BILL ANALYSIS �
Bill No: SB
190
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2013-2014 Regular Session
Staff Analysis
SB 190 Author: Wright
As Amended: April 4, 2013
Hearing Date: April 23, 2013
Consultant: Paul Donahue
SUBJECT
Sports wagering
DESCRIPTION
This urgency bill legalizes sports betting in California by
authorizing a currently licensed owner or operator of a
gambling establishment or horse racing track to conduct
wagering on specified sports events after receiving
regulatory approval from licensing authorities. This bill
also authorizes federally recognized Indian tribes to
conduct sports wagering as specified. Specifically, this
bill :
1)Authorizes sports wagering by the following entities:
a) The owner or operator of a gambling establishment
with a current license issued by the California
Gambling Control Commission (CGCC).
b) The owner or operator of a horse racing track,<1>
including a horse racing association, with a current
license issued by the California Horse Racing Board
(CHRB).
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<1> A licensed horse racing track may operate a sports book
if it has an agreement in place with the CHRB-recognized
organization that is responsible for negotiating purse
agreements, satellite wagering agreements, and all other
business agreements on behalf of the horsemen and
horsewomen participating in a racing meeting.
SB 190 (Wright) continued
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c) A federally recognized Indian tribe that has
entered into a compact agreement with the state,
including one that authorizes operation of a satellite
wagering facility, as provided for pursuant to the
Indian Gaming Regulatory Act of 1988 (IGRA), and under
terms no more stringent than those applicable to any
other state gambling establishment.
2)Defines "sports wagering" as the business of accepting
wagers on a sports event by any legal system or method of
wagering.
3)Defines a "sports event" include any professional sports
or athletic event, and any collegiate sports or athletic
event.
4)Prohibits sports wagering on any collegiate sports or
athletic event that takes place in California, or a
sports event in which any California college team
participates, regardless of the location at which the
event takes place.
5)Specifies the manner in which an owner or operator of a
gambling establishment or horse racing track shall apply
for authorization to conduct sports wagering, and that
the authorization to conduct sports wagering shall not be
unreasonably withheld for applicants in good standing
with regulators.
6)Requires gambling establishment or horse racing track
operators that conduct sports wagering to pay a $3000
annual fee into the Gambling Addiction Program Fund.
7)Requires each sports wagering operator to pay a 7.5% tax
on gross revenues generated by sports wagering
activities. Gross revenues are determined according to
generally accepted accounting principles.
8)Directs the CHRB and CGCC to adopt implementing
regulations governing recordkeeping, methods for issuing
wagering tickets, and the like, and authorizes the CHRB
and CGCC to establish fees in a reasonable amount
necessary to recover costs of administration of sports
wagering authorized in this bill.
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9)Dictates that sports wagering may be conducted only on
Indian lands, consistent with IGRA, or at the gambling
establishment or horse racing track of the licensed
operator.
10)Specifies that a licensed operator shall not do any of
the following:
a) Accept a wager on a sports event from any person
who is not physically present at the facility where
the sports wagering is conducted.
b) Accept a wager from a person using any form of
credit to place the wager.
c) Accept a wager from a person who is under 21 years
of age.
d) Accept bets from any person whose name appears on
any self-exclusion list.
11)Directs the Department of Justice (DOJ) to investigate a
request for authorizations to conduct sports wagering
made by the CGCC or the CHRB.
12)Makes it a misdemeanor to violate any provision of this
sports wagering authorization law, and directs DOJ to
monitor the conduct of all operators and other persons
having a material involvement, directly or indirectly,
with a sports wagering operation.
13)Authorizes DOJ to investigate violations and complaints
lodged against sports wagering operators, initiate
disciplinary actions, and seek license revocations and
other sanctions when warranted. DOJ may file
administrative enforcement actions and seek penalties.
Penalties cannot exceed $20,000 for each separate
violation.
14)Exempts sports wagering conducted under the auspices of
this bill from existing laws that prohibit a person from
making a betting pool or placing a bet or wager on the
result of any contest or event, including a sporting
event.
15)Provides that the CHRB, CGCC and DOJ have the authority
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to regulate sports wagering to the same extent that these
entities regulate other legal gambling in this state,
including the ability to audit the books and records of a
licensed operator related to the sports wagering
activity.
EXISTING LAW
Existing California statutes prohibit a person from making
a betting pool or placing a bet or wager on the result of
any contest or event, including a sporting event.
The California Constitution provides that the Legislature
has no power to authorize casinos of the type currently
operating in Nevada and New Jersey.
BACKGROUND
Author's purpose : The author believes that Californians
should be able to place a bet on a sporting event without
having to travel to Nevada to do so. The author states that
passage of this bill will capture significant economic
activity that has historically been transferred out of the
state. The author believes a significant amount of revenue
could be captured and infused into local economies
throughout California.<2> The author also notes that this
bill legitimizes an activity that has been illegal in the
state. The money illegally spent on sports betting in
California is a significant contributor to California's
underground, non-taxed economy. Finally, the author notes
that this bill authorizes sports wagering only for
individuals or entities that have already been deemed
suitable by state law enforcement officials to conduct
other forms of legalized gambling.
Potential positive effect on California economy : A record
$98.9 million was bet on this year's Super Bowl. Nevada
took in more than $3.4 billion in bets on all sports last
year, generating $15 million to $20 million in tax revenue.
In March 2012, Nevada sports books handled $288.5 million
in bets on basketball, an estimated 70 percent of them - or
$201 million - on college games, according to the Nevada
-------------------------
<2> According to the New York Times, more than $200 million
was bet in Las Vegas recently during the NCAA Men's
Basketball Tournament.
SB 190 (Wright) continued
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Gambling Commission. The F.B.I. estimates that $2.6 billion
is bet illegally on the NCAA college basketball tournament
alone.<3>
In the United Kingdom, where bookmaking venues are
pervasive and online wagering is readily available,
bookmakers paid 900 million pounds in taxes (about $1.36
billion), 24 percent of it, or about $343 million, on
sports and horse racing, according to a study by Deloitte
on behalf of the Association of British Bookmakers.
What is going on in other states : Although federal law
prohibits sports wagering, except in four states,<4>
voters in New Jersey recently passed a referendum by a
2-to-1 margin making sports betting legal. Last year Gov.
Chris Christie signed a law legalizing it at Atlantic
City's 12 casinos and the state's 4 horse racing tracks.
Illinois and New York are also considering allowing sports
betting.
The N.C.A.A. has filed a lawsuit with the N.F.L., the
N.H.L., the N.B.A. and Major League Baseball contending
that sports betting in New Jersey would "irreparably"
corrupt sports in the United States. This year they were
joined by the US Justice Department, which defended the
constitutionality of the 1992 law banning sports betting
outside of few states. In February, a federal judge ruled
against New Jersey and upheld the ban on sports betting.
The state is appealing, and the case is expected to reach
the US Supreme Court.
Earlier this month, the Nevada Legislature's Senate
Judiciary Committee passed legislation allowing private
investment groups to place sports wagers on behalf of
investors, which would allow the state to reap millions of
dollars in untapped revenue. Gambling executives there
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<3> The National Gambling Impact Study Commission says $380
billion is bet annually with bookies or offshore betting
operations, on all sporting events together.
[http://www.nytimes.com/2013/03/28/sports/more-states-look-t
o-get-in-the-sports-betting-game.html ]
<4> Professional and Amateur Sports Protection Act (PASPA)
of 1992 [28 U.S.C. � 3701 et seq.]. The states in which
sports wagering is currently allowed are Montana, Oregon,
Delaware and Nevada.
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project that Nevada sports books action will nearly triple
in the next five years if the measure becomes law.
The author notes that passage of this bill would serve two
important purposes: Absent a statute on the books,
California lacks the legal standing to challenge the law in
federal court. Additionally, should Congress re-open a
window of opportunity for states to approve sports betting,
this bill would place the state in a position to take
advantage of what might be a short period of time within
which to authorize sports wagering in California. To that
end, there is a bill now before the US Congress that would
open a window of time within which a State could elect to
authorize sports betting.
California Constitution : The California Constitution
declares that the "Legislature has no power to authorize,
and shall prohibit casinos of the type currently operating
in Nevada and New Jersey."<5> Some have contended that
this provision must mean that the Legislature cannot
authorize sports betting; however, the California Supreme
Court appears to disagree.
In 1999, the Court said, for instance, that a "casino" is
simply "a building or room for gambling."<6> Insofar as
the phrase "of the type currently operating in Nevada and
New Jersey" is concerned, the Court wrote:
"The 1984 constitutional amenders must have had
in mind a type of gambling house unique to or
particularly associated with Nevada and New
Jersey, since they chose to define the prohibited
institution by reference to those states. On this
logic, the 'type' of casino referred to must be
an establishment that offers gaming activities
including banked table games [e.g., blackjack]
and gaming devices, i.e., slot machines, for in
1984 that 'type' of casino was legal only in
Nevada and New Jersey and, hence, was
particularly associated with those states?of the
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<5> Cal. Const., art. IV, � 19, subd. (e), added by
initiative, Gen. Elec. (Nov. 6, 1984)
<6> Hotel Employees & Restaurant Employees Internat. Union
v. Davis (1999) 21 Cal.4th 585, at p. 604.
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states, only Nevada and New Jersey allow 'casinos
offering the full range of gambling games']"<7>
New Jersey has never authorized sports betting, and
certainly didn't allow it in 1984. It is therefore
necessary to conclude that sports betting never was
"particularly associated with" New Jersey. The California
Supreme Court summarizes and explains as follows:
"Thus, a casino of 'the type ... operating in
Nevada and New Jersey' may be understood, with
reasonable specificity, as one or more buildings,
rooms, or facilities, whether separate or
connected, that offer gambling activities
including those statutorily prohibited in
California, especially banked table games and
slot machines."<8>
Thus, it appears that the Legislature is only prohibited
from authorizing so-called brick-and-mortar facilities or
buildings that provide roulette tables, crap tables,
blackjack tables, and especially slot machines and banked
card games.
Statements in support : Supporters note that California
failed to take advantage of a one-year window of
opportunity for states to pass a law authorizing sports
betting in advance of a federal ban, and that enactment of
this bill would authorize California to take advantage of a
new window period proposed in pending federal legislation.
Supporters also believe that this bill could have a
significant positive impact on the future of horse racing
industry, address the underground economy in which illegal
sports betting now takes place, and capture revenue for
California instead of Nevada.
Opposition : The California Coalition Against Gambling
Expansion opposes the bill because it seeks to legalize new
forms of gambling. They also object to the broad definition
of professional sports or athletic events, which would be
legalized under the bill, and contend that the measure
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<7> Hotel Employees, 21 Cal.4th at p. 605
<8> Id., at p. 605
SB 190 (Wright) continued
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likely violates Constitutional provisions against new forms
of gaming.
PRIOR/RELATED LEGISLATION
SB 1390 (Wright) 2011-2012 Session. Would have authorized
sports wagering in California. (Held in Assembly
Appropriations)
SR 49 (Wright) 2009-2010 Session. Urges the President and
the Congress of the United States to remove the ban on
sports wagering by repealing federal law prohibiting it,
and urges the California Attorney General to take legal
action on behalf of the State of California, as deemed
appropriate and necessary, to challenge enforcement of
federal law. (Adopted by the Senate on August 27, 2010)
SUPPORT:
California Thoroughbred Breeders Association
Capitol Casino
Del Mar Thoroughbred Club
Hollywood Park Casino
Los Angeles County Fair/Fairplex
Lucky Chances Casino
Oak Tree Racing Association
The Village Club
Thoroughbred Owners of California
OPPOSE:
California Coalition Against Gambling Expansion
FISCAL COMMITTEE: Senate Appropriations Committee
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