BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 356|
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THIRD READING
Bill No: SB 356
Author: Yee (D)
Amended: As introduced
Vote: 21
SENATE GOVERNMENTAL ORGANIZATION COMMITTEE : 7-3, 4/23/13
AYES: Wright, Calderon, Cannella, De Le�n, Galgiani, Hernandez,
Lieu
NOES: Nielsen, Berryhill, Correa
NO VOTE RECORDED: Padilla
SUBJECT : Gambling establishments: owner licensing
SOURCE : Author
DIGEST : This bill allows a person or entity with a financial
interest in a foreign gambling operation to retain a California
gambling license.
ANALYSIS :
Existing law:
1.Provides, under the Gambling Control Act, for the licensure
and regulation of various legalized gambling activities and
establishments by the Gambling Control Commission (GCC) and
the enforcement of those activities by the Bureau of Gambling
Control within the Department of Justice (DOJ).
2.Defines "person" to include a natural person, corporation,
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partnership, limited partnership, trust, joint venture,
association, or any other business organization.
3.Considers a person not suitable to hold a gambling license if
that person, or any partner, officer, director, or shareholder
of that person, has a financial interest in a business or
organization engaged in any form of gambling prohibited by
Penal Code Section 330. There is an exception for publicly
traded horse racing associations, as specified.
4.Penal Code Section 330 prohibits the play of any specified
games, including roulette, twenty-one, as well as any banking
or percentage game played with cards, dice, or any device, for
money, checks, credit, or other representative of value.
This bill allows a person or entity with a financial interest in
a foreign gambling operation to retain a California gambling
license. Specifically, this bill deems a current licensee
suitable to continue to hold a state gambling license if:
1.The licensee holds a license in good standing as an owner of a
gambling establishment for at least five years as of January
1, 2013; and
2.The licensee has obtained a financial interest in a gambling
operation that is conducted only outside of the United States.
Background
California's regulation of gambling has been expanding over the
last several years. In 1984, the Legislature passed the Gambling
Registration Act, which increased regulatory oversight of card
rooms, and established state regulation of card room owners,
employees and vendors. The Gambling Control Act of 1997 (Act)
further strengthened state oversight of gambling. The Act
created the GCC and Division of Gambling Control within the DOJ
and vested within each specified powers.
Under this expanded structure, the state investigates the
background of individuals and businesses that want to be
involved in the gambling industry. In prior years, the state
imposed broad prohibitions against certain classes of ownership.
Specifically, the law denies a license to anyone who is
involved in gambling activities that are outlawed by state law,
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such as house-banked games, even if that activity is legal in
another state.
This law was enacted at a time when gambling was closely
associated with organized crime. By preventing casino operators
from owning card clubs in California, lawmakers hoped to prevent
organized crime from becoming involved in gambling in the state,
and to keep Nevada casino owners from having ownership interests
in California gambling establishments.
Little Hoover Commission (LHC) study on financial interests of
card room owners . In 2001, Governor Davis vetoed SB 51
(Vincent), which would have authorized issuance of a gambling
license to a publicly traded corporation irrespective of whether
the person has any financial interest in a company outside
California that engages in gambling that is not legal here. In
his veto message, the Governor asked the LHC to study current
state law that prohibits the ownership of card rooms by anyone
associated with a gambling operation not permitted in
California. Thereafter, the LHC published a report entitled
"Card Clubs in California: A Review of Ownership Limitations,"
in which the LHC concluded that these limitations, originally in
place to protect the public, are no longer necessary.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local:
No
SUPPORT : (Verified 4/24/13)
Capitol Casino
Hollywood Park Casino
Lucky Chances
Ocean's 11 Casino
The Village Club
OPPOSITION : (Verified 4/24/13)
Artichoke Joe's
ARGUMENTS IN SUPPORT : According to the author's office,
existing law makes it illegal for a California gambling license
holder in good standing to have any financial interest in gaming
prohibited in California even if the investment is in, and the
gaming occurs, overseas. This bill will only allow current
license holders to participate in this practice, which ensures
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that no outside gaming interest could be involved in a manner
that would give them any ability to influence, own or run a
gaming operation in California. This bill upholds the intent of
the law, but allows license holders the opportunity to invest
abroad.
According to supporters, no other gaming industry in California
is precluded from investing in gaming operations outside of this
country, and there is no rational basis for this discriminatory
practice to continue. In addition, supporters note that no
other gaming jurisdiction in the United States precludes their
licensees from investing in other countries. They believe that
responsible business owners in this state should not be
precluded from making investments that will have no effect on
the industry here in California.
ARGUMENTS IN OPPOSITION : The opponent to the bill, Artichoke
Joe's, states that this proposed change in law runs counter to
existing law, which is intended to prohibit the "cross
pollination" of funds between a California-licensed card room
and money generated in out of state casinos. The concern was
that a California card room would obtain a financial interest in
a Las Vegas casino and use the profits to enhance their card
room operations. Such a practice would provide that card rooms
with a competitive advantage compared to other card rooms and
tribal casinos in the area. It could also lead to a situation
where a Las Vegas casino was essentially managing a California
card room.
The opponent also contends that the potential for foreign funds,
generating from casinos in other countries with no United States
oversight or jurisdiction, is bad policy and creates a business
relationship that existing law was intended to prevent, and
further questions how this activity could be regulated by
California governmental entities.
MW:ej 4/24/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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