BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
SB 190 (Wright) - Sports Wagering
Amended: April 29, 2013 Policy Vote: GO 11-0
Urgency: Yes Mandate: No
Hearing Date: May 13, 2013 Consultant: Maureen Ortiz
SUSPENSE FILE. AS PROPOSED TO BE AMENDED
Bill Summary: SB 190 establishes a statutory framework for
authorizing sports betting in California at any licensed
gambling establishment, horse racing track, and satellite
wagering facility, as well as authorizes a federally recognized
Indian tribe to conduct sports wagering on professional and
collegiate sports or athletic events. The bill allows fees to
be charged to cover regulatory expenses, and requires licensees
to remit 7.5% of gross revenue generated by sports wagering
activities to the state's General Fund.
Fiscal Impact:
Unknown, potentially $16 million revenue to the General
Fund from the 7.5% tax on gross revenues.
Preliminary estimates by the Department of Justice indicate
the need for 50 PYs at a cost of approximately $7.8 million
in the first year of implementation, and $6.7 million
annually thereafter. (General Fund).
The California Gambling Control Commission has estimated
costs of $109,000 and the need for 1 PY (AGPA) over a two
year period to develop regulations and unknown, ongoing
costs to process applications (Special Fund). While these
costs may be offset by fee revenue, that revenue is unknown
as it will be dependent on the number of license
applications received and will not cover initial costs for
regulations which will have to be promulgated before any
revenue is received.
Estimates by the California Horse Racing Board indicate the
need for a minimum of 2 PYs for promulgating regulations and
processing license applications at an estimated cost of
$130,183 which could potentially be offset by fee revenue
(General Fund).
Estimated revenue of up to $500,000 into the Gambling
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Addiction Program Fund (if all eligible card clubs,
racetracks, and tribes opt to participate in sports wagers).
Revenue estimates from the 7.5% tax that will be paid to the
General Fund are based on an estimate of $4 - $5 billion in
sports wagering bets annually (these are figures reported by the
state of Nevada). Of those wagers, it is estimated that 95%
will be returned as winnings, and the remaining $200 - $250
million will be subject to the 7.5% tax on gross revenues as
required in SB 190.
The Department of Justice costs result from the following
responsibilities:
- Placing compliance and enforcement responsibilities related
to sports wagering with the DOJ Division of Law Enforcement
(DLE).
- Requiring DLE to investigate applications for authorization
to conduct sports wagering, which includes necessary background
investigations for businesses that provide ancillary services to
bookmaking.
- Requiring the Attorney General's Public Rights Division to
provide legal services to the Bureau of Gambling Control, the
California Gambling Control Commission, and the California Horse
Racing Board in relation to their respective roles in
registering and investigating sports wagering operators.
The Bureau of Gambling Control within DOJ will incur the
following expenses in relation to the above activities:
- Licensing & Investigation : This team will consist of 1 DOJA,
5 AGPAs, 4 IA IVs, 1 SSA and 1OT which will be responsible for
licensing individuals associated with sports wagering and
performing any investigations that may be requested by the
Commission.
- Compliance & Enforcement : DOJ anticipates the need for six
teams of 6 PYs in order to cover investigations for all of the
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cardrooms, tribal casinos, and race tracks with the teams being
stationed in six field offices across the state.
- Special Programs : 2 PYs will be required to fulfill duties
related to the Responsible Gaming and Charitable Gambling
Programs which includes processing voluntary exclusions,
handling complaints, inquiries, training for cardrooms and any
other issues that arise.
Costs also include one-time facility build-outs for Sacramento
and Redding offices.
Background: Existing federal law, enacted by the Professional
and Amateur Sports Protection Act (PASPA) of 1992, prohibits
sports wagering except in 4 states: Nevada, Oregon, Montana and
Delaware. Specifically, PASPA makes it unlawful for 1) a
governmental entity to sponsor, operate, advertise, promote,
license, or authorize by law or compact, or 2) a person to
sponsor, operate, advertise, or promote, pursuant to the law or
compact of a governmental entity, any wagering or gambling
scheme that is based on competitive games in which amateur or
professional athletes participate.
In 2009, several parties in New Jersey sued the federal
government, seeking to invalidate PASPA on several
constitutional grounds, including violations of the Commerce
Clause, the Equal Protection Clause, and the Tenth Amendment.
However, the U.S. District Court in New Jersey granted the
motion to dismiss filed by the government because the plaintiffs
lacked standing to bring the action. New Jersey lacked
"standing" because the State had not enacted any statute
authorizing sports betting; therefore they could not be harmed
by the statute they sought to overturn.
In response to this ruling, the State of New Jersey enacted
legislation in January 2012 legalizing sports betting in New
Jersey casinos. In addition, on January 23, 2012, Rep. Frank
LoBiondo (D-NJ) introduced H.R. 3797, the "Sports Gaming
Opportunity Act of 2012," to amend PASPA to allow all states a
new window of opportunity to approve and establish sports
betting within their borders, which would thereby abolish the
federal ban on sports betting in those states.
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The passage of SB 190 would serve two important purposes in
connection with PASPA. Absent a codified statute, California
would also lack the legal standing to challenge the law in
federal court. Additionally, should Congress re-open a window
of opportunity for states to approve sports betting, this bill
would place the state in a position to take advantage of what
might be a short period of time within which to authorize sports
wagering in California.
Proposed Law: SB 190 authorizes the owner or operator of a
gambling establishment with a current license issued by the
California Gambling Control Commission (CGCC), the owner or
operator of a horse racing track or satellite wagering facility
with a current license issued by the California Horse Racing
Board (CHRB), and tribal casinos to conduct wagering on
professional and collegiate sports or athletic events.
SB 190 also authorizes a federally recognized Indian tribe to
conduct sports wagering on Indian lands consistent with the
requirements of the federal Indian Gaming Regulatory Act of
1988.
The owner or operator of each facility will have to apply to
their respective licensing entity (CGCC or CHRB) for
authorization to conduct sports wagering. The board or
commission must hear and decide promptly all applications to
conduct sports wagering from owners and operators of license
gambling establishments, license horse racing tracks, and
satellite wagering facilities. SB 190 specifies that an
authorization to conduct sports wagering shall not be
unreasonably withheld for any applicant that is currently
licensed and in good standing.
The CGCC and the CHRB will be required to adopt regulations for
the administration and enforcement of sports wagering and must
consult each other during promulgation. Applications for the
authorization must be made on forms furnished by the board and
the commission. The regulations must provide for the approval
of wagering rules and equipment to ensure fairness to the public
and compliance with state law.
SB 190 additionally requires provides the Department of Justice
with the following responsibilities:
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a) Investigate any request made by the CGCC or CHRB in
connection with an application for authorization, and to
recommend the denial or the limitation, conditions or
restriction of any authorization.
b) Monitor the conduct of all licensed operators and other
persons having a material involvement, directly or
indirectly, with sports wagering.
c) Investigate suspected violations of sports wagering
rules.
d) Investigate complaints against licensed operators or
other persons associated with a sports wagering operation
by members of the public.
SB 190 authorizes the DOJ to impose fines and penalties for
violations of the sports wagering rules of up to $20,000 for
each separate violation.
SB 190 requires each sports wagering operator to pay a 7.5% tax
on gross revenues to the Treasurer for deposit into the General
Fund. The bill also requires an owner or operator of a gambling
establishment, of a racing track or satellite wagering facility
that conducts sports wagering to pay an annual fee of $3,000 to
the state Department of Alcohol and Drug Programs for deposit
into the Gambling Addiction Program Fund.
Additionally, SB 190 outlines specific guidelines for granting
the model tribal-state sports wagering compact for the conduct
of sports wagering on Indian lands, as defined by the federal
Indian Gaming Regulatory Act of 1988 (IGRA) to a federally
recognized California Indian tribe as specified. Although the
tribes will be required to pay into the Gambling Addiction Fund,
they will not be required to engage in any type of revenue
sharing with the state because the state is not providing tribal
casinos with any form of exclusivity as to sports wagering.
Related Legislation: This bill is similar to SB 1390 (Wright)
which was held on the Assembly Appropriations Committee Suspense
File last year. Additionally, SR 49 (Wright) 2010 urged the
President and Congress to remove the ban on sports wagering by
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repealing PASPA, and urged the California Attorney General to
take legal action on behalf of the State of California to
challenge enforcement of PASPA.
Staff Comments: In 1992 Congress passed the Professional and
Amateur Sport Protection Act that prohibits betting on
single-game collegiate sporting events in states not
grandfathered into the Act. In 2009 the NCAA banned hosting of
championships in states that allow betting on single-game
events.
SR 49 (Wright) 2010 urged the President and Congress to remove
the ban on sports wagering by repealing PASPA, and urged the
California Attorney General to take legal action on behalf of
the State of California to challenge enforcement of PASPA. SB
190 will not become effective until the federal government
repeals the current prohibition on sports wagering.
There are currently 68 tribal casinos, 90 card clubs, and 36
racing establishments that would be potentially eligible to
offer sports wagering along with an unknown number of
owner/operators.
Staff notes that SB 190 requires applications for sports
wagering to be submitted to the CGCC, however, the Governor's
Reorganization Plan No. 2 requires applications to be processed
by the Bureau of Gambling Control within the Department of
Justice.
Additionally, the bill does not establish any special funds for
deposit of fee revenue. The Gambling Control Fund cannot be
used for purposes of sports wagering since that activity is not
part of the Gambling Control Act.
AUTHOR'S AMENDMENTS: Proposed author's amendments make
numerous technical changes and add provisions for tribal
reimbursements to the state for the actual and reasonable costs
of inspections.