BILL NUMBER: SB 1463	INTRODUCED
	BILL TEXT


INTRODUCED BY   Senators Wright and Steinberg

                        FEBRUARY 24, 2012

   An act to add Chapter 5.2 (commencing with Section 19990.01) to
Division 8 of, and to repeal Sections 19990.235 and 19990.96 of, the
Business and Professions Code, relating to Internet gambling, making
an appropriation therefor, and declaring the urgency thereof, to take
effect immediately.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 1463, as introduced, Wright. Internet gambling.
   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. The Department of Justice has
related investigatory and enforcement duties under the act. Any
violation of these provisions is punishable as a misdemeanor, as
specified.
   This bill would establish a framework to authorize intrastate
Internet gambling, as specified. The bill would authorize eligible
entities to apply to the department for a 10-year license to operate
an intrastate Internet gambling Web site offering the play of
authorized gambling games to registered players within California.
The bill would prohibit the offer or play of any gambling game
provided over the Internet that is not authorized by the state
pursuant to this bill. The bill would provide that any violation of
its provisions is punishable as a misdemeanor. By creating a new
crime, this bill would impose a state-mandated local program.
   The bill would require a license applicant to pay an application
fee to the department, for deposit into the Internet Gambling
Licensing Fund, as created by the bill, to be continuously
appropriated to the department for the reasonably anticipated costs
of investigating the applicant. The bill would also create the
Internet Gambling Fund, for the deposit of an unspecified regulatory
fee, which would be administered by the Controller subject to annual
appropriation by the Legislature for the actual costs of license
oversight, consumer protection, state regulation, problem gambling
programs, and other purposes related to this bill, and which would
not be subject to the formulas established by statute directing
expenditures from the General Fund. The bill would require each
licensee to pay a nonrefundable license fee in the amount of
$30,000,000 for deposit in the General Fund. The license fee would be
credited against monthly fees imposed on the licensee's gross gaming
revenue proceeds, as specified.
   Existing law provides that a statute that imposes a requirement
that a state agency submit a periodic report to the Legislature is
inoperative on a date 4 years after the date the first report is due.

   This bill would require the department, notwithstanding that
requirement, in consultation with the commission, the Treasurer, and
the Franchise Tax Board, to issue a report to the Legislature
describing the state's efforts to meet the policy goals articulated
in this bill within one year of the operative date of this bill and,
annually, thereafter.
   The bill would also require the Bureau of State Audits, 2 years
after the issue date of any license by the state, but no later than 3
years after that date, to issue a report to the Legislature
detailing the implementation of this bill, as specified.
   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: yes. Fiscal committee: yes.
State-mandated local program: yes.


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

  SECTION 1.  Chapter 5.2 (commencing with Section 19990.01) is added
to Division 8 of the Business and Professions Code, to read:
      CHAPTER 5.2.  THE INTERNET GAMBLING CONSUMER PROTECTION AND
PUBLIC-PRIVATE PARTNERSHIP ACT OF 2012



      Article 1.  Title, Legislative Declarations, and Statement of
Legislative Intent


   19990.01.  This chapter shall be known and may be cited as the
Internet Gambling Consumer Protection and Public-Private Partnership
Act of 2012.
   19990.02.  The Legislature hereby finds and declares all of the
following:
   (a) Californians participate in illegal online gambling on
unregulated Internet gambling Web sites every week. These Internet
gambling Web sites are operated by offshore operators that are not
regulated by United States authorities. As such, neither federal nor
California laws provide any consumer protections for California
players. California players assume all risks, any negative social or
financial impacts are borne by the citizens of California, and the
revenues generated from online gambling are being realized by
offshore operators and do not provide any benefits to the citizens of
California.
   (b) The presence, operation, and expansion of offshore,
unlicensed, and unregulated Internet gambling Web sites available to
Californians endanger Californians because the current Internet
gambling Web sites operate illegally and without regulation as
demonstrated by criminal prosecutions of some Internet gambling
purveyors, and questions often arise about the honesty and the
fairness of the games played on these Internet gambling Web sites as
well as about the true purpose for, and use of, proceeds generated by
these unregulated Internet gambling Web sites.
   (c) In October 2006, Congress passed the SAFE Port Act, to
increase the security of United States ports. Embedded within the
language of that act was a section entitled the Unlawful Internet
Gambling Enforcement Act of 2006 (UIGEA), which prohibits the use of
banking instruments, including credit cards, checks, or fund
transfers, for interstate Internet gambling, essentially prohibiting
online gambling by United States citizens. UIGEA does include
exceptions that permit individual states to create a regulatory
framework to enable intrastate Internet gambling, provided the bets
or wagers are made exclusively within a single state, whose state
laws or regulations comply with all of the following:
   (1) Contain certain safeguards regarding those transactions,
including both of the following:
   (A) Age and location verification requirements.
   (B) Data security standards designed to prevent access to minors
and persons located outside of that state.
   (2) Expressly authorize the bet or wager and the method by which
the bet or wager is made.
   (3) Do not violate any federal gaming statutes, including all of
the following:
   (A) The Interstate Horseracing Act of 1978.
   (B) The Professional and Amateur Sports Protection Act.
   (C) The Gambling Devices Transportation Act.
   (D) The Indian Gaming Regulatory Act of 1988 (IGRA).
   (d) State provision of Internet gambling consistent with federal
law provides California with the means to protect its citizens and
consumers under certain conditions by providing a framework to ensure
that, among other things, minors are prevented from gambling,
citizens participating in gambling activities are protected, and the
state is not deprived of income tax revenues to which it would
otherwise be entitled.
   (e) The state currently maintains and implements substantial
regulatory and law enforcement efforts to protect thousands of
Californians who gamble and play, among other things, real-money
poker in licensed California cardrooms and tribal government casinos,
yet the state provides no licensing requirements, regulatory
structure, or law enforcement tools to protect millions of
Californians who play the same games daily for money on the Internet.

   (f) In order to protect Californians who gamble online, allow
state law enforcement to ensure consumer protection, and keep the
revenues generated from Internet gambling in California, it is in the
best interest of the state and its citizens to authorize, implement,
and create a legal system for intrastate Internet gambling.
   (g) It is also the interest of the state to provide hundreds of
millions of dollars annually for the public services that have been
cut repeatedly during the state's budget crisis. It is the intent of
the Legislature in enacting this act to ensure that the state
realizes a minimum of two hundred million dollars ($200,000,000) of
General Fund revenue from licensing fees during the 2012-13 fiscal
year.
   (h) The state's interests are best met by a public-private
partnership between the state and private entities, the terms of
which would facilitate meeting the important consumer protection
interests of the state while ensuring, through the success of the
private entities, that the state receives the benefits of the
licensing scheme as well as tax revenues that it would otherwise not
receive.
   (i) The state's interests are best met by encouraging competition
among qualified entities with the technical expertise and systems
that comply with federal law, protect registered players, and ensure
that the state collects consideration under the licensing scheme with
those qualified entities, personal income taxes owed by registered
players, corporate taxes from the earnings of licensed entities, and
property, employment, and sales and use taxes created from new
businesses, jobs, and other economic inducements from the
authorization, regulation, and control of Internet gambling.
   (j) The Department of Justice, in conjunction with other state
agencies and private partners, has the expertise to evaluate the
qualifications of applicants for a license to conduct intrastate
Internet gambling services, and to license the best qualified and
most responsive applicants to meet the needs of the state and its
citizens.
   (k) The authorization of intrastate Internet gambling pursuant to
these provisions does not violate the California Constitution or
interfere with any right under any compact between the state and any
federally recognized Indian tribe. Moreover, the authorization and
regulation of intrastate Internet gambling pursuant to these
provisions do not violate the exclusivity provisions of any compact
between the state and any federally recognized Indian tribe. Internet
gambling will take place throughout California on both tribal and
nontribal lands. Moreover, the facilities used in the provision of
Internet gambling are not slot machines or gaming devices as defined
in any of those compacts. While the federal Indian Gaming Regulatory
Act of 1998 balanced the interests of three sovereigns, the state,
the tribes, and the federal government, UIGEA was designed to balance
the federal interest in secure financial transactions with the state'
s power to determine how online gambling should take place within
that state. Finally, application of UIGEA in California does not
violate federal Indian law by impinging upon protected tribal
sovereignty.
   (l) Nothing in this chapter prohibits any federally recognized
Indian tribe within California with a tribal-state gaming compact
with the state pursuant to IGRA from participating in intrastate
Internet gambling pursuant to these provisions subject to the
jurisdiction of the state.
   (m) It is the intent of the Legislature to encourage the Governor,
immediately following enactment of this chapter, to enter into meet
and confer negotiations with interested tribal governments that have
tribal-state gaming compacts with the state to resolve the questions
related to exclusivity of tribal gaming, and to ensure that the
signatory parties to compacts may exercise their rights under the
compacts in a timely manner and that the state may commence the
authorization of Internet gambling as provided by this chapter.
   19990.03.  It is the intent of the Legislature to create a
licensing and regulatory framework to:
   (a) Ensure that authorized games are offered only for play in a
manner that is consistent with federal and state law.
   (b) Authorize the Department of Justice to issue licenses, with
the consent of the commission, to applicants that meet the background
requirements and demonstrate the technical expertise to ensure that
wagering authorized by this chapter is offered only to registered
players who are physically present within the borders of California
at the time of play and who are 21 years of age or older.
   (c) Authorize the Department of Justice, after any licensee has
been providing authorized games for three years, and, at any time
thereafter, to renegotiate the terms and conditions of the licenses
with the licensees, based in large part on the report and
recommendations of the Bureau of State Audits to the Legislature
pursuant to Section 19990.96. The state reserves the right to make
reasonable modifications to the terms and conditions of the license
after a three-year review, and, at any time thereafter, to balance
the relationship between the licensee and the state, and offer
existing licensees the opportunity to agree to these modifications
and continue in partnership with the state, subject to the statutory
approval of those terms and conditions by the Legislature.
   (d) Include all of the provisions in this chapter as terms of the
license between the state and each licensee subject to the
enforcement provisions delineated in this chapter.
   (e) Ensure that each licensee complies with federal and state laws
and regulations.
   (f) Grant power to the state agencies authorized in this chapter
to oversee the operations of each licensee and to enforce the
provisions of this chapter to ensure that the interests of the state
and registered players are protected.
   (g) Establish a process that includes a background check and
requires that each employee of each licensee or subcontractor
receives all necessary licenses and work permits from the state.
   (h) Ensure that the state is able to collect income tax revenues
from registered players.
   (i) Distribute regulatory fees collected by the state from each
licensee to the Internet Gambling Fund, as established in Section
19990.86, which shall be administered by the Controller subject to
annual appropriation by the Legislature, and which shall not be
subject to the formulas established by law directing expenditures
from the General Fund, for the following:
   (1) The actual costs of license oversight, consumer protection,
state regulation, and problem gambling programs.
   (2) Other purposes related to this chapter as the Legislature may
decide.
   (j) Create systems to protect each registered player's private
information and prevent fraud and identity theft.
   (k) Ensure that registered players are able to have their
financial transactions processed in a secure and transparent fashion.

   (l) Ensure that all applicable state agencies will have
unrestricted access to the premises and records of each licensee to
ensure strict compliance with state law concerning credit
authorization, account access, and other security provisions.
   (m) Require that each licensee provide registered players with
accessible customer service.
   (n) Require that each licensee's Internet Web site contain
information relating to problem gambling, including a telephone
number that an individual may call to seek information and assistance
for a potential gambling addiction.
   (o) Require that each licensee and all of its subcontractors be
organized in California. The licensee, its facilities, its bank
accounts related to its intrastate online gambling operations, and
its registered players' bank accounts shall be located entirely
within the state.
   (p) Ensure that there are no artificial business constraints on
the licensee, such as limits on the percentage of revenues that may
be paid to technology supply contractors. Licensees and suppliers are
free to structure their own desired relationships without
interference from the state.
   (q) Ensure that all employees of the licensee are physically
present in the state when working on the licensee's Internet gambling
Web site or in its facilities connected to the play of Internet
gambling in this state, or when in contact with registered players.
However, the licensee shall have discretion to use the expertise of
personnel not physically present in the state when necessary to
protect registered players and state interests, including, but not
limited to, for the purposes of diagnosing and addressing
technological problems, investigating fraud and collusion, and
supervising software and configuration changes.
   (r) Create an express exemption from disclosure, pursuant to the
California Public Records Act under subdivision (b) of Section 6253
of the Government Code, that exempts from public disclosure
proprietary information of a license applicant or a licensee in order
to permit disclosure of confidential information to state agencies
while achieving the public policy goals of deploying secure systems
that protect the interests of the state and players.
   (s) Preserve the authority of the state to opt out of, or opt
into, any federal framework for Internet gambling, or to enter into
any agreement with other states to provide Internet gambling.
   (t) As a matter of statewide concern, preempt any city, county, or
city and county from passing any law or ordinance regulating or
taxing any matter covered in this chapter.

      Article 2.  Definitions


   19990.05.  For the purpose of this chapter the following words
have the following meanings:
   (a) "Authorized game" means a game approved by the department
pursuant to Section 19990.14 and played using an intrastate Internet
Web site pursuant to the authority of the state or offered by a
licensee as authorized by the state.
   (b) "Background check" means a criminal history record check and
the electronic submission of fingerprints to the Department of
Justice and to the Federal Bureau of Investigation for processing.
   (c) "Bet" means the placement of a wager in a game.
   (d) "Commission" means the California Gambling Control Commission.

   (e) "Department" means the Department of Justice.
   (f) "Employee" means any natural person employed in, or serving as
a consultant or independent contractor with respect to, the
operation of an intrastate Internet gambling Web site or a
subcontractor.
   (g) "Employee work permit" means a permit issued to an employee of
the licensee by the department after a background investigation.
   (h) "Finding of suitability" means a finding by the department
that a person or entity meets the qualification criteria described in
Section 19990.23, and that the person would not be disqualified from
being a licensee on any of the grounds specified in Section
19990.23.
   (i) "Gambling" means to deal, operate, carry on, conduct,
maintain, or expose for play any game for money.
   (j) "Game" means any gambling game.
   (k) "Gaming system" means the technology, including hardware and
software, used by a licensee to facilitate the offering of authorized
games to registered players.
   (l) "Gross revenues" means the total amount of money paid to a
licensee pursuant to activities authorized under this chapter. Gross
revenues shall not include player deposits and wagers.
   (m) "Internet Gambling Fund" means the fund established pursuant
to Section 19990.86 for annual allocation by the Legislature.
   (n) "Intrastate" means within the borders of California.
   (o) "Land-based gaming entity" means a card club operated pursuant
to Chapter 5 (commencing with Section 19800) or a casino operated by
a federally recognized Indian tribe on Indian land in California
that provides any game for players on its premises that is offered on
an intrastate Internet gambling Web site.
   (p) "Licensee" means an entity licensed pursuant to this chapter
to offer the play of authorized games to registered players on an
intrastate Internet Web site.
   (q) "Online self-exclusion form" means a form on which an
individual notifies a licensee that he or she must be excluded from
participation in authorized games for a stated period of time.
   (r) "Owner" means any person that has a financial interest in or
control of a licensee, subcontractor, or other entity required to be
found suitable under this chapter.
   (s) "Per hand charge" means the amount charged by the licensee for
registered players to play in a per hand game.
   (t) "Per hand game" means an authorized game for which the
licensee charges the player for each hand played.
   (u) "Person" means an individual, corporation, business trust,
estate, trust, partnership, limited liability company, association,
joint venture, government, governmental subdivision, agency, or
instrumentality, public corporation, or any other legal or commercial
entity.
   (v) "Play settings" means the options and default parameters made
available by a licensee to a registered player in the play of
authorized games.
   (w) "Proprietary information" means and includes all information
that, whether or not patentable or registerable under patent,
copyright, trademark, or similar statutes, (1) can be protected as a
trade secret under California law or any other applicable state law,
federal law, or foreign law, or (2) derives independent economic
value, actual or potential, from not being generally known to the
public or to other persons that can obtain economic value from its
disclosure or use. "Proprietary information" includes, but is not
limited to, computer programs, databases, data, algorithms, formulae,
expertise, improvements, discoveries, concepts, inventions,
developments, methods, designs, analyses, drawings, techniques,
strategies, new products, reports, unpublished financial statements,
budgets, projections, billing practices, pricing data, contacts,
client and supplier lists, business and marketing records, working
papers, files, systems, plans and data, and all registrations and
applications related thereto.
   (x) "Registered player" means a player who has registered with a
licensee to play authorized games.
   (y) "Registration information" means the information provided by a
person to a licensee in order to become a registered player.
   (z) "Robotic play" means the use of a machine by a registered
player to take the next action at any point in a game.
   (aa) "State" means the State of California.
   (ab) "Subcontractor" means any person providing goods or services
to a licensee in connection with the operation of authorized games.
   (ac) "Terms of Use Registered Player's Agreement" means the
agreement offered by a licensee and accepted by a registered player
delineating, among other things, permissible and impermissible
activities on an intrastate Internet gambling Web site and the
consequences of engaging in impermissible activities.
   (ad) "Tournament" means a competition in which registered players
play a series of authorized games to decide the winner.
   (ae) "Tournament charge" means the amount charged by the licensee
for registered players to play in a tournament.
   (af) "Tournament winnings" means the amount of any prize awarded
to a registered player in a tournament.
   (ag) "Tribe" means a federally recognized California Indian tribe,
including, but not limited to, the governing body of that tribe or
any entity that is an affiliate of that tribe.

      Article 3.  Legal Authorized Games Offered Over the Internet in
California


   19990.10.  Under the federal Unlawful Internet Gambling
Enforcement Act of 2006, California is permitted to authorize games
as long as all players and the online wagering activities are located
within the state and the games are not played by minors.
   19990.11.  Notwithstanding any other law, a person in California
21 years of age or older is hereby permitted to participate as a
registered player in an authorized game provided over the Internet by
a licensee as described in this chapter.
   19990.12.  (a) A person shall not offer any game on the Internet
in this state unless that person holds a valid license issued by the
state to offer the play of authorized games on an intrastate Internet
Web site pursuant to this chapter.
   (b) It is unlawful for any person to offer or play any gambling
game provided on the Internet that is not authorized by the state
pursuant to this chapter.
   (c) It is unlawful for any person to aggregate computers or other
access devices in a public setting principally for the purpose of
playing gambling games on the Internet, whether or not otherwise
authorized pursuant to this chapter, or to promote or market such a
facility.
   (d) Any violation of this chapter is punishable as a misdemeanor.
   19990.13.  Chapter 5 (commencing with Section 19800) of Division 8
does not apply to this chapter.
   19990.14.  (a) All games offered for play on an intrastate
Internet Web site pursuant to this chapter shall be approved by the
department.
   (b) For the first two years following the initial issue date of
any license pursuant to this chapter, only games commonly referred to
as poker, the play of which is permitted as a controlled game
pursuant to Chapter 5 (commencing with Section 19800), shall be
authorized. After that two-year period, the department may phase in
other games allowed under the California Constitution and the Penal
Code.
   (c) Within 90 days of the department's approval of any new game,
the Legislature may reject, by resolution adopted by majority vote of
either house, any new game approved by the department after the
initial two-year period of poker only games.

      Article 4.  Licensing of Intrastate Internet Gambling Web Sites



   19990.20.  (a) A license to operate an intrastate Internet
gambling Web site shall be issued for a term of 10 years, with a
review of that license initiated during year three of the initial
term.
   (b) All initial licenses issued pursuant to this chapter shall
take effect on the same date, as determined by the department, but
not later than January 1, 2014.
   19990.21.  (a) Each entity described in subdivision (b) is
eligible for a single intrastate Internet gambling Web site license.
There is no limit on the total number of licenses the state may
issue. Any of the eligible entities may jointly apply for a license.
   (b) Entities eligible to apply for a license pursuant to this
chapter for the operation of an intrastate Internet gambling Web site
include all of the following:
   (1) A holder of an owner license issued pursuant to subdivision
(a) of Section 19851 who has been subject to oversight by, and in
good standing with, the commission for the three years immediately
preceding its application for licensure.
   (2) A federally recognized California Indian tribe operating a
casino pursuant to a tribal-state gaming compact under the federal
Indian Gaming Regulatory Act of 1988, that has been subject to
oversight by, and in good standing with, the commission and the
department for the three years immediately preceding its application
for licensure.
   (3) A thoroughbred, quarter horse, or harness association licensed
by the California Horse Racing Board that has been subject to
oversight by, and in good standing with, the board for the three
years immediately preceding its application for licensure.
   (4) An operator of an online advanced deposit wagering site
regulated by the California Horse Racing Board that has been subject
to oversight by, and in good standing with, the board for the three
years immediately preceding its application for licensure.
   19990.22.  (a) Factors to be considered in evaluating a license
applicant shall include, but are not limited to, quality, competence,
experience, past performance, efficiency, reliability, financial
viability, durability, adaptability, timely performance, integrity,
and security.
   (b) (1) A license applicant, and all subcontractors of the
applicant, shall be a resident of California, or an entity organized
in California, and subject to state taxation, auditing, and
enforcement. All facilities and bank accounts of the license
applicant related to intrastate Internet gambling shall be located in
California.
   (2) At all times, a license applicant or licensee shall be
domiciled in California and in good standing with the Secretary of
State and the Franchise Tax Board.
   (3) All subcontractors of a license applicant or licensee, or
persons otherwise providing goods or performing services in
connection with the operation of authorized games for the license
applicant or licensee, or any of its subcontractors, shall be subject
to this subdivision. If a licensee desires to enter into an
agreement with a person to provide goods or services in connection
with the operation of authorized games, that person shall be subject
to this subdivision and investigation and a finding of suitability as
set forth in Section 19990.23.
    (c) In addition to any other confidentiality protections afforded
to license applicants, the state and its agencies shall treat the
proprietary information of any license applicant as confidential to
protect the license applicant and to protect the security of any
prospective intrastate Internet gambling Web site. This chapter shall
not prohibit the exchange of confidential information among state
agencies considering a license application. The confidentiality
provisions in this chapter exempt proprietary information supplied by
a license applicant to a state agency from public disclosure
consistent with subdivision (b) of Section 6253 of the Government
Code.
   (d) A license applicant that has been deemed suitable and eligible
shall submit to the department, together with its application, an
application fee of no less than one million dollars ($1,000,000), and
no greater than five million dollars ($5,000,000), as determined by
the department for the reasonably anticipated costs to complete
necessary background checks and evaluate the suitability of the
applicant. All fees shall be deposited into the Internet Gambling
Licensing Fund, as hereby created, and to be administered by the
department. Notwithstanding Section 13340 of the Government Code, all
moneys in the fund are continuously appropriated to the department,
without regard to fiscal years, in the amounts necessary for the
department to perform its duties under this section and Section
19990.23. Any funds associated with the license applicant that remain
after completion of background checks and the finding of suitability
shall be refunded to the applicant. If additional moneys are needed
to complete the investigation of the license applicant, the applicant
shall pay the funds necessary to complete the
                     investigation.
   (e) A federally recognized California Indian tribe, including, but
not limited to, the governing body of that tribe or any entity that
is an affiliate of that tribe, that applies for a license pursuant to
this chapter shall waive its sovereignty for the purpose of
evaluation of its application. The application shall affirmatively
declare that the license applicant is subject to the state's
jurisdiction as set forth in this chapter and in the regulations
adopted by state agencies. Any license issued pursuant to this
chapter to a federally recognized California Indian tribe shall
include that tribe's affirmative agreement, in a form acceptable to
the department, to be subject to the jurisdiction of the state for
all purposes under this chapter.
   19990.23.  (a) The department shall review the suitability of a
license applicant to operate an intrastate Internet gambling Web
site.
   (b) The department may establish a process to conduct a
preliminary determination of suitability based on a partial
investigation of license applicants. The partial investigation is
intended to screen out applicants that do not meet the suitability
requirements of this chapter. The partial investigation shall include
fingerprint-based state and federal criminal history checks,
inquiries into various public databases regarding credit history and
any civil litigation, and a review of the applicant's financial
status, which shall include the required submission of income
statements and balance sheets for the prior 12-month period. A full
investigation shall be conducted of only those persons that pass
partial investigation and that will undergo a full investigation
pursuant to subdivision (c). Those applicants that do not pass the
partial investigation may appeal the decision to the commission.
   (c) The department shall conduct a full investigation into the
suitability of any license applicant to operate an intrastate
Internet gambling Web site. The investigation shall include all of
the following persons:
   (1) The license applicant and all of its subcontractors.
   (2) All officers of the license applicant.
   (3) The owner or owners of the following:
   (A) The license applicant.
   (B) Any affiliate of the license applicant.
   (C) Any subcontractors of a license applicant, or other persons
otherwise providing goods to, or performing services for, the license
applicant.
   (d) (1) A department-approved, independent forensic accounting
firm shall prepare a report on each applicant undergoing a full
investigation, on a form developed by the department, and at the
applicant's expense. The report shall include the financial
information necessary for the department to make a determination of
suitability, as specified in regulation adopted by the department for
this purpose.
   (2) The department may, by regulation, specify additional
requirements regarding the contents of the report described in
paragraph (1) and any other financial information or documentation
required to be submitted with the application.
   (e) The department shall issue a finding of suitability for a
license applicant to operate an intrastate Internet gambling Web site
only if, based on all of the information and documents submitted,
the department is satisfied that each of the persons subject to
investigation pursuant to this section is both of the following:
   (1) A person of good character, honesty, and integrity, or, if an
entity, in good standing in its jurisdiction of organization and in
all other jurisdictions in which it is qualified, or should be
qualified, to do business.
   (2) A person whose prior activities, criminal record, if any,
reputation, habits, and associations do not pose a threat to the
public interest of this state, or to the effective regulation and
control of controlled gambling, or create or enhance the dangers of
unsuitable, unfair, or illegal practices, methods, and activities in
the conduct of controlled gambling or in the carrying on of the
business and financial arrangements incidental thereto.
   (f) The department shall issue a finding that a license applicant
is not suitable to operate an intrastate Internet gambling Web site
if it finds that any person subject to investigation pursuant to this
section has done any of the following:
   (1) Failed to clearly establish eligibility and qualifications in
accordance with this chapter.
   (2) Failed to timely provide information, documentation, and
assurances required by this chapter or requested by the department,
or, with respect to a license applicant, failed to reveal any fact
material to qualification, or supplied information that is untrue or
misleading as to a material fact pertaining to the suitability
criteria.
   (3) Been convicted of a felony, including a conviction by a
federal court or a court in another state or foreign jurisdiction for
a crime that would constitute a felony if committed in California.
   (4) Been convicted of any misdemeanor involving dishonesty or
moral turpitude within the 10-year period immediately preceding the
submission of the application, unless the applicant has been granted
relief pursuant to Section 1203.4, 1203.4a, or 1203.45 of the Penal
Code. However, the granting of relief pursuant to Section 1203.4,
1203.4a, or 1203.45 of the Penal Code shall not constitute a
limitation on the discretion of the department or affect the
applicant's burden.
   (5) Has associated with criminal profiteering activity or
organized crime, as defined in Section 186.2 of the Penal Code.
   (6) Has contemptuously defied any legislative investigative body,
or other official investigative body of any state or of the United
States or any foreign jurisdiction, when that body is engaged in the
investigation of crimes relating to gambling, official corruption
related to gambling activities, or criminal profiteering activity or
organized crime, as defined in Section 186.2 of the Penal Code.
   (7) Is less than 21 years of age.
   (8) Has accepted any wager from persons in the United States on
any form of Internet gaming that has not been affirmatively
authorized by law in this state or the United States after December
31, 2006, or has been the holder of a direct or indirect financial
interest in a person or entity that has accepted such a wager.
   (g) The department shall request that the United States Department
of Justice or any other federal agency or agency of a state other
than California provide any information about any license applicant
or any of its subcontractors as part of its inquiry as to the
suitability of a license applicant to operate an intrastate Internet
gambling Web site.
   (h) (1) The department shall reject the license application of any
applicant found to be unsuitable to be a licensee.
   (2) The department shall provide to the applicant a written
explanation listing the reasons for denial of the license
application.
   (3) This section neither requires the department to divulge to the
applicant any confidential information received from any law
enforcement agency or any information received from any person with
assurances that the information would be maintained confidential, nor
to divulge any information that might reveal the identity of any
informant or jeopardize the safety of any person.
   (4) Denial of an application shall be without prejudice to a new
and different application filed in accordance with any regulations
adopted by the department with respect to the submission of
applications.
   19990.235.  (a) A finding of suitability by a state gaming agency
within the United States with expertise recognized within the gaming
industry, and that is also recognized as meeting this standard by the
department, shall be grounds for a state provisional finding of
suitability with respect to a particular person or entity until a
permanent suitability finding is issued by the department as to that
person or entity.
   (b) This section shall remain in effect only until January 1,
2016, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2016, deletes or extends
that date.
   19990.24.  In addition to any other data that the department shall
request from license applicants as a matter of law and to ensure
that any license applicant is legally, technically, and financially
qualified to become a licensee, the department shall request that any
license applicant name, describe, or provide all of the following:
   (a) The license applicant's qualifications and the qualifications
of its executives and employees to receive an employee work permit as
set forth in Section 19990.31.
   (b) The license applicant's experience and qualifications to
provide the services anticipated of a licensee as set forth in
Article 5 (commencing with Section 19990.30).
   (c) The names of all of the license applicant's owners,
executives, and employees, as well as sufficient personally
identifiable information on each of those persons to conduct
background checks as required by the department.
   (d) The fingerprints of the owners, directors, managers,
executives, and employees of the licensee, its affiliates, and
subcontractors taken using live scan technology.
   (e) Documentation and information relating to the license
applicant and its direct and indirect owners, including, but not
limited to, all of the following:
   (1) With respect to the license applicant and any of its
subcontractors, proof of formation in California, including, as
applicable, articles of incorporation, articles of organization,
bylaws, operating agreement, partnership agreement, or other
formation or charter documents.
   (2) Current and historical audited financial and accounting
records.
   (3) Any documents relating to legal and regulatory proceedings.
   (4) Any documents relating to the license applicant's business
history.
   (5) Any documents relating to the nature and sources of the
license applicant's financing, including, but not limited to,
operating agreements, partnership agreements, stock purchase
agreements, pro forma cap tables, pro forma statements of profits and
loss, investor rights agreements, voting agreements, and shareholder
agreements. These materials may be submitted subject to a request
for confidentiality.
   (6) Any documentation that demonstrates that the license applicant
is financially qualified to perform the obligations of a licensee as
described in this article.
   (7) An independent financial audit report by a certified public
accountant.
   (f) Documentation and information relating to all proposed
subcontractors of the license applicant, including, but not limited
to, all of the following:
   (1) A description of the services to be provided by each
subcontractor.
   (2) Information for each subcontractor as set forth in
subdivisions (b), (c), and (d).
   (3) For subcontractors that are not formed in California, a
commitment in writing by the subcontractor to create a California
subsidiary prior to the commencement of authorized games provided by
the licensee. The commitment required pursuant to this paragraph
shall be subject to the cure provisions of Section 19990.61.
   (g) A description of the games and services the license applicant
proposes to offer to registered players.
   (h) A description of how the licensee's facilities will accomplish
the goals of this chapter, including, but not limited to:
   (1) The licensee's location within the state.
   (2) The licensee's security systems.
   (i) The license applicant's proposal for how it will facilitate
compliance with all of the standards set forth in this chapter and
federal law, including, but not limited to, Section 5362(10)(B) of
Title 31 of the United States Code, including, but not limited to,
all of the following:
   (1) Age and location verification requirements reasonably designed
to block access to minors and persons located out of state.
   (2) Appropriate data security standards to prevent unauthorized
access by any persons whose age and current location have not been
verified in accordance with this chapter and applicable regulations.
   (3) The requirement that the licensee be located in California and
all bets be initiated and received or otherwise made exclusively
within California.
   (j) The system requirements that the license applicant plans to
implement to achieve the state's goals under this chapter, including,
but not limited to:
   (1) Connectivity.
   (2) Hardware.
   (3) Software.
   (4) Antifraud systems.
   (5) Virus prevention.
   (6) Data protection.
   (7) Access controls.
   (8) Firewalls.
   (9) Disaster recovery.
   (10) Redundancy.
   (11) Gaming systems, including, but not limited to, hardware and
software that ensure all of the following:
   (A) The games are legal.
   (B) The games are independent and fair and played by live persons.

   (C) Game and betting rules are available to all registered
players.
   (D) All data used for the conduct of each game is randomly
generated and unpredictable.
   (12) Accounting systems, including but not limited to, those for
any of the following:
   (A) Registered player accounts.
   (B) Per hand charges.
   (C) Transparency and reporting to all state agencies.
   (D) Distribution of funds, pursuant to the license and this
chapter, to the state and registered players.
   (E) Ongoing auditing.
   (13) Facility security systems to protect the intrastate Internet
gambling Web site from either internal or external threats.
   (k) The license applicant's proposal to facilitate the statutory
duties and responsibilities of the state agencies with jurisdiction
over aspects of the licensee's operations, including, but not limited
to, all of the following:
   (1) The department.
   (2) The commission.
   (3) The Treasurer.
   (4) The Franchise Tax Board.
   (l) An acknowledgment by the license applicant that the terms and
conditions of the license issued by the state may be modified by the
state after three years, and at any time thereafter, at which point
the licensee may either agree to be subject to that modification or
relinquish the license.
   (m) In addition to demonstrating that the license applicant is
legally, technically, and financially qualified to become a licensee,
a licensee shall describe how it will comply with the requirements
of this chapter.
   19990.25.  (a) A holder of an owner license issued pursuant to
subdivision (a) of Section 19851, and who is in good standing, shall
not be deemed unqualified to operate a land-based gambling entity by
reason of an investment in a license applicant or a licensee.
   (b) An official representative of the government of a federally
recognized California Indian tribe with a tribal-state gaming compact
with the state shall not be deemed unqualified to operate a
land-based gambling entity by reason of an investment in a license
applicant or a licensee.
   (c) (1) A license applicant whose application is denied may bring
an action to appeal that decision to the Superior Court of the County
of Sacramento. The decision of the Superior Court of the County of
Sacramento is not appealable. No remedy other than an injunction is
available pursuant to this subdivision.
   (2) The Superior Court of the County of Sacramento shall uphold
the decision by the department if there is any substantial evidence
to support the department's decision to deny the license application.

   (3) If the Superior Court of the County of Sacramento finds for
the license applicant, it shall return the application to the
department for action consistent with the decision of the court.
   19990.26.  (a) At least two years after the initial issue date of
any license pursuant to this chapter, but no later than three years
after that date, the Bureau of State Audits shall issue a report to
the Legislature consistent with Section 19990.96.
   (b) At least three years after the initial issue date of any
license pursuant to this chapter, but no later than four years after
that date, the department, the commission, the Legislature, and
licensees shall meet to review the operation of intrastate Internet
gambling Web sites pursuant to this chapter. The department may
renegotiate the terms and conditions of the licenses with the
licensees, based in large part on the report and recommendations of
the Bureau of State Audits to the Legislature pursuant to Section
19990.96 with respect to all aspects of the licensees' operations,
obligations, and economics. The state reserves the right to make
reasonable modifications to the terms and conditions of the licenses
after that three-year review, and at any time thereafter, to balance
the relationship between the licensees and the state.
   (c) If the Legislature statutorily approves new or modified
license terms and conditions relating to the rights and obligations
of the licensees, which modification may include amendment of this
chapter, the department shall notify existing licensees of the new
terms and conditions in accordance with the statutory changes
approved by the Legislature. A licensee shall indicate whether it
accepts the new or modified license terms and conditions within 30
days of receiving notification from the department. A licensee's
acceptance of the new or modified license terms and conditions shall
apply for the remaining term of the license, or until those terms and
conditions are subsequently modified by the Legislature. The
licensee also may decline to accept the new or modified license terms
and conditions, but, pursuant to that declination, shall relinquish
the license to the state without compensation.
   (d) If the department recommends no changes to the terms and
conditions of the license, or if the Legislature does not approve any
changes to the terms or conditions of the license, the licensees
shall continue to operate under the existing terms and conditions of
the license, and the license shall remain in force for the remainder
of the term of the license, or until those terms and conditions are
subsequently renegotiated and are approved by the Legislature.
   (e) No relicensing shall be required upon modification.

      Article 5.  Rights and Obligations of Licensees


   19990.30.  (a) A licensee shall comply with the terms of this
chapter.
   (b) In the event of commercial infeasibility created by a change
in federal law rendering the provision of intrastate Internet
gambling services illegal, or some other event, a licensee may
abandon its operations after providing the department with 90 days'
advance notice of its intent and a statement explaining its
interpretation that continuing to operate the intrastate Internet
gambling Web site is commercially infeasible. In response to that
notice, the state may file an action in the Superior Court of the
County of Sacramento as it deems necessary to protect any state
interests, including, but not limited to, the interests of registered
players.
   (c) In the event that any dispute arises between the state and the
licensee, either the department or a licensee may file an action in
the superior court of any county in which the department has an
office for an interpretation of the rights and responsibilities of
the state and the licensee pursuant to this chapter.
   19990.31.  (a) Prior to initiating operations and thereafter, a
licensee shall ensure that every employee has been issued an employee
work permit by the department, pursuant to standards adopted by the
department, prior to that person having access to the licensee's
facilities. The permit shall be renewed every two years.
   (b) An employee work permit shall not be issued unless, based on
all of the information and documents submitted, the department is
satisfied that the applicant is, at a minimum, all of the following:
   (1) A person of good character, honesty, and integrity.
   (2) A person whose prior activities, criminal record, if any,
reputation, habits, and associations do not pose a threat to the
public interest of this state, or to the effective regulation and
control of controlled gambling, or create or enhance the dangers of
unsuitable, unfair, or illegal practices, methods, and activities in
the conduct of controlled gambling or in the carrying on of
incidental business and financial arrangements.
   (3) A person who is in all other respects qualified to hold an
employee work permit as provided in this chapter.
   (c) The department shall disqualify an applicant for an employee
work permit for any of the following reasons:
   (1) Failure of the applicant to clearly establish eligibility and
qualification in accordance with this chapter.
   (2) Failure of the applicant to provide timely information,
documentation, and assurances required by this chapter or requested
by any state official, or failure of the applicant to reveal any fact
material to the qualification, or the supplying of information that
is untrue or misleading as to a material fact pertaining to the
qualification criteria.
   (3) Conviction of a felony, including a conviction by a federal
court or a court in another state for a crime that would constitute a
felony if committed in California.
   (4) Conviction of the applicant for any misdemeanor involving
dishonesty or moral turpitude within the 10-year period immediately
preceding the submission of the application, unless the applicant has
been granted relief pursuant to Section 1203.4, 1203.4a, or 1203.45
of the Penal Code. However, the granting of relief pursuant to
Section 1203.4, 1203.4a, or 1203.45 of the Penal Code shall not
constitute a limitation on the discretion of the department or affect
the applicant's burden under subdivision (b).
   (5) Association of the applicant with criminal profiteering
activity or organized crime, as defined by Section 186.2 of the Penal
Code.
   (6) Contemptuous defiance by the applicant of any legislative
investigative body, or other official investigative body of any state
or of the United States, when that body is engaged in the
investigation of crimes relating to gambling, official corruption
related to gambling activities, or criminal profiteering activity or
organized crime, as defined by Section 186.2 of the Penal Code.
   (7) The applicant is less than 21 years of age.
   (d) A licensee shall apply for an employee work permit on behalf
of each employee.
   (e) A person shall not be issued an employee work permit unless
the person meets the qualification standards adopted by the
department.
   (f) The department shall establish a fee to be paid by a licensee
in submitting applications for employee work permits on behalf of
that licensee's employees. The department shall establish processes
for the revocation or suspension of an intrastate Internet gambling
Web site license or employee work permit, and to withdraw an
application for an intrastate Internet gambling Web site license or
employee work permit.
   (g) (1) A licensee or subcontractor of a licensee shall not enter
into, without prior approval of the department, any contract or
agreement with a person who is denied a gambling license or employee
work permit pursuant to Chapter 5 (commencing with Section 19800), or
whose gambling license or employee work permit is suspended or
revoked by the department, or with any business enterprise under the
control of that person, after the date of receipt of notice of the
department's action.
   (2) A licensee or subcontractor of a licensee shall not enter into
any contract or agreement with a person or entity that has accepted
any wager from persons in the United States on any form of Internet
gaming that has not been affirmatively authorized by law in this
state or the United States after December 31, 2006, or has been the
holder of a direct or indirect financial interest in a person or
entity that has accepted such a wager.
   (h) A licensee or subcontractor of a licensee shall not employ,
without prior approval of the department, any person in any capacity
for which he or she is required to have an employee work permit, if
the person has been denied a gambling license or an employee work
permit pursuant to Chapter 5 (commencing with Section 19800), or if
his or her gambling license or employee work permit has been
suspended or revoked after the date of receipt of notice of the
action by the department. A licensee or subcontractor of a licensee
shall not enter into a contract or agreement with a person whose
application for a gambling license or an employee work permit has
been withdrawn with prejudice, or with any business enterprise under
the control of that person, for the period of time during which the
person is prohibited from filing a new application for a gambling
license or an employee work permit.
   (i) If an employee who is required to hold an employee work permit
pursuant to this chapter is denied an employee work permit, or has
his or her employee work permit revoked by the department, the
employee shall be terminated in all capacities. The employee shall
not be permitted to exercise a significant influence over the
gambling operation, or any part thereof, upon notification of the
licensee of the department's action.
   (1) If an employee who is required to hold an employee work permit
pursuant to this chapter has his or her employee work permit
suspended, the employee shall be suspended in all capacities. The
employee shall not be permitted to exercise a significant influence
over the gambling operation, or any part thereof, during the period
of suspension, upon notification of the licensee of the department's
action.
   (2) If a licensee or subcontractor of a licensee designates
another employee to replace the employee whose employment was
terminated or suspended, the licensee or subcontractor shall promptly
notify the department and shall apply for an employee work permit on
behalf of the newly designated employee.
   (j) A licensee or subcontractor of a licensee shall not pay to a
person whose employment has been terminated or suspended pursuant to
subdivision (i) any remuneration for any service performed in any
capacity in which the person is required to hold an employee work
permit, except for amounts due for services rendered before the date
of receipt of notice of the department's action of suspension or
termination.
   (k) Except as provided in subdivision (i), a contract or agreement
for the provision of services or property to a licensee or
subcontractor or for the conduct of any activity pertaining to the
operation of an intrastate Internet gambling Web site, which is to be
performed by a person required by this chapter or by regulations
adopted pursuant to this chapter, to hold an employee work permit,
shall be terminated upon a suspension or revocation of the person's
employee work permit.
            (l) In any case in which a contract or agreement for the
provision of services or property to a licensee or an affiliate
thereof, or for the conduct of any activity at an intrastate Internet
gambling Web site, is to be performed by a person required by this
chapter or by regulations adopted by the department to hold an
employee work permit, the contract shall be deemed to include a
provision for its termination without liability on the part of the
licensee, affiliate, or subcontractor upon a suspension or revocation
of the person's employee work permit. In any action brought by the
department to terminate a contract pursuant to subdivision (k) or
this subdivision, it shall not be a defense that the agreement does
not expressly include the provision described in this subdivision,
and the lack of express inclusion of the provision in the agreement
shall not be a basis for enforcement of the contract by a party
thereto.
   (m) If a licensee does not comply with the requirements of this
section, the department may impose a civil fine of not more than ____
dollars ($____) per occurrence. In the event that a licensee
negligently, willfully, or wantonly fails to comply with these
requirements, the department may initiate an enforcement action and
subject a licensee to a civil fine of ____ dollars ($____) and may
begin proceedings to suspend or revoke the licensee's license.
   19990.32.  The licensee shall be responsible for providing current
and accurate documentation on a timely basis to all state agencies
as provided in this chapter.
   (a) In addition to any other confidentiality protections provided
to persons licensed by the state, the state and its agencies shall
treat the proprietary information provided by a licensee as
confidential to protect the licensee and to protect the security of
the intrastate Internet gambling Web site.
   (b) The confidentiality provisions of this chapter exempt
proprietary information supplied by a licensee to a state agency from
public disclosure consistent with subdivision (b) of Section 6253 of
the Government Code.
   19990.33.  (a) Changes in ownership of the licensee shall be
approved by the department prior to the closing of any proposed
transaction.
   (b) The department shall investigate to ensure that any person
acquiring interest in a licensee is suitable and otherwise
financially, technically, and legally qualified to be a licensee
consistent with the provisions of this chapter. If an acquiring
person is found to be unsuitable to be a licensee or otherwise not
financially, technically, or legally qualified to be a licensee, the
licensee or the acquiring person may challenge that determination
consistent with subdivision (c) of Section 19990.25.
   19990.34.  All facilities, software, including downloadable
programs, and any other property, both tangible and intangible, used
by the licensee in offering authorized games for play on an
intrastate Internet gambling Web site shall be the property of the
licensee or its subcontractors, and shall be approved by the
department.
   19990.35.  (a) A licensee shall ensure that registered players are
eligible to play authorized games and implement appropriate data
security standards to prevent access by a person whose age and
location has not been verified in accordance with this chapter.
   (b) A registered player shall be physically located within the
State of California at the time of gambling.
   (c) A registered player shall not be less than 21 years of age.
   (1) Online games shall not be provided, directly or indirectly, to
any person under 21 years of age.
   (2) Each licensee shall do all of the following:
   (A) Prior to registering a person as a registered player or
permitting a person to play an authorized game, the licensee shall
verify that the person is 21 years of age or older. The licensee or
seller shall attempt to match the name, address, and date of birth
provided by the person to information contained in records in a
database of individuals who have been verified to be 21 years of age
or older by reference to an appropriate database of government
records. The licensee also shall verify that the billing address on
the check or credit card offered for payment by the person matches
the address listed in the database.
   (B) If the licensee is unable to verify that the person is 21
years of age or older pursuant to subparagraph (A), the licensee
shall require the person to submit an age-verification kit consisting
of an attestation signed by the person that he or she is 21 years of
age or older and a copy of a valid form of government
identification. For the purposes of this section, a valid form of
government identification includes a driver's license, state
identification card, passport, official naturalization or immigration
document, such as an alien registration receipt card or an immigrant
visa, or United States military identification. The licensee also
shall verify that the billing address on the check or credit card
provided by the person matches the address listed in the government
identification.
   (C) The licensee shall not permit registered players to make
payments by money order or cash. The licensee shall submit to each
credit card company with which it has credit card sales, information
in an appropriate form and format so that the words "Internet
gambling" may be printed on the purchaser's credit card statement
when a payment to a licensee is made by credit card payment.
   (3) If a licensee complies with the requirements of paragraph (2),
and a person under 21 years of age participates in an authorized
game provided by the licensee, the licensee is not in violation of
this section.
   (4) The department may assess civil penalties against a person
that violates this section, according to the following schedule:
   (A) Not less than one thousand dollars ($1,000) and not more than
two thousand dollars ($2,000) for the first violation.
   (B) Not less than two thousand five hundred dollars ($2,500) and
not more than three thousand five hundred dollars ($3,500) for the
second violation.
   (C) Not less than four thousand dollars ($4,000) and not more than
five thousand dollars ($5,000) for the third violation.
   (D) Not less than five thousand five hundred dollars ($5,500) and
not more than six thousand five hundred dollars ($6,500) for the
fourth violation.
   (E) Ten thousand dollars ($10,000) for a fifth or subsequent
violation.
   (d)  The department shall, by regulation, provide a process for a
licensee to exclude from play any person who has filled out an online
self-exclusion form.
   (1) The department shall develop an online self-exclusion form
within six months of the operative date of this chapter.
   (2) The department shall deliver the form to each licensee.
   (3) A licensee shall prominently display a link to the department'
s Responsible Gambling Internet Web page and the online
self-exclusion form on the Internet Web page that is displayed when
either of the following occurs:
   (A) A person registers as a registered player.
   (B) Each time a registered player accesses the intrastate Internet
gambling Web site prior to playing.
   (4) A licensee shall retain the online self-exclusion form to
identify persons who want to be excluded from play.
   (5) A licensee that has made commercially reasonable efforts to
comply with this subdivision shall not be held liable in any way if a
person who has filled out an online self-exclusion form plays
despite that person's request to be excluded.
   19990.36.  A licensee shall only offer authorized games and
process bets in accordance with the specified game and betting rules
established by the licensee and approved by the department pursuant
to Section 19990.14.
   19990.37.  (a) In order to propose a game for play, a licensee
shall provide the department with both of the following:
   (1)  Game rules and betting rules it proposes to offer to
registered players.
   (2) Documentation relating to development and testing of the game'
s software.
   (b) The department shall approve the game rules and betting rules
before a licensee may offer the game to registered players.
   19990.38.  (a) A licensee shall ensure that games are fair.
   (b) The gaming system shall display for each game the following
information:
   (1) The name of the game.
   (2) Any restrictions on play.
   (3) The rules of the game.
   (4) All instructions on how to play.
   (5) The unit and total bets permitted.
   (6) The registered player's current account balance which shall be
updated in real time.
   (7) Any other information that a licensee determines is necessary
for the registered player to have in real time to compete fairly in
the game.
   (c) Data used to create game results shall be unpredictable so
that it is infeasible to predict the next occurrence in a game, given
complete knowledge of the algorithm or hardware generating the
sequence and all previously generated numbers.
   (d) A licensee shall deploy controls and technology to minimize
fraud or cheating through collusion, including external exchange of
information between different players, robotic play, or any other
means.
   (1) If a licensee becomes aware that fraud or cheating is taking
place or has taken place, it shall take steps to stop those
activities immediately and inform the department of all relevant
facts.
   (2) The department shall not impose liquidated damages against a
licensee to prevent fraud or cheating if the licensee can demonstrate
that it acted responsibly to prevent those activities as soon as the
licensee became aware of them.
   (e) In a per hand game, if the gaming server or software does not
allow a game to be completed, the game shall be void and all funds
relating to the incomplete game shall be returned to the registered
player's account.
   (f) In a tournament, if the gaming server or software does not
allow the tournament to be completed, all prize money shall be
distributed among players in accordance with the procedure published
by the licensee prior to the commencement of the tournament.
   19990.39.  (a) A licensee shall register players and establish
player accounts prior to play.
   (b) A person shall not participate in any game provided by a
licensee unless the person is a registered player and holds an
account.
   (c) Accounts shall be established in person, by mail, telephone,
or by any electronic means.
   (d) To register and establish an account, a person shall provide
the following registration information:
   (1) First name and surname.
   (2) Principal residence address.
   (3) Telephone number.
   (4) Social security number.
   (5) Identification or certification to prove that person is at
least 21 years of age.
   (6) Valid e-mail address.
   (e) A licensee shall provide registered players with the means to
update the registration information provided to the licensee.
   (f) Nothing in this section shall prevent a licensee from entering
into a marketing agreement with any third party to recruit people to
become registered players if the registration process described in
this section is under the sole control of the licensee.
   19990.40.  (a) A licensee shall provide a means for registered
players to put funds into a registered player account and transfer
funds out of that account.
   (b) A registered player shall identify the source of funds to be
used to put money into the account established once the registration
process is complete, and a licensee shall provide a means for a
registered player to transfer money into and out of the player's
intrastate Internet gambling Web site account.
   (c) At the time of establishing an intrastate Internet gambling
Web site account, a registered player shall designate the bank
account into which funds from the registered player's intrastate
Internet gambling Web site account are to be transferred.
   (d) A registered player shall establish only one account on any
intrastate Internet gambling Web site.
   (e) While playing an authorized game, a licensee shall not permit
a registered player to increase the amount of money in that
registered player's account after that hand has started and before
its completion.
   (f) A licensee shall maintain records on the balance of each
registered player's account.
   (g) A licensee shall not permit a registered player to place a
wager unless the registered player's account has sufficient funds to
cover the amount of the wager.
   (h) A licensee shall not provide credit to a registered player's
account or act as agent for a credit provider to facilitate the
provision of funds.
   (i) No interest shall be paid by a licensee with respect to
registered player accounts.
   19990.41.  (a) A licensee shall segregate funds it holds in all
registered player accounts from all of its other assets.
   (b) A licensee shall not commingle funds in the segregated account
containing funds paid by registered players with any other funds
held by the licensee, including, but not limited to, operating funds
of the licensee. Both the accounts of the licensee and its segregated
registered player accounts shall be held in financial institutions
located in the state.
   (c) Funds held in a registered player's account shall only be used
for the following purposes:
   (1) To pay per hand or tournament charges owed by a registered
player to the licensee for play of authorized games.
   (2) To transfer funds from one registered player's account to the
account of another registered player to reconcile the result of a
loss in the play of an authorized game.
   (3) To transfer funds from a registered player's account to a
temporary account to be held by a licensee pending the outcome of an
authorized game.
   (4) To remit tax proceeds due and owing from a registered player
to the Franchise Tax Board.
   (5) To transfer funds from a registered player's account with the
licensee to an account specified by a registered player upon that
registered player's request.
   19990.42.  Prior to completing the registration process, a
licensee shall explain to the person who is registering in a
conspicuous fashion the privacy policies of the intrastate Internet
gambling Web site, and a person shall assent to the following
policies:
   (a) No personally identifiable information shall be shared with
any nongovernment third parties except as provided in subdivision (j)
of Section 19990.47.
   (b) All personally identifiable information about registered
players shall be shared with state agencies, including, but not
limited to, the department, the commission, and the Franchise Tax
Board, as necessary to assist them in fulfilling their obligations
under this chapter.
   (c) Personally identifiable information may be shared with
government agencies only as set forth in subdivision (b) or subject
to court order as provided in subdivision (j) of Section 19990.47.
   19990.43.  A licensee may require that a registered player, or a
person registering as a player, agree to a Terms of Use Registered
Player's Agreement.
   19990.44.  A licensee may suspend or revoke the account of a
registered player for any of the following reasons:
   (a) A person or registered player provided false information to
the licensee, including, but not limited to, in the registration
process.
   (b) The registered player has not updated registration information
to keep it current.
   (c) The registered player has violated the intrastate Internet
gambling Web site's Terms of Use Registered Player's Agreement.
   (d) The person has already been registered.
   (e) The licensee suspects that the registered player has
participated in an illegal or unauthorized activity on the intrastate
Internet gambling Web site.
   (f) The licensee is directed by a state agency to suspend or
revoke the registered player's account.
   19990.45.  (a) Upon registration, and each time a registered
player logs into an intrastate Internet gambling Web site, the
licensee shall permit a registered player to adjust his or her play
settings to:
   (1) Set a limit on the deposits that can be made per day.
   (2) Set a limit on the aggregate losses in a registered player's
account within a specified period of time.
   (b) During play, in order to assist a registered player to decide
whether to suspend play, the registered player's screen shall do all
of the following:
   (1) Indicate how long the player has been playing.
   (2) Indicate the net change in value to a registered player's
account since the time of last logging in.
   (3) At least once every six hours require the registered player to
confirm that the player has read the message or give an option to
the player to end the session or return to the game.
   19990.46.  A licensee shall establish a toll-free telephone
customer service hotline that shall be available to registered
players 24 hours per day, 365 days a year. All employees shall be
physically present in the state while in contact with registered
players. However, the licensee shall have discretion to use the
expertise of personnel not physically present in the state when
necessary to protect registered players and state interests,
including, but not limited to, for the purposes of diagnosing and
addressing technological problems, investigating fraud and collusion,
and supervising software and configuration changes. The licensee
shall give notice to the department when using personnel who are out
of state.
   19990.47.  (a) A licensee shall protect the privacy of registered
players and their personally identifiable information.
   (b) A licensee shall comply with all state and federal privacy and
data protection laws.
   (c) At the time of registration with a licensee as a registered
player, and at least once a year thereafter, a licensee shall provide
notice in the form of a separate, written statement, delivered via
postal service or electronic mail, to the registered player that
clearly and conspicuously informs the registered player of all of the
following:
   (1) The nature of personally identifiable information collected or
to be collected with respect to the registered player and the nature
of the use of that information.
   (2) The nature, frequency, and purpose of any disclosure that may
be made of personally identifiable information, including an
identification of the types of persons to whom the disclosure may be
made.
   (3) The period during which personally identifiable information
will be maintained by the licensee.
   (4) The times and place at which the registered player may have
access to personally identifiable information in accordance with
subdivision (h).
   (5) The limitations provided by this section with respect to the
collection and disclosure of personally identifiable information by a
licensee and the right of the registered player under subdivision
(j) or (k) to enforce those limitations.
   (d) A licensee shall not collect personally identifiable
information concerning any registered player without the prior
written or electronic consent of the registered player concerned.
   (e) A licensee may collect personally identifiable information in
order to do both of the following:
   (1) Obtain information necessary to operate the intrastate
Internet gambling Web site and offer authorized games to registered
players pursuant to this chapter.
   (2) Detect unauthorized play, activities contrary to a licensee's
Terms of Use Registered Player's Agreement, or activities contrary to
state or federal law.
   (f) Except as provided in subdivision (g), a licensee shall not
disclose personally identifiable information concerning any
registered player without the prior written or electronic consent of
the registered player concerned and shall take actions necessary to
prevent unauthorized access to that information by a person other
than the registered player or licensee.
   (g) A licensee may disclose personally identifiable information if
the disclosure is any of the following:
   (1) Necessary to render, or conduct a legitimate business activity
related to, the provision of authorized games to the registered
player by the licensee.
   (2) Subject to subdivision (k), made pursuant to a court order
authorizing the disclosure, if the registered player is notified of
the order by the person to whom the order is directed.
   (3) A disclosure of the names and addresses of registered players
to any tournament third party, if both of the following apply:
   (A) The licensee has provided the registered player the
opportunity to prohibit or limit the disclosure.
   (B) The disclosure does not reveal, directly or indirectly, the
nature of any transaction made by the registered player over the
intrastate Internet gambling Web site.
   (4) To the department to fulfill its obligations under this
chapter or a state agency as authorized in this chapter.
   (h) A registered player shall be provided access to all personally
identifiable information regarding that registered player that is
collected and maintained by a licensee. The information shall be made
available to the registered player at reasonable times and at a
place designated by the licensee. A registered player shall be
provided reasonable opportunity to correct any error in the
information.
   (i) A licensee shall destroy personally identifiable information
if the information is no longer necessary for the purpose for which
it was collected, and there are no pending requests or orders for
access to the information under subdivision (k).
   (j) Any person aggrieved by any act of a licensee in violation of
this section may bring a civil action in any superior court. The
court may award:
   (1) Actual damages but not less than the rate of ____ a day for
each day of violation or ____, whichever is higher.
   (2) Punitive damages.
   (3) Reasonable attorney's fees and other litigation costs
reasonably incurred.
   (k) Except as provided in subdivision (g), a governmental or
nongovernmental third party may obtain personally identifiable
information concerning a registered player pursuant to a court order
only if, in the court proceeding relevant to the court order, both of
the following apply:
   (1) The third party offers clear and convincing evidence that the
subject of the information is reasonably suspected of engaging in
criminal activity or otherwise relevant to a pending civil action and
that the information sought would be material evidence in the case.
   (2) The registered player about whom the information is requested
is afforded the opportunity to appear and contest the third-party's
claim.
   19990.48.  A licensee shall establish a book of accounts and
regularly audit all of its financial records and reports, which
shall, at a minimum, include all of the following:
   (a) Monthly auditable and aggregate financial statements of
gambling transactions.
   (b)  Monthly calculation of all amounts payable to the state.
   (c) The identity of registered players.
   (d) The balance on each registered player's account at the start
of a session of play, the amount won or lost by each registered
player during a game, and the balance on the registered player's
account.
   (e) The wagers placed on each game, time stamped by the games
server.
   (f) The result of each game, time stamped by the games server.
   (g) The amount, if any, as determined by the registered` player,
withheld from winnings for federal or state income tax purposes.
   19990.49.  (a) A licensee shall make all financial records
established and maintained pursuant to Section 19990.48, including,
but not limited to, all books, records, documents, financial
information, and financial reports, available on both an electronic
basis and in hard copy, as required by the department or other state
agencies so that those state agencies can fulfill their
responsibilities under this chapter.
   (b) The licensee's data shall be retained in a manner by which it
may be accessed by the state agencies online.
   (c) Notwithstanding subdivision (b), data covered by subdivisions
(d), (e), and (f) of Section 19990.48 shall be accessible to the
state agencies online for 120 days, and, thereafter, archived and
retained for one year.
   19990.50.  (a) A licensee shall implement technical systems that
materially aid the department in the protection of registered
players.
   (b) A licensee shall define and document its methodology for
developing software and applications and describe the manner in which
software protects registered players from fraud and other risks in
the play of authorized games and in the management of registered
player accounts.
   (c) A licensee shall meet minimum game server connectivity
requirements to ensure that registered players are protected from
losses due to connectivity problems.
   (d) A licensee shall ensure that all transactions involving
registered players' funds shall be recoverable by the system in the
event of a failure or malfunction.
   (e) All information required for reviewing a game interrupted due
to loss of connectivity shall be recoverable by the licensee.
   (f) Preventative and detective controls addressing money
laundering and fraud risks shall be documented and implemented by the
licensee.
   19990.51.  (a) A licensee may charge registered players to play in
authorized games.
   (b) Per hand charges are permitted.
   (1) A per hand charge shall be designated and conspicuously posted
on the screen prior to the start of each authorized game.
   (2) A licensee may vary the per hand charges to registered players
based on betting limits or other factors.
   (c) Tournament charges shall be permitted.
   (1) A tournament charge shall be designated and conspicuously
posted on the screen prior to the start of the first authorized game
of any tournament.
   (2) A licensee may vary tournament charges based on tournament
prizes or other factors.
   (d) A licensee shall provide notice to the department of the
charges to registered players prior to initiating play.
   19990.52.  A licensee may enter into an agreement with any third
party to sponsor or underwrite prizes for a tournament, subject to
the approval of the department.
   19990.53.  A licensee may enter into an agreement to sell
advertisement space on any Internet Web site it controls, subject to
the approval of the department.
   19990.535.  (a) A licensee may enter into an agreement with a
third party for marketing, or any other purpose consistent with this
chapter, including, but not limited to, displaying the name of a
marketing partner on a screen viewed by a registered player.
   (b) A licensee shall not utilize any brand or business name, trade
or service mark, software, customer information, or other data
acquired, derived, or developed directly or indirectly from any
operation                                            that has
accepted any wager from persons in the United States on any form of
Internet gaming that has not been affirmatively authorized by law in
this state or the United States after December 31, 2006. To the
extent any business relationships or financial arrangements were
utilized or existed to further any such illegal Internet gambling,
those relationships and arrangements shall be discontinued.
   19990.54.  A licensee may enable a chat function between
registered players if it has in place effective controls against
collusion, subject to the approval of the department.
   19990.55.  A licensee may post Internet Web links on the Internet
Web sites it controls to permit registered players to access remote
Internet Web sites, subject to the approval of the department.
   19990.56.  A licensee may enter into contractual agreements with
one or more licensees for the purpose of ensuring adequate player
liquidity, subject to the approval of the department.
   19990.57.  A licensee may allow a registered player to participate
simultaneously in multiple games or tournaments, if the licensee has
demonstrated to the department that it has technical controls that
prohibit a registered player from playing multiple hands
simultaneously in the same game, subject to the approval of the
department.
   19990.58.  (a) Any entity licensed to operate an intrastate
Internet gambling Web site shall remit to the Treasurer for deposit
in the General Fund a nonrefundable license fee in the amount of
thirty million dollars ($30,000,000). This amount shall be credited
against fees imposed pursuant to subdivision (b) on the licensee's
gross gaming revenue proceeds for the first three years of operation.
Upon depletion of the license fee, the department shall notify the
licensee to commence monthly payments to the state in accordance with
subdivision (b).
   (b) A licensee shall remit to the Treasurer on a monthly basis for
deposit in the General Fund, an amount equal to 10 percent of its
gross revenues.
   (1) Each monthly payment shall be due on the 10th day of the
following month.
   (2) A licensee shall make all electronic and written financial
records available to the Treasurer, the commission, and the
department on an electronic basis.
   (3) For the purposes of determining gross revenues, the licensee
and the Treasurer shall use generally accepted accounting principles.

   (c) Each licensee shall pay a regulatory fee, to be deposited in
the Internet Gambling Fund as established by Section 19990.86, in an
amount to be determined by the department for the actual costs of
license oversight, consumer protection, state regulation, problem
gambling programs, and other purposes related to this chapter.
   19990.59.  (a) The licensee shall facilitate the collection of
personal income taxes from registered players by the Franchise Tax
Board.
   (b) The licensee shall withhold 5 percent of tournament winnings
for state income tax if the winnings less the tournament charge are
more than six hundred dollars ($600) and are at least 300 times the
tournament charge.
   (1) The licensee shall transfer that withheld income to the
Franchise Tax Board.
   (2) Winnings and losses of the registered player from other
tournaments sponsored by the licensee during the year are not taken
into account in arriving at the six-hundred-dollar ($600) amount.
Required withholding is determined on a tournament-by-tournament
basis.
   (c) Within six months of the operative date of this chapter, the
Franchise Tax Board shall publish a form to be used annually by a
licensee to ensure that the state is able to collect income tax
revenues from registered players. The Franchise Tax Board shall
provide a date by which the form is required to be filed. The form
shall include, but shall not be limited to, the following
information:
   (1) The registered player's first name and surname.
   (2) Social security number.
   (3) The total amount the registered player deposited in his or her
account during the year.
   (4) The registered player's total winnings, if any, during the
year.
   (5) The registered player's total losses, if any, during the year.

   (6) The total amount withheld by the licensee, if any, during the
year for purposes of federal or state income taxes.
   (7) Whether the registered player opened or closed his or her
account during the year.
   (d) The licensee shall electronically file a copy of the form with
the Franchise Tax Board for each registered player who held an
account with the licensee for all, or any portion of, the taxable
year. The licensee shall electronically provide each registered
player with a copy of the form.
   19990.60.  (a) A security interest in a licensee shall not be
enforced without the prior approval of the department.
   (b) It is unlawful for any person to sell, purchase, lease,
hypothecate, borrow, or loan money, or create a voting trust
agreement or any other agreement of any sort with a licensee or with
respect to any portion of the provision of authorized games, except
in accordance with the department.
   (c) Every licensee that is involved in a transaction for the
extension or redemption of credit by the licensee, or for the
payment, receipt, or transfer of coin, currency, or other monetary
instruments, as specified by the department, in an amount,
denomination, or amount and denomination, or under circumstances
prescribed by regulation, and any other participant in the
transaction, as specified by the department, shall, if required by
regulation, make and retain a record of, or file with the department
a report on, the transaction, at the time and in the manner
prescribed by regulation.
   19990.61.  (a) A licensee shall act expeditiously to cure any
violation of this chapter, or any regulation adopted pursuant to this
chapter, in the offer or administration of authorized games that
interferes with its obligations to the state or registered players
under this chapter.
   (b) If a licensee becomes aware of any violation, it shall notify
the department immediately and work with the department to develop a
plan to rectify the violation.
   (c) If the department becomes aware of any violation, or if it
becomes aware of any activities that might lead to a violation, the
department shall provide notice of that violation to the licensee and
a reasonable opportunity to cure the violation.
   (d) All state agencies with responsibilities under this chapter
shall report any actual or suspected violation of this chapter, or
any regulation adopted pursuant to this chapter, or activities that
may lead to such a violation, to the department immediately so that
the department can assess whether it needs to commence an
investigation or enforcement action.
   (e) A licensee shall be afforded a reasonable time period to cure
any reported violation. The department may assess penalties for any
violation of this chapter, or any regulation adopted pursuant to this
chapter.
   (f) The department shall have the subpoena power in an
investigation of any violation of this chapter, or any regulation
adopted pursuant to this chapter.
   (g) The department may revoke or suspend any license or work
permit under this chapter upon reaching a finding that the licensee
or employee is in violation of any provision of this chapter, or any
regulation adopted pursuant to this chapter.
   (h) A licensee may appeal any decision of the department pursuant
to this section to the superior court. The superior court shall hear
any appeal de novo.
   19990.62.  The department shall protect the rights and assets of
registered players on an intrastate Internet gambling Web site if the
licensee's license pursuant to this chapter is revoked or the
licensee becomes bankrupt.
   19990.63.  (a) A licensee shall at all times indemnify, defend,
and hold harmless the state and its agencies from and against any
claims, damages, liabilities, costs, and expenses, including, but not
limited to, reasonable attorney's fees and expenses arising out of
any third-party claim made against the state or any of its agencies
relating to actions of the licensee and this chapter. However, the
state shall not enter into a settlement agreement related to any of
those claims, damages, liabilities, costs, or expenses without the
prior written approval of the licensee.
   (b) The state and its agencies shall promptly notify a licensee of
any claim or litigation to which the indemnity set forth in Section
19990.62 applies.
   (c) At the option of a licensee, it may assume the defense of any
claim or litigation. If a licensee assumes the defense of any claim
or litigation, the licensee's obligation with respect thereto shall
be limited to the payment of any settlement approved by the licensee,
or any judgment in connection with that claim or litigation.

      Article 6.  Authority of State Agencies


   19990.70.  (a) (1) The department, and any other state agency with
a duty pursuant to this chapter, shall adopt regulations, in
consultation with the commission, to implement this chapter and
facilitate the operation of intrastate Internet gambling Web sites in
compliance with this chapter no later than 12 months after the
operative date of this chapter.
   (2) The regulations adopted by the department shall address
underage gambling and problem gambling.
   (b) (1) Each state agency with a duty pursuant to this chapter
shall identify a contact person at that agency and describe the
responsibility of the contact with respect to the state agency's
duty.
   (2) Any notice provided by a licensee to a state agency pursuant
to this chapter shall be addressed to the contact identified by the
state agency pursuant to paragraph (1).
   (3) Unless otherwise provided by this chapter, notice by a
licensee to the state shall be deemed effectively given upon personal
delivery, three days after deposit in the United States mail by
certified or registered mail, return receipt requested, one business
day after its deposit with any return receipt express courier,
prepaid, or one business day after electronically confirmed
transmission by facsimile.
   19990.71.  The Legislature may, by a statute adopted by a majority
vote of both houses, do either of the following:
   (a) Opt out of, or opt into, any federal framework for Internet
gambling.
   (b) If the United States Department of Justice notifies the
department in writing that it is permissible under federal law, enter
into any agreement with other states to provide Internet gambling.
   19990.72.  The department may outsource its regulatory functions
under this chapter where optimal to provide efficient, effective, and
robust regulation with access to worldwide expertise tested and
proven in the gambling industry.

      Article 7.  Protection of Registered Players


   19990.75.  A licensee shall use its best efforts to protect
registered players. Subject to the approval of the department, and
consistent with uniform standards established by the department by
regulation, each licensee shall establish administrative procedures
to resolve registered player complaints.
   19990.76.  In the event a registered player has a complaint
against a licensee, the exclusive remedy shall be to register the
complaint with the department, unless an action is brought pursuant
to the remedies described in subdivision (j) of Section 19990.47.
   19990.77.  (a) The department, in consultation with the
commission, shall establish regulations with respect to registered
player complaints.
   (b) Under the regulations, the department shall do all of the
following:
   (1) Investigate registered player complaints to determine if a
licensee has failed to meet its obligations to a registered player.
   (2) Attempt to resolve complaints by registered players if a
licensee fails to meet an obligation to a registered player.
   (3) Initiate enforcement actions to require specific performance
of any obligation that a licensee has to a registered player and
payment by the licensee of restitution to a registered player for
actual losses and interest thereon.
   19990.78.  A licensee may appeal any action by the department
pursuant to this article to the superior court, which shall review
the appeal de novo.

      Article 8.  Disposition of State Regulatory Proceeds


   19990.86.  (a) The Treasurer shall transfer all amounts received
from a licensee pursuant to subdivision (c) of Section 19990.58 to
the Controller for deposit in the Internet Gambling Fund, which is
created in the State Treasury, to be administered by the Controller
subject to annual appropriation by the Legislature. These amounts
shall not be subject to the formulas established by statute directing
expenditures from the General Fund.
   (b) The state agencies shall submit revenue needs to fulfill their
obligations under this chapter for the upcoming fiscal year to the
Senate Committee on Budget and Fiscal Review and the Assembly
Committee on Budget, as well as the Senate and Assembly Committees on
Governmental Organization and the Department of Finance on or before
March 31 of the preceding fiscal year. A justification of those
costs shall be provided with each submission of revenue needs.
   (c) The State Department of Alcohol and Drug Programs, Office of
Problem Gambling, shall submit revenue needs for programs to
alleviate problem gambling that results from the offering of
authorized games for the upcoming fiscal year to the Senate Committee
on Budget and Fiscal Review and the Assembly Committee on Budget, as
well as the Senate and Assembly Committees on Governmental
Organization, the Senate and Assembly Committees on Human Services,
and the Department of Finance on or before March 31 of the preceding
fiscal year. A justification of those costs shall be provided with
each submission of revenue needs.
   (d) All remaining proceeds not allocated to subdivisions (b) and
(c) shall remain in the Internet Gambling Fund subject to
appropriation by the Legislature.

      Article 9.  Preemption of Local Regulation


   19990.90.  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. This section shall not prohibit or limit the
investigation and prosecution of any violation of this chapter.

      Article 10.  Reports to the Legislature


   19990.95.  Notwithstanding Section 10231.5 of the Government Code,
within one year of the operative date of this chapter and, annually
thereafter, the department, in consultation with the commission, the
Treasurer, and the Franchise Tax Board, shall issue a report to the
Legislature describing the state's efforts to meet the policy goals
articulated in this chapter. The report shall be submitted in
compliance with Section 9795 of the Government Code.
   19990.96.  (a) At least two years after the issue date of any
license pursuant to this chapter, but no later than three years after
that date, the Bureau of State Audits shall issue a report to the
Legislature detailing the implementation of this chapter. The State
Auditor may advise the Legislature on any recommendations regarding
the terms of licensure, including the consideration paid to the
state, the economic and operational impacts upon the licensee and the
state, and any other issues that may be relevant to the state's
decision whether to impose modifications on existing licensees. The
report may also advise the Legislature as to any proposed changes to
Article 5 (commencing with Section 19990.30) of this chapter. The
State Auditor shall advise the Legislature whether continuation of
the moratorium on state gaming contained in Section 19962 is
justified, given statewide competition with legalized Internet
gambling.
   (b) A report submitted pursuant to subdivision (a) shall be
submitted in compliance with Section 9795 of the Government Code.
   (c) Pursuant to Section 10231.5 of the Government Code, this
section is repealed on January 1, 2019.
  SEC. 2.  The Legislature finds and declares that Section 1 of this
act, which adds Chapter 5.2 (commencing with Section 19990.01) to
Division 8 of the Business and Professions Code, imposes a limitation
on the public's right of access to the meetings of public bodies or
the writings of public officials and agencies within the meaning of
Section 3 of Article I of the California Constitution. Pursuant to
that constitutional provision, the Legislature makes the following
findings to demonstrate the interest protected by this limitation and
the need for protecting that interest:
   The limitations on the people's rights of access set forth in this
chapter are necessary to protect the privacy and integrity of
information submitted by the registered players as well as the
proprietary information of the license applicants and licensees.
  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 protect the interests of Californians who play online
gambling games and to ensure that people play fair games, that the
state realizes the revenues, and that suitable persons operate online
gambling Internet Web sites, it is necessary that this act take
effect immediately.