BILL ANALYSIS �
SB 356
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Date of Hearing: June 26, 2013
ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
Isadore Hall, Chair
SB 356 (Yee) - As Amended: June 19, 2013
SENATE VOTE : 26-5
SUBJECT : Gambling establishments: owner licensing
SUMMARY : Allows a person or entity with a financial interest
in a foreign gambling operation to retain a California gambling
license. Specifically, this bill :
1)Allows a person or entity with a financial interest in a
foreign gambling operation to retain a California gambling
license if that person or entity has been licensed in good
standing as an owner of a gambling establishment for at least
5 years as of January 1, 2014.
2)Requires the person or entity to notify the California
Gambling Control Commission (Commission) and the Department
of Justice (DOJ), and receive Commission approval to obtain a
financial interest in another business or organization that
conducts lawful gambling outside the United States that, if
conducted within California, would be unlawful.
EXISTING LAW
1)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 prohibited gambling. There
is an exception for publicly traded horse racing associations,
as specified.
2)The Gambling Control Act (Act) provides for the licensure and
regulation of various legalized gambling activities and
establishments by the Gambling Control Commission and the
enforcement of those activities by the Bureau of Gambling
Control within the DOJ.
3)Requires DOJ to investigate the qualifications of applicants
before any license, permit, or other approval is issued, and
to investigate any request to the Commission for any approval
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that may be required. DOJ may recommend the denial or the
limitation, conditioning, or restriction of any license,
permit, or other approval.
4)Allows a person or entity to hold a state gambling license if
they have a financial interest in another business that
conducts lawful gambling outside the state that, if conducted
within California, would be unlawful, provided that an
applicant or licensee may not own more than 1 percent interest
in that business.
FISCAL EFFECT : Unknown
COMMENTS :
Purpose of the bill : According to the author, current 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 gaming occurs,
overseas. There is no sound reason why responsible business
people in this state should be banned from making investments
overseas that will have no effect on the industry here in
California.
Background : California's regulation of gambling has been
expanding over the last several decades. 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 Gambling
Control Commission and Division of Gambling Control within the
Department of Justice 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,
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
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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 Report : 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 Little Hoover
Commission (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 Little Hoover Commission (LHC) published a
report entitled, "Card Clubs in California: A Review of
Ownership Limitations," in which the LHC concluded that:
Given that public safety was the purpose of those
prohibitions, it is illogical to keep them in place.
Today, the State has both an expanding gambling industry
and a fortified regulatory infrastructure. Preventing
publicly traded corporations - and the companies not
experienced in the industry - from doing business in
California is inconsistent with these deliberate and highly
publicized policy decisions.
Arguments in support : According to supporters, this measure
seeks to remedy California law to allow current cardroom
licensees to invest in gaming operations outside the United
States. Under current law, a person is deemed unsuitable to
hold a state gambling license if they have more than one percent
interest in any business or organization that is engaged in a
prohibited form of gambling outside of this state, except as
specified in race tracks. This means that a California license
holder in good standing cannot hold any financial interest in
gaming prohibited in California even if the investment is in,
and the gaming occurs outside of the United States.
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, no other gaming jurisdiction in the
United States precludes their licensees from investing in other
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Countries. 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 : Artichoke Joe's writes in opposition
to the bill claiming that the intent of current law is 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.
Previous Legislation : AB 1290 (Hill) 2011-2013 Legislative
Session. Repealed an existing body of law in the Act relative
to an exemption from licensing requirements for a card club on
the grounds of a racetrack and recasts that body of law. (Held
in Senate Rules Committee)
SB 175 (Vincent), 2005-2006 Legislative Session. Would have
deemed and applicant suitable to hold a state gambling license,
notwithstanding the fact that the applicant has a financial
interest in another business that conducts lawful gambling
outside the state that may violate California law if it were
conducted in California. (Held in Assembly Appropriations
Committee)
SB 1524 (Vincent), 2003-2004 Legislative Session. Would have
removed the prohibition precluding a person engaged in any form
of prohibited gambling, as specified, whether within or without
this state, from obtaining a state gambling license to own a
gambling establishment. (Failed passage in Assembly
Appropriations Committee)
SB 1314 (Vincent), 2001-2002 Legislative Session. Would have
authorized a publicly traded corporation that leases a card club
from a publicly traded racing association to obtain a state
gambling license for a card club located at the racing
association's racetrack irrespective of whether the person has
any financial interest in a company, either within our outside
of this state, that is engaged in a form of gambling that is
prohibited in California. (Held in Assembly Governmental
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Organization Committee)
AB 572 (Firebaugh), 2001-2002 Legislative Session. Would have
authorized specified persons and corporations to obtain a
gambling license despite having a financial interest in an
establishment that offers forms of gambling that are illegal in
the state as long as the Commission, upon recommendation by the
Division of Gambling Control, finds that the ownership interest
is not detrimental to enforcement of state gaming law. (Held in
Senate Inactive File)
SB 51 (Vincent), 2001-2002 Legislative Session. Would have
authorized a publicly traded corporation to obtain a state
gambling license regardless of whether the person has any
financial interest in a company, either within our outside of
this state, that is engaged in a form of gambling that is
prohibited in California. (Vetoed by the Governor)
SB 100 (Maddy), Chapter 387, Statutes of 1995. Authorizes
publicly traded racing associations and qualified racing
associations to be eligible for a state gambling license to own
a gambling establishment.
REGISTERED SUPPORT / OPPOSITION :
Support
Capitol Casino
Crystal Casino
Hollywood Park Casino
Lucky Chances Casino
Lucky Derby
Ocean's Casino
Phoenix Casino
The Village Club
Opposition
Artichoke Joe's
Analysis Prepared by : Felipe Lopez / G. O. / (916) 319-2531
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