Judiciary Committee which was considering
PASPA. Among other things, the US DOJ stated that PASPA
calls into question issues of federalism, states' rights,
and "particularly troubling" was the fact that PASPA
permits not only the US Attorney General to seek
enforcement, but it also purports to allow enforcement of a
federal law by private, amateur and professional sports
organizations.
<5> Interactive Media Entertainment & Gaming Association,
Inc. v Holder (D-NJ 2009), Civil Action No. 09-1301 (GEB)
Ýunpublished opn].
SB 1390 (Wright) continued
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legislation in January 2012 legalizing sports betting in
New Jersey casinos. In addition, on January 23, 2012,
Rep. Frank LoBiondo (D-NJ) introduced H.R. 3797, the
"Sports Gaming Opportunity Act of 2012," which is now
pending in the US Congress. H.R. 3797 amends PASPA to
allow all states a new window of opportunity to approve
and establish sports betting within their borders, which
would thereby abolish the federal ban on sports betting
in those states.
The author notes that passage of this bill would serve
two important purposes in connection with PASPA. Absent
a statute on the books, California would also lack the
legal standing to challenge the law in federal court.
Additionally, should Congress re-open a window of
opportunity for states to approve sports betting, this
bill would place the state in a position to take
advantage of what might be a short period of time within
which to authorize sports wagering in California.
3)Economic impact : Following recent passage of the New
Jersey sports betting law, Club CalNeva, a Las
Vegas-based company which operates over 30 sports books
and handles billions of dollars in bets, estimated that
sports betting will bring in, annually, $1.3 billion in
sports wagering gross revenues and $120 million in tax
revenues for New Jersey.<6>
A research report by Union Gaming Research analysts
estimated that, using a revenue distribution methodology,
sports book revenues would average $37 million to $60
million annually for New Jersey.<7> Assuming a 5-year
average sports book hold of Las Vegas, analysts estimate
total sports book revenues of $787 million to $1.3
billion in annual sports book wagers in New Jersey.
Industry experts estimate that allowing sports betting
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<6> Source: "Christie Signs Law Bringing Legal Sports
Betting Closer In NJ," New Jersey Today, Jan. 18, 2012
<7> New Jersey Lawmakers OK Bill to License Casinos, Tracks
to Take Sports Bets" Las Vegas Business Press, January 16,
2012. The article also states that, using a
Sportsbet/visitor methodology, the analysts arrived at
revenues of $48 million for New Jersey, according to the
article.
SB 1390 (Wright) continued
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could mean 10,000 or more jobs for California.<8>
4)Effect on Indian Tribal gaming interests : It is
reasonable to suggest that this bill would have a
favorable economic effect on tribal gaming interests. It
should be noted that this bill does not authorize
Internet sports betting-all sports wagers must be placed
by persons who are physically present at the race track,
card room, or Indian gaming facility.<9> At a time
during which many Indian gaming casinos are struggling to
attract patrons, this bill presents an opportunity to
offer sports enthusiasts an appealing alternative to
Nevada sports books. Regardless of whether the Indian
gaming interests are interested in exploring this
potentially lucrative business opportunity, the federal
and state laws provide that Indian Tribes effectively
have the right to operate any form of gambling allowed
under the laws of the state where the Tribe is
located.<10> This bill expressly authorizes a federally
recognized Indian tribe to conduct sports wagering,
consistent with the requirements of the Indian Gaming
Regulatory Act of 1988 (IGRA).
5)Constitutional issues : Among other things, the
California Constitution states that the Legislature has
no power to authorize lotteries, except for the State
lottery, allows the Legislature to authorize horse
racing, and allows the Legislature to authorize cities
and counties to provide for charitable bingo games.
In addition the state constitution declares that "The
Legislature has no power to authorize, and shall prohibit
casinos of the type currently operating in Nevada and New
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-------------------------
<8> Source: Breon Corcoran, Managing Director, Paddy Power
- Los Angeles Times, August 1, 2010
<9> Therefore, the bill does not run afoul of the federal
Wire Act, which prohibits the use of a wire communications
facility for transmission in interstate or foreign commerce
of bets or wagers on any sporting event or contest.
<10> See, California v. Cabazon Band of Mission Indians
(1987) 480 U.S. 202; and Indian Gaming Regulatory Act
(IGRA), 25 U.S.C. § 2701 et seq., and 18 U.S.C. §§ 1166-68
SB 1390 (Wright) continued
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SB 1390 (Wright) continued
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Jersey."<11> Some contend that this provision means that
the Legislature cannot authorize sports betting; however,
the California Supreme Court appears to disagree.
In 1999, the Court said, for instance, that a "casino" is
simply "a building or room for gambling."<12> Insofar as
the phrase "of the type currently operating in Nevada and
New Jersey" is concerned, the Court wrote:
"The 1984 constitutional amenders must have had
in mind a type of gambling house unique to or
particularly associated with Nevada and New
Jersey, since they chose to define the
prohibited institution by reference to those
states. On this logic, the 'type' of casino
referred to must be an establishment that
offers gaming activities including banked table
games Ýe.g., blackjack] and gaming devices,
i.e., slot machines, for in 1984 that 'type' of
casino was legal only in Nevada and New Jersey
and, hence, was particularly associated with
those states ?of the states, only Nevada and New
Jersey allow 'casinos offering the full range
of gambling games']"<13>
New Jersey has never authorized sports betting, and
certainly didn't allow it in 1984. It is therefore
logical to conclude that wagering on sports events never
" was particularly associated with " New Jersey.
Therefore, objections to the bill based on this
constitutional provision are seemingly misplaced. The
California Supreme Court summarizes and explains as
follows:
"Thus, a casino of 'the type ... operating in
Nevada and New Jersey' may be understood, with
reasonable specificity, as one or more
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<11> Cal. Const., art. IV, § 19, subd. (e), added by
initiative, Gen. Elec. (Nov. 6, 1984)
<12> Hotel Employees & Restaurant Employees Internat. Union
v. Davis (1999) 21 Cal.4th 585, at p. 604.
<13> Hotel Employees, 21 Cal.4th, at p. 605 (emphasis
added)
SB 1390 (Wright) continued
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buildings, rooms, or facilities , whether
separate or connected, that offer gambling
activities including those statutorily
prohibited in California, especially banked
table games and slot machines ."<14>
It therefore appears that what the Legislature cannot do
is authorize so-called brick-and-mortar facilities or
buildings that provide roulette tables, crap tables,
blackjack tables, and especially slot machines and banked
card games .
Proposition 1A (2000) amended the California Constitution
to authorize the Governor to negotiate compacts,<15>
subject to ratification by the Legislature "for the
operation of slot machines and for the conduct of lottery
games and banking and percentage card games by federally
recognized Indian tribes on Indian lands in California in
accordance with federal law. Accordingly, slot machines,
lottery games, and banking and percentage card games are
hereby permitted to be conducted and operated on tribal
lands subject to those compacts." ÝCal. Const., art. IV,
§ 19, subd. (f)]
Thus, it would seem that none of the relevant provisions
of the California Constitution discussed above would
operate to limit or nullify the effect of this bill .
6)Arguments in support : Supporters note that California
failed to take advantage of a one-year window of
opportunity for states to pass a law authorizing sports
betting in advance of a federal ban, and that enactment
of this bill would authorize California to take advantage
of a new federal window period proposed in pending
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<14> Id., at p. 605
<15> Under the terms of most current Indian gaming
Compacts, the State promises that it "?shall not authorize
any person or entity other than an Indian tribe with a
federally authorized compact" to operate slot machines or
banked and percentage card games within each tribe's core
geographic market?" Thus, so long as the state does not
authorize a person or entity to operate slot machines or
banked and percentage card games, this bill does not
violate exclusivity provisions of the compacts.
SB 1390 (Wright) continued
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federal legislation. Therefore, California would not
again miss the opportunity to take advantage of the
revenues and employment associated with this regulated
activity. Supporters believe that this bill could have a
significant positive impact on the future of horse racing
industry, address the underground economy in which
illegal sports betting now takes place, and capture
revenue for the state-which we currently export to
Nevada.
7)Arguments in opposition : Opponents believe that
authorizing people to gamble on sports events is unwise
public policy, and that federal law outlaws sports
betting except in a few states. Other opponents contend
that this bill violates provisions of the State
Constitution prohibiting "casinos of the type currently
operating in Nevada and New Jersey."
PRIOR/RELATED LEGISLATION
SR 49 (Wright) 2009-2010 Session . Urges the President and
the Congress of the United States to remove the ban on
sports wagering by repealing PASPA, and urges the
California Attorney General to take legal action on behalf
of the State of California, as deemed appropriate and
necessary, to challenge enforcement of PASPA, including the
submission of an amicus brief in Interactive Media
Entertainment & Gaming Assoc., Inc. v. Attorney General of
the United States, a case challenging PASPA. (Adopted by
the Senate on August 27, 2010)
SUPPORT:
Bicycle Casino
California Commerce Casino
California Gaming Association
California Thoroughbred Breeders Association
Del Mar Thoroughbred Club
Hawaiian Gardens Casino
Hollywood Park Casino
Los Angeles County Fair Association - Fairplex
Oak Tree Racing Association
Sutters Place, Inc., dba Bay 101 Casino
Thoroughbred Owners of California
OPPOSE:
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Blue Lake Rancheria
California Coalition Against Gambling Expansion
California Nations Indian Gaming Association
California Police Chiefs Association
Elk Valley Rancheria
Rincon Band of Luiseno Indians
FISCAL COMMITTEE: Senate Appropriations Committee