Amended in Senate August 19, 2013

Senate BillNo. 678


Introduced by Senator Correa

February 22, 2013


An act to add Chapter 5.2 (commencing with Sectionbegin delete 19990)end deletebegin insert 19990.01)end insert to Division 8 of the Business and Professions Code, relating tobegin delete gambling.end deletebegin insert gambling, making an appropriation therefor, and declaring the urgency thereof, to take effect immediately.end insert

LEGISLATIVE COUNSEL’S DIGEST

SB 678, as amended, Correa. Internet gambling.

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(1) 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 willful violation of these provisions is punishable as a misdemeanor, as specified.

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This bill would authorize intrastate Internet poker, as specified. The bill would authorize eligible entities to apply for a license to operate an intrastate Internet poker Web site offering the play of authorized games to players within California, as specified. The bill would prohibit the offer or play of any gambling game provided over the Internet that is not an authorized game permitted by the state pursuant to this bill. The bill would prohibit a person, except as provided, from aggregating computers or other access devices in a public setting within this state for the purpose of playing a gambling game on the Internet, or to promote, facilitate, or market that activity. The bill would make any violation of these provisions punishable as a misdemeanor. By creating new crimes, the bill would impose a state-mandated local program.

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This bill would require the commission, and any other state agency with a duty pursuant to these provisions, to adopt regulations within 120 days after the effective date of this bill, in consultation with the department to implement these provisions, and to facilitate the operation of intrastate Internet poker Web sites and expedite the state’s receipt of revenues. This bill would authorize the commission to issue initial licenses, as specified, and would establish the procedure for license renewal. The bill would require a license applicant to apply to the commission and pay an application deposit sufficient to cover all costs associated with the issuance of the license, for deposit into the Internet Poker Licensing Fund, as created by the bill, to be continuously appropriated to the department and the commission in the amounts reasonably necessary to investigate and evaluate the suitability of license applicants. The bill would establish separate license procedures for an applicant that is a federally reorganized Indian tribe.

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This bill would require the payment of a regulatory fee, for deposit into the Internet Poker Fund, as created by the bill, subject to annual appropriation by the Legislature for the actual reasonable costs of license oversight, consumer protection, state regulation, problem gambling programs, and other purposes related to this bill. The bill would require each licensee to pay a one-time license fee for deposit in the General Fund. The license fee would be credited against fees imposed on the licensee’s gross gaming proceeds, as specified.

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This bill would authorize each licensee, subject to approval by the department, and the department, subject to approval by the commission, to establish administrative procedures to resolve registered player complaints.

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This bill would require the department, 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 effective date of this bill and, annually, thereafter. The bill would also require the Bureau of State Audits, at least 4 years after the issue date of any license by the state, but no later than 5 years after that date, to issue a report to the Legislature detailing the implementation of this bill, as specified.

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(2) The bill would state that its provisions are severable.

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(3) 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.

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This bill would provide that no reimbursement is required by this act for a specified reason.

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(4) This bill would declare that it is to take effect immediately as an urgency statute.

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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.

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This bill would authorize the operation of Internet poker Web sites within the borders of this state. The bill would require the commission to establish a regulatory framework for the licensure of eligible entities and the operation of Internet poker Web sites within the borders of the state.

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Vote: begin deletemajority end deletebegin insert23end insert. Appropriation: begin deleteno end deletebegin insertyesend insert. Fiscal committee: yes. State-mandated local program: begin deleteno end deletebegin insertyesend insert.

The people of the State of California do enact as follows:

P3    1begin insert

begin insertSECTION 1.end insert  

end insert

begin insertChapter 5.2 (commencing with Section 19990.01)
2is added to Division 8 of the end insert
begin insertBusiness and Professions Codeend insertbegin insert, to
3read:end insert

begin insert

4 

5Chapter  begin insert5.2.end insert The Internet Poker Consumer Protection
6Act of 2013
7

7 

8Article begin insert1.end insert  General Provisions
9

 

10

begin insert19990.01.end insert  

This chapter shall be known and may be cited as
11the Internet Poker Consumer Protection Act of 2013.

12

begin insert19990.02.end insert  

The Legislature hereby finds and declares all of the
13following:

14(a) The state and the governments of numerous federally
15recognized California Indian Tribes currently maintain and
16implement substantial regulatory and law enforcement efforts to
17protect thousands of Californians who play, among other things,
18real-money poker in, respectively, licensed California card rooms
P4    1and authorized tribal government casinos, yet the state provides
2no licensing requirements, regulatory structure, or law enforcement
3efforts to protect Californians who play the same games online on
4an illegal and unregulated basis for money. The Legislature finds
5that protection of the interests of both the state and persons within
6its jurisdiction that play real-money games online requires the
7authorization and establishment of a system for regulating Internet
8poker gambling within California.

9(b) In October 2006, Congress passed the SAFE Port Act (Public
10Law 109-347), to increase the security of United States ports. That
11act included a section entitled the Unlawful Internet Gambling
12Enforcement Act of 2006 (UIGEA), which prohibits the use of
13banking instruments, including credit cards, checks, or fund
14transfers, for interstate Internet gambling, essentially prohibiting
15poker and other gambling games played online by United States
16citizens. UIGEA includes exceptions, however, that permit
17individual states to create a regulatory framework to enable
18intrastate Internet gambling, in which wagers are made exclusively
19within a single state whose laws or regulations comply with all of
20the following:

21(1) Contain certain safeguards regarding those transactions,
22including both of the following:

23(A) Age and location verification requirements.

24(B) Data security standards designed to prevent access by
25minors and persons located outside of that state.

26(2) Expressly authorize the betting or wagering process.

27(3) Do not violate any federal gaming statutes, including all of
28the following:

29(A) The Interstate Horseracing Act of 1978.

30(B) The Professional and Amateur Sports Protection Act.

31(C) The Gambling Devices Transportation Act.

32(D) The Indian Gaming Regulatory Act of 1988 (IGRA).

33(c) Despite the absence of enabling legislation in conformity
34with UIGEA, Californians participate in Internet poker and other
35forms of Internet gambling operated by offshore operators that
36are not regulated by California or United States authorities.
37Neither federal nor California laws provide any protections for
38California participants in those sites, nor do the citizens of
39California directly benefit from these activities. This significant
40rise in Internet gaming within California, together with efforts by
P5    1other states to begin authorizing and regulating Internet gambling
2and recent federal claims of illegal activities by certain offshore
3Internet gambling operators, has increased the need for California
4to enact on an urgent basis a statutory framework for authorizing
5and regulating Internet gaming within the state. The Legislature
6finds that Internet poker is a reality that must be addressed by
7California in order to protect consumers from compulsive
8gambling, underage play and exploitation from illegal operators,
9as well as to meet the needs of its citizens and economy. California
10also wants to limit the scope of Internet gambling to the game of
11poker, with which it has extensive regulatory experience.

12(d) By regulating Internet poker, the state will achieve the
13following:

14(1) Protect and promote its economy.

15(2) Provide California players with a safe and secure
16environment to play online.

17(3) Ensure fair and transparent Internet gambling.

18(4) Protect player funds and their winnings.

19(5) Protect against underage gambling.

20(6) Combat crime, racketeering, corruption, money laundering,
21and terrorism financing.

22(7) Enable the poker industry in California, which employs
23thousands of Californians, to compete fairly in Intrastate poker.

24(8) Generate millions of dollars of additional revenues to meet
25California and tribal governmental needs.

26(e) California, thus, has a state interest in authorizing and
27regulating legitimate Internet poker and in ensuring that those
28activities are consistent with existing public policy regarding the
29playing of poker games within the state. The public interest will
30be best served by requiring that those entities who desire to own
31or operate Internet poker web sites within the state continue to
32comply with the existing standards and rigorous scrutiny that must
33be met in order to qualify to offer poker games within the state.

34(f) The Legislature has determined, from experience gained by
35observing the development of Internet poker throughout the world,
36and in agreement with the federal requirements for authorizing
37Internet gambling under UIGEA, that California’s regulatory
38requirements must include all of the following:

39(1) A system that is implemented and administered in a fair and
40transparent manner that ensures that players can participate in
P6    1an environment that safeguards and secures their personal data
2in accordance with the latest industry data security standards.

3(2) The maintenance of player deposits and winnings in a secure
4system that enables players to access and withdraw their funds at
5any time in accordance with published terms and conditions.

6(3) The subjection of all authorized Internet gaming software
7to rigorous testing by independent testing facilities to ensure that
8the game outcomes are unbiased and unpredictable.

9(4) The exclusion of minors and the protection of vulnerable
10players from compulsive and excessive gambling by installing
11player verification systems and enforcing measures to detect these
12individuals and behavior in order to prevent them from accessing
13and playing on Internet Web sites.

14(5) Ensuring that online gambling activities are free from crime
15or the use of moneys obtained illegally, including the use of systems
16designed to detect, prevent, and report suspicious activities and
17transactions, including, but not limited to, robotic or collusive
18play, money laundering, or the evasion of state income taxes.

19(6) To offer responsible gaming features that limit a player’s
20potential for excessive gambling.

21(g) It is in the interest of the state to recapture, to the maximum
22extent, the hundreds of millions of dollars of public service funding
23that has been repeatedly cut during the state’s budget crisis. It is
24the intent of the Legislature in enacting this chapter to ensure that
25the state realizes a minimum of ____ dollars ($____) of General
26Fund revenue from operator and license fees and payments during
27the 2015-16 fiscal year.

28(h) The Legislature has considered and finds that authorization
29of intrastate Internet poker pursuant to this chapter does not violate
30the California Constitution or interfere with any right or exclusivity
31provision under any compact between the state and any federally
32recognized Indian tribe. Neither the equipment, including the
33computers required to access authorized intrastate Internet poker
34games under this chapter, any component thereof, nor any building
35or room, other than where poker is currently authorized, may be
36used in the operation or play of Internet poker. This chapter also
37prohibits the offering or use of any slot machine or other gaming
38device as defined in any of those compacts, or any other device
39which permits the playing of a gambling game against a computer
40or device in connection with any Internet poker game authorized
P7    1under this chapter. Only nonbanking poker games in which
2authorized live players play against each other in real time is to
3be permitted. The Legislature finds that the application of UIGEA
4in California would not be prohibited by the activities contemplated
5by this chapter and that the chapter does not violate federal law
6by infringing upon tribal sovereignty.

7(i) This chapter does not prohibit any federally recognized
8Indian tribe within California with a tribal-state gaming compact
9with the state pursuant to IGRA from participating in authorized
10Internet poker games pursuant to these provisions.

11

begin insert19990.03.end insert  

It is the intent of the Legislature to create a licensing
12and regulatory framework that will achieve all of the following:

13(a) Ensure that authorized games are offered for play only in
14a manner that is consistent with federal and state law.

15(b) Authorize the California Gambling Control Commission to
16issue licenses, with the recommendation of the Department of
17Justice, to applicants that meet the qualifications and background
18requirements consistent with this chapter, and to authorize those
19agencies to conduct the investigations necessary to carry out those
20duties.

21(c) Ensure that game play authorized by this chapter is offered
22 only to registered players who are physically present within the
23borders of California at the time of play and who are 21 years of
24age or older.

25(d) Include all of the provisions in this chapter as terms of the
26license between the state and each licensee, subject to the
27enforcement provisions delineated in this chapter.

28(e) Grant power to the state agencies authorized in this chapter
29to oversee the operations of each licensee and to enforce the
30provisions of this chapter to ensure that the interests of the state
31and registered players are protected.

32(f) Establish a process that includes the ability to conduct
33background investigations as necessary to determine an applicant’s
34suitability to participate in the gaming industry, and financial
35ability to obtain a license and the required software from the
36applicant’s own resources, in order to prevent a person from using
37a false identity to acquire a license, and requires that each
38employee of a licensee receive all necessary licenses and work
39permits from the state prior to engaging in any activities for which
40that license or permit is required.

P8    1(g) Ensure that the state is able to collect income tax revenues
2from authorized players in California.

3(h) Distribute regulatory fees which have been deposited into
4the Internet Poker Fund, as established in Section 19990.86, which
5shall be administered by the Controller, subject to annual
6appropriation by the Legislature, and which shall not be subject
7to the formulas established by law directing expenditures from the
8General Fund, for the following:

9(1) The actual costs of license oversight, consumer protection,
10state regulation, and problem gambling programs.

11(2) Other purposes related to this chapter as the Legislature
12may decide.

13(i) Create systems to protect each player’s private information
14and prevent fraud and identity theft.

15(j) Ensure that authorized players are able to have their
16financial transactions processed in a secure, safe, and transparent
17fashion, including the segregation of player deposits from other
18operator funds, the right to terminate accounts and obtain the
19return of deposits, the payment of winnings on a timely basis, and
20full accountability of all bets made, moneys collected, and prizes
21and pots paid out, including the basis therefore under game rules.

22(k) Ensure that all authorized Internet gambling games offered
23by a licensee are fair and honest, including, but not limited to,
24verifiable protections against cheating, collusion, nonrandom card
25shuffles or dealing, and advance knowledge of cards dealt.

26(l) Ensure that all applicable gaming regulatory agencies have
27unrestricted access to the premises and records of each licensee
28that relate to the operation, maintenance, control, money handling
29or other material aspect of any authorized game and that these
30premises and accounts be in strict compliance with state and tribal
31gaming laws and regulations concerning credit authorization,
32account access, and other security provisions and that all of the
33operator’s computers, servers and other components of the gaming
34system, and any bank or other repository where player’s or
35operator’s funds in connection with the poker room operation are
36deposited, are physically located within California.

37(m) Require that each licensee provide players with easily
38accessible customer service.

39(n) Require that each licensee’s Internet Web site contain
40information relating to problem gambling, including a telephone
P9    1number that an individual may call to seek information and
2assistance for a potential gambling addiction, provided that
3operators shall not be required to disrupt game play with that
4information.

5(o) Require that each licensee and all of its service providers,
6including tribal governments, meet the requirements applicable
7to it in connection with authorized games.

8(p) Ensure that there are no artificial business constraints on
9the licensee, such as limits on the percentage of revenues that may
10be paid to service providers or limits on the number of intrastate
11Internet poker rooms a licensee may operate or that the state may
12issue overall.

13(q) Ensure that all employees of the licensee are located, and
14all gaming activities operated by it are conducted, physically within
15the state and that the activities of licensees relating to gaming
16activities remain within the state’s regulatory jurisdiction, either
17because they are conducted within state boundaries or by entities
18that have agreed to subject themselves to the state’s regulatory
19and enforcement jurisdiction, provided that this chapter does not
20prohibit the use of servers or other equipment located outside
21California where that equipment is maintained solely for backup
22purposes.

23(r) Create an express exemption from disclosure, pursuant to
24the California Public Records Act under subdivision (b) of Section
256253 of the Government Code, that exempts from public disclosure
26proprietary information of a license applicant or a licensee in
27order to permit disclosure of confidential information to state
28agencies while achieving the public policy goals of deploying
29secure systems that protect the interests of the state and players.

30(s) Preserve the authority of the state to opt out of or into any
31federal framework for Internet poker, or to enter into an agreement
32with other states to provide Internet poker, provided these schemes
33or frameworks meet the criteria and address the issues concerning
34the matters set forth herein and are in compliance with applicable
35law.

36(t) As a matter of public policy requiring statewide consistency,
37preempt any city, county, or city and county from enacting any
38law or ordinance regulating or taxing Internet poker activities
39covered in this chapter.

 

P10   1Article begin insert2.end insert  Definitions
2

 

3

begin insert19990.05.end insert  

For the purposes of this chapter the following words
4have the following meanings:

5(a) “Authorized game” means a game of poker as defined in
6this chapter that has been approved by the commission for play
7on the Internet in an authorized poker room. Authorized games
8may only be operated by licensed poker room operators on an
9authorized poker platform.

10(b) “Authorized player” means a registered player who has
11provided the information and met the qualifications to play an
12authorized game.

13(c) “Authorized poker platform” means a software system that
14has been approved by the regulatory agency to manage and operate
15the play and presentation of authorized games, provided that player
16management systems and funds management systems, as defined
17in this chapter, shall be in software modules that are separate
18from the poker platform software and shall not be under the
19operation or control of, or accessible to, an authorized platform
20operator unless the platform operator is also the licensed poker
21room operator for the poker room on which the platform is
22operated.

23(d) “Authorized poker room” means a virtual cardroom on the
24Internet with one or more virtual card tables in which authorized
25players can play authorized games, provided that this chapter does
26not prohibit an authorized poker room from offering “play for
27free” or “play for fun” poker games to authorized players.
28Authorized poker rooms may only operate games on an authorized
29platform and shall handle financial and player management
30functions through authorized software that is separate and distinct
31from the game management system.

32(e) “Authorized poker room skin,” or “skin,” means a portal
33to an authorized poker room which may be provided by a poker
34room licensee to any person or entity, a skin sponsor, that is, itself,
35qualified to hold an authorized poker room license, and shall be
36regulated in accordance with subdivision (o) of Section 19990.20.

37(f) “Background investigation” means a process of reviewing
38and compiling personal and criminal history and financial
39information through inquiries of various law enforcement and
P11   1public sources to establish a person’s qualifications and suitability
2for a license to participate in the gambling industry.

3(g) “Bet” means the placement of money or something of
4monetary value at risk of being lost depending of the outcome of
5a game.

6(h) “Commission” means the California Gambling Control
7Commission, except that where the described function also involves
8a function to be served by the department, the term “commission”
9shall also mean the department to the extent of those functions.

10(i) “Core functions” and “core functioning” mean the
11management, administration, or control of the following:

12(1) Bets.

13(2) Authorized players.

14(3) Payments to and from authorized players.

15(4) Authorized games.

16(5) Intellectual property, including the trademarks, trade names,
17service marks, or similar intellectual property under which a
18licensee identifies its games to its customers.

19(6) A system for administering the deposit accounts, including
20records of moneys owed to, or paid to or from, players by the
21operator.

22(j) “Department” means the Department of Justice, except that
23where the described function also involves a function to be served
24by the commission, the term “department” shall also mean the
25commission to the extent of those functions.

26(k) “Deposit account” is a fund maintained by an authorized
27poker room on behalf of authorized players into which the players
28may deposit cash for use for betting in games or for deposit of
29player winnings from games.

30(l) “Employee work permit” means a permit issued to an
31employee of a licensee by the commission after a background
32investigation and finding of suitability.

33(m) “Finding of suitability” means a finding by the regulatory
34agency that a person meets the qualification criteria described in
35Article 4 (commencing with Section 19990.20), and that the person
36would not be disqualified on any of the grounds specified in that
37article.

38(n) “Funds management system” means an authorized software
39system that is dedicated to managing player funds in authorized
40games, including, but not limited to, tracking player accounts,
P12   1bets, pot collections and awards, player credits, financial reporting
2requirements, and other financial transactions associated with the
3operation of authorized games. Funds management systems may
4only be operated by a licensed poker room operator and only in
5connection with a poker room under its management and control.

6(o) “Gamble” or “gambling” means the placing of a bet or
7something of value at risk on the chance that the outcome of a
8game or event over which the player does not have total control
9will occur and that will result in the winning of a prize for correctly
10predicting the outcome.

11(p) “Game” means a contest in which players may win or lose
12depending on skill, chance or a combination thereof, depending
13on the rules of play.

14(q) “Gaming system” means the combination of hardware,
15software and data networks specifically described in Section
1619990.35.

17(r) “Good standing” means that a person has not had a
18California gaming license or determination of suitability suspended
19or revoked by a final decision of an agency that has issued that
20license or been issued a final order by a court of competent
21jurisdiction to cease conducting gaming activities. A suspension,
22revocation, or order shall be deemed final for purposes of this
23definition when it is no longer subject to challenge or appeal
24through administrative or court processes. The reinstatement of
25a finding of suitability or license following a suspension or
26revocation shall restore a person’s eligibility to be considered
27suitable or for a license, unless the determination of reinstatement
28itself bars that restoration.

29(s) “Gross revenues” means the total amount of moneys paid
30by players to the operator to participate in authorized games before
31deducting the cost of operating those activities except for fees to
32intermediate and payment processing fees. Gross revenues do not
33include player account deposits, amounts bet, except to the extent
34that those bets are used for generating fees to the operator as
35permitted under this chapter, and only to the extent those bet
36portions are retained by the operator, discounts on goods or
37services, rebates or promotional discounts or stakes provided to
38players, or revenues from nongaming sources, such as from food,
39beverages, souvenirs, advertising, clothing and other nongaming
40sources.

P13   1(t) “Initial license” means a license issued under this chapter
2on or before a date set by the commission pursuant to paragraph
3(1) of subdivision (a) of Section 19990.70 for the issuance of the
4first licenses that will be issued under this chapter and that shall
5be issued simultaneously.

6(u) “Intermediary” means a party that enters into an agreement
7with a licensee to recruit players to the licensee’s authorized poker
8room.

9(v) “Internal control system” means the system utilized by the
10authorized operator to ensure that all procedures involving the
11play of the game, the payment, receipt, rewarding, deposit or other
12handling of moneys, the integrity of the game equipment, the player
13actions to be scrutinized, enforcement of the age and geographic
14restrictions on players, and all other aspects of the game and the
15poker room are being carried out in a way that will comply with
16game rules and laws, uphold the integrity of the game, and prevent
17fraud or cheating from occurring.

18(w) “Internet poker” means an authorized game.

19(x) “Internet Poker Fund” means the fund established pursuant
20to Section 19990.86.

21(y) “Internet Poker Licensing Fund” means the fund established
22pursuant to Section 19990.20.

23(z) “Internet self-exclusion form” means a form on which an
24authorized player notifies an authorized poker room operator that
25he or she must be excluded from participation in authorized games
26for a stated period of time.

27(aa) “Intrastate” means within the borders of California.

28(ab) “Key employee” means any natural person employed by
29a licensed operator or service provider licensee who is an officer
30or director of the licensee, or who, in the judgment of the
31commission, has the authority to exercise significant influence
32over decisions concerning the operation of the licensee, over the
33operation of an authorized platform or poker room, or over any
34core function associated therewith.

35(ac) “Land-based gaming entity” means a licensee that is a
36card club operated pursuant to Chapter 5 (commencing with
37Section 19800).

38(ad) “Licensee” means a licensed operator, a service provider,
39or any other person holding a license under this chapter.

P14   1(ae) “Licensed operator” means an authorized poker room
2operator, an authorized poker platform operator, or both.

3(af) “Operator” means a person that operates an authorized
4platform or poker room.

5(ag) “Owner” means a person that has a financial interest in
6or control of a licensee, service provider, or other entity required
7to be found suitable under this chapter.

8(ah) “Per hand charge” means the amount charged to an
9authorized player to enable him or her to play a hand in an
10authorized game. Notwithstanding any other provision of state
11law, per hand charges may be collected on behalf of all
12participants in an individual game through the collection by the
13operator of a percentage of the pot or each bet made into the pot.

14(ai) “Per hand game” means a game for which the operator
15charges the player for each hand played.

16(aj) “Person” means an natural person, corporation, business
17trust, estate, trust, partnership, limited liability company,
18association, joint venture, government, including a tribal
19government, governmental subdivision, agency, or instrumentality,
20public corporation, or any other legal or commercial entity.

21(ak) “Play-for-fun game” means a version of a lawfully played
22gambling game in which there is no requirement to pay to play or
23any possibility of winning any prize or other consideration of value.
24Play-for-fun games are typically offered for training, educational,
25marketing, or amusement purposes only.

26(al) “Play-for-free game” means a version of a lawfully played
27gambling game that may include prizes or pots, without requiring
28a fee or other consideration for the right to play.

29(am) “Player management system” means an authorized
30software system dedicated to managing the activities of players in
31authorized games. Player management systems may only be
32operated by licensed poker room operators, and only in connection
33with poker rooms under their management and control.

34(an) “Play settings” means the options and default parameters
35made available by an operator to a player in the play of games.

36(ao) “Player account” means a record kept by a poker room
37operator on the gaming system, storing the player’s personal
38details, in which player gaming deposits and winnings are kept
39separate from an operator’s assets.

P15   1(ap) “Player session” means a temporary connection
2established between a player’s interface and a gaming system for
3the exchange of information, for the duration of the time that an
4authorized player is logged into his or her account.

5(aq) “Poker” means any of several nonbanked card games
6commonly referred to as “poker” that meet all of the following
7criteria:

8(1) Played by two or more individuals who bet and play against
9each other and not against the house on cards dealt to them out
10of a common deck of cards for each round of play, including those
11games played over the Internet using electronically generated and
12displayed virtual cards.

13(2) The object of the game is to hold or draw to a hand
14containing a predetermined number of cards which, when all cards
15to be dealt in the round have been distributed and the betting is
16completed, meets or exceeds the value of the hands held by the
17other players. The pot of bets made is awarded to the player or
18players holding the combination of cards which qualify as the
19winning combination under the rules of play. Values may be
20assigned to cards or combinations of cards in various ways, such
21as in accordance with their face value, the combinations of cards
22held, such as cards of a similar suit or face value, the order of the
23cards that are held, or other values announced before the round.

24(3) The house may deal or operate and officiate the game, and
25may collect a fee for doing so, but is not a participant in the game
26itself. The house has no stake in who wins or loses or the amount
27that is wagered.

28(4) Poker may be played in a variety of ways, including dealing
29all cards to the players so that they may not be seen by others,
30dealing the cards open face to the players, dealing through a
31combination of both, or creating a common set of cards that may
32be used by all players. The particular rules and winning
33combinations are made known to the players before each round
34is dealt.

35(5) All bets are placed in a common pot. At one or more
36predetermined point during the game a player may resign,
37challenge other players to make additional bets into the pot, or
38demand that players reveal their hand so a winner can be
39determined.

P16   1(6) A poker game that has been approved by the commission
2for play in an authorized live poker club in California under the
3Gambling Control Act shall be eligible for qualification by the
4commission as the basis of an authorized intrastate Internet poker
5gambling game, except that neither pai gow nor any other game
6in which persons other than authorized players to whom the cards
7in the game are dealt, and by whom they are held and played, are
8permitted to be on a game outcome or other game feature, or who
9may otherwise control the play of the hand, shall be authorized,
10offered, or played in connection with an intrastate Internet poker
11game. Subject to this limitation, the rules governing play in an
12authorized poker game under this chapter shall generally be the
13same as if the game were lawfully played in a live poker club.

14(7) Video games, slot machines, and other similar devices that
15individuals play against the house or device and win based on
16valuations or combinations of cards that are similar to those
17valuations or combinations used in live, interactive poker games,
18commonly known as “video poker” and “video lottery,” are not
19“poker” and are not permitted under this chapter.

20(ar) Other characteristics defining “poker” under this chapter
21include the following:

22(1) Live players with equal chances of winning competing
23against each other over the Internet in real time and not against
24the house or any device.

25(2) Success over time may be influenced by the skill of the
26player.

27(3) The bets of one player may affect the decisions of another
28player in the game, and the decisions of one player may affect the
29success or failure of another.

30(4) The term “poker” includes poker tournaments in which
31players pay a fee to the operator of the tournament under
32tournament rules approved by the applicable gaming regulatory
33agency.

34(as) “Poker enterprise” means a person or entity meeting the
35requirements for that designation under subdivision (d) of Section
3619805 and any other requirements under law for operating a
37land-based gaming entity.

38(at) “Proprietary information” means and includes all
39information that, whether or not patentable or registerable under
40patent, copyright, trademark, or similar statutes, (1) can be
P17   1protected as a trade secret under California law or any other
2applicable state law, federal law, or foreign law, or (2) derives
3independent economic value, actual or potential, from not being
4generally known to the public or to other persons that can obtain
5economic value from its disclosure or use. “Proprietary
6information” includes, but is not limited to, computer programs,
7databases, data, algorithms, formulas, expertise, improvements,
8discoveries, concepts, inventions, developments, methods, designs,
9analyses, drawings, techniques, strategies, new products, reports,
10unpublished financial statements, budgets, projections, billing
11practices, pricing data, contacts, client and supplier lists, business
12and marketing records, working papers, files, systems, plans and
13data, and all registrations and applications related thereto.

14(au) “Registered player” means a player who has submitted
15the required registration information to an authorized poker room
16operator in order to be eligible to become an authorized player
17in an authorized game in that poker room.

18(av) “Regulatory agency” means the commission, a tribal
19gaming commission with jurisdiction over the tribal license
20applicant and licensee, or both, and the department, as provided
21in this chapter.

22(aw) “Player’s agreement” means the legal agreement to be
23offered by an authorized poker room operator and accepted by a
24registered player as a condition of becoming an authorized player
25and qualified for play in an authorized game. The player’s
26agreement shall delineate, among other things, permissible and
27impermissible activities in which the player may or may not engage
28on the Internet poker Web site and the consequences of engaging
29in those activities.

30(ax) “Registration information” means the information provided
31by a person to a poker room operator in order to record the
32person’s interest in becoming an authorized player in that poker
33room.

34(ay) “Robotic play” means the use of a machine or software by
35a player or operator to simulate or automate player action at any
36point in a game, or otherwise to act as a substitute for a live player.

37(az) “Service provider” means a person that, under a service
38provider license, does any of the following:

39(1) Supplies goods or services to an authorized platform
40 operator or poker room operator to enable the operator to operate
P18   1that platform or poker room. Service providers may not provide
2goods or services directly to authorized players or authorized
3games in connection with the operation of any authorized platform
4or poker room, but shall only do so through and by a licensed
5platform or poker room operator.

6(2) Provides a gaming product or service to a licensee for use
7in an authorized game, including providing intermediary services.

8(3) The term “service provider” does not include a provider of
9goods or services that are not principally used in connection with
10the operation of an authorized game.

11(ba) “State” means the State of California.

12(bb) “Tournament” means a competition in which players play
13a series of games to decide the winner.

14(bc) “Tournament charge” means the amount charged by the
15operator for an authorized player to play in a tournament.

16(bd) “Tournament winnings” means the amount of a prize
17awarded to an authorized player in a tournament.

18(be) “Tribe” means a federally recognized Indian tribal
19government located within California.

20(bf) “Tribal enterprise” means an entity that is wholly owned
21and controlled by one or more tribes and no others, and shall be
22treated as a tribe for the purpose of this chapter.

23(bf) “Tribal regulatory agency” means the person, agency,
24board, committee, commission, or council designated under tribal
25law or the rules of the tribal enterprise to carry out the primary
26gaming regulatory responsibilities for a tribe or tribal enterprise,
27provided that tribal enterprises that are combinations of tribes or
28tribal enterprises shall include within their rules a designation of
29a specific tribal regulatory agency to register with the commission
30and function as the primary tribal regulatory agency with
31regulatory jurisdiction over the combination. That designation
32may not be changed except upon 20 days’ written notice to the
33commission.

34(bg) “Wagering suspense account” means a segregated account
35that temporarily holds the bets in a game pending the outcome of
36the game.

 

P10   1Article begin insert3.end insert  Authorized Games
2

 

3

begin insert19990.10.end insert  

To the extent permitted by federal law, the operation
4of gambling games on the Internet shall be authorized as long as
5all players and their betting activities are located within the state
6and the games are not played by minors.

7

begin insert19990.11.end insert  

Notwithstanding any other law, a person in
8California shall be 21 years of age or older to participate as a
9registered player in an authorized game.

10

begin insert19990.12.end insert  

(a) A person in the state shall not offer the
11opportunity to play an Internet gambling game, and a person shall
12not offer the opportunity to play an authorized game to anyone
13located within this state without holding a valid operator’s license
14issued by the state to offer the play of authorized games.

15(b) It is unlawful for a person to offer or play an Internet
16gambling game that is not authorized by the state.

17(c) Except as stated in this chapter, this chapter does not impose
18a limitation, restriction, or requirement on the offering of “play
19for fun” games, or “play for free” games on the Internet.

20(d) It is unlawful for a person to offer the use of, or aggregate,
21except at a license poker room operator’s lawfully operating live
22site, computers or other devices or equipment in a public setting
23or for consideration for the purpose of enabling others to access,
24play or participate over the Internet, directly or indirectly, in an
25authorized game or any other gambling activity, or to promote or
26market the playing of those games or activities, whether or not
27those games or activities are controlled games or authorized under
28this chapter.

29(e) A violation of this chapter is punishable as a misdemeanor.

30

begin insert19990.13.end insert  

Any money, other representative of value, or real
31or personal property used in, or derived from, the play of a
32gambling game provided on the Internet that is not authorized by
33the state pursuant to this chapter is subject to seizure by the
34commission or by a peace officer. Upon a finding by a court that
35the money, other representative of value, or real or personal
36property was used in, or derived from, the play of a gambling game
37provided on the Internet that is not authorized by the state pursuant
38to this chapter, that money or property shall be forfeited to the
39Internet Poker Fund established in Section 19990.86. This chapter
40does not apply to play-for-fun or play-for-free games.

P20   1

begin insert19990.14.end insert  

Only poker games that are offered for play or played
2in an authorized poker room are authorized games.

3 

4Article begin insert4.end insert  Licensing Internet Poker Gambling
5

 

6

begin insert19990.20.end insert  

(a) There shall be the following three categories of
7licenses:

8(1) Platform operator licenses. Platform operator licenses shall
9be required of a person operating an authorized platform.

10(2) Poker room operator licenses. Poker room operator licenses
11shall be required of a person operating an authorized card room.

12(3) Service provider licenses. A service provider license shall
13be required of a person providing goods or services to, or in
14connection with, the operation of an authorized poker room.

15(b) Entities eligible to apply for, receive, and maintain a
16platform operator license or a poker room operator license
17pursuant to this chapter are the following:

18(1) A poker enterprise, as defined in subdivision (m) of Section
1919805, that holds an owner license to operate a land-based gaming
20entity issued pursuant to subdivision (a) of Section 19851, subject
21to oversight by, and in good standing with, the commission.

22(2) A federally recognized California Indian tribe with a valid
23gaming ordinance or resolution and a valid compact authorizing
24it to offer gaming under the Indian Gaming Regulatory Act of
251988, or a tribal enterprise controlled by, and subject to, the
26powers and immunities of one or more members, partners, or
27shareholder tribes that have that authorization. A tribal enterprise
28may have as its members, partners, or shareholders any
29combination of federally recognized tribes or tribal enterprises.

30(3) A legal entity whose members, partners, or shareholders or
31any combination of poker enterprises, Indian tribes, and tribal
32entities, each of which is eligible to hold the same kind of license
33as or to be held by the combination.

34(4) In the case of a platform operator license, the applicant, or,
35if a combination, each of its members, partners, or shareholders,
36shall have been lawfully offering and operating live on-premises
37poker gambling games for in-person players within California
38continuously for the three years immediately preceding the filing
39of the application.

P21   1(c) A service provider license may be issued to any person or
2form of entity, provided the applicant meets the regulatory
3requirements for the license.

4(d) For the purposes of this section, an incorporation or other
5change in legal form of ownership during the three years
6immediately preceding application for licensure that did not alter
7the ownership qualifications of the entity, does not disqualify an
8entity otherwise eligible for licensure.

9(e) Initial licenses for purposes of this section are licenses issued
10pursuant to applications properly and completely filed with the
11appropriate regulatory commission not later than 120 days prior
12to the date on which the first license issued pursuant to this chapter
13shall take effect. Subject to the power of the appropriate regulatory
14commission to deny, revoke, suspend, condition, or limit an
15operating license, as provided in this chapter, a license is eligible
16for renewal at the end of each term. Failure of a licensee to file
17an application for renewal prior to the expiration date of the
18license may be deemed to be an abandonment of the license.

19(f) Platform operator licenses issued under this chapter shall
20be for a term of up to 10 years, and shall require payment of a
21license fee payment of ____ dollars ($____).

22(g) Poker room operator licenses issued under this chapter shall
23be for a term of 5 years and shall require a license fee payment of
24____ dollars ($____).

25(h) Service provider licenses issued under this chapter shall be
26for a term of 10 years and shall require a license fee pay of ____
27dollars ($____).

28(i) A license applicant shall submit to the commission, together
29with its application, an application deposit as determined by the
30department, in consultation with the commission, and any tribal
31regulatory agency with jurisdiction over the applicant’s intended
32poker room or platform for the reasonably anticipated costs to
33complete a necessary background investigation and evaluate the
34suitability of the applicant.

35(j) All moneys collected pursuant to this section shall be
36deposited into the Internet Poker Licensing Fund, which is hereby
37created, to be administered by the department. Notwithstanding
38Section 13340 of the Government Code, all moneys in the fund are
39continuously appropriated to the department and the commission,
40without regard to fiscal years, in the amounts necessary for the
P22   1department and the commission to perform their duties under this
2section.

3(k) An operator and service provider license applicant who
4intends to function as an operator licensee or service provider to
5a tribal poker room or platform, including a tribe or tribal
6enterprise providing those services under this chapter, and any
7others required to be licensed in connection therewith under this
8chapter, tribal license applicants, shall obtain a license from the
9tribal regulatory agency exercising jurisdiction over that platform
10or poker room, under the procedures set forth in this section. The
11parties intend that the licensing process provided for pursuant to
12this chapter shall involve joint cooperation among tribal regulatory
13agencies, the commission, and the department. The licensing
14process shall be as follows:

15(1) All tribal license applicants shall pay the required fee to the
16commission and obtain a certified receipt verifying payment.

17(2) The certified receipt of payment shall be presented to the
18tribal regulatory agency prior to that agency beginning the
19background and licensing process.

20(3) Tribal gaming agencies receiving those applications shall
21notify the commission of those applications within five days
22following receipt thereof.

23(4) In reviewing an application for a license, the tribal
24regulatory agency shall determine whether issuance of the license
25would meet the licensing standards set forth in this chapter. A
26license may not be issued unless, based on all information and
27documents submitted, the tribal regulatory agency is satisfied that
28the applicant meets all of the criteria set forth in Sections 199022
29and 199023, including those which must be met to find that an
30applicant is suitable for licensing.

31(5) Each applicant for a tribal regulatory agency license shall
32submit the completed application along with the required
33information and a tribal regulatory agency application fee, if
34required, to the tribal regulatory agency in accordance with the
35rules and regulations of that agency. At a minimum, the tribal
36regulatory agency shall require submission and consideration of
37all information required under Sections 199022 and 199023. For
38applicants who are business entities, the licensing provisions shall
39apply to the entity as well as to each of the following:

40(A) Its officers and directors.

P23   1(B) Its principal management employees, including any chief
2executive officer, chief financial officer, chief operating officer,
3and general manager.

4(C) Its owners or partners, if an unincorporated business.

5(D) Its shareholders who own more than 10 percent of the shares
6of the corporation, if a corporation.

7(E) Each person or entity, other than a financial institution that
8the tribal regulatory agency has determined does not require a
9 license under the preceding section, that, alone or in combination
10with others, has provided financing in connection with any gaming
11authorized under this chapter, if that person or entity provided
12more than 10 percent of (i) the startup capital, (ii) the operating
13capital over a 12-month period, or (iii) a combination thereof. For
14purposes of this section, where there is any commonality of the
15characteristics identified in subparagraphs (A) to (E), inclusive,
16between any two or more entities, those entities may be deemed
17to be a single entity. Nothing herein precludes the tribe or tribal
18regulatory agency from requiring more stringent licensing
19requirements.

20(6) The tribal regulatory agency shall conduct, or cause to be
21conducted, all necessary background investigations reasonably
22required to determine that the applicant is qualified for a gaming
23license under the standards set forth in Sections 199022 and
24199023.

25(7) In lieu of completing its own background investigation, and
26to the extent that doing so does not conflict with or violate this
27chapter, the tribal regulatory agency may contract with the
28commission and the department for the conduct of background
29investigations, may rely on a state certification of nonobjection
30previously issued under a gaming compact involving another tribe,
31or may rely on a state gaming license previously issued to the
32applicant, to fulfill some or all of the tribal regulatory agency’s
33background investigation obligation. An applicant for a tribal
34license shall be required to provide releases to the commission to
35make available to the tribal agency background information
36regarding the applicant. The commission shall cooperate in
37furnishing to the tribal regulatory agency that information, unless
38doing so would violate any agreement the commission has with a
39source of the information other than the applicant, or would impair
40 or impede a criminal investigation, or unless the tribal regulatory
P24   1agency cannot provide sufficient safeguards to ensure the state
2gaming agency that the information will remain confidential or
3that a provision of the information would violate state or federal
4law.

5(8) If the tribe adopts an ordinance confirming that Article 6
6(commencing with section 11140) of Chapter 1 of Title 1 of Part
74 of the Penal Code is applicable to members, investigators, and
8staff of the tribal regulatory agency, and those members,
9investigators, and staff thereafter comply with that ordinance,
10then, for purposes of carrying out its obligations under this section,
11the tribal regulatory agency shall be considered to be an entity
12entitled to receive state summary criminal history information
13within the meaning of paragraph (12) of subdivision (b) of Section
1411105 of the Penal Code. The Department of Justice shall provide
15services to the tribal regulatory agency through the California
16Law Enforcement Telecommunications System (CLETS), subject
17to a determination by the CLETS advisory committee that the tribal
18regulatory agency is qualified for receipt of those services, and
19on those terms and conditions as are deemed reasonable by that
20advisory committee.

21(9) Upon completion of the necessary background investigation,
22the tribal regulatory agency may issue a license on a conditional
23or unconditional basis. Nothing herein shall create a property or
24other right of an applicant in an opportunity to be licensed, or in
25a license itself, both of which shall be considered to be privileges
26granted to the applicant in the sole discretion of the tribal
27regulatory agency.

28(10) Any tribal license application under this chapter may be
29denied, and any license issued may be revoked, if the tribal
30regulatory agency determines that the application is incomplete
31or deficient, or if the applicant is determined to be unsuitable or
32otherwise unqualified for a gaming license. Pending consideration
33of revocation, the tribal regulatory agency may suspend a license.
34All rights to notice and hearing shall be governed by the rules of
35the tribal regulatory agency, which shall meet minimum
36requirements to be developed among the tribes, the commission,
37and the department, and as to which the applicant will be notified
38in writing, along with notice of an intent to suspend or revoke the
39license.

P25   1(11) Except as provided in subparagraph (B), upon receipt of
2notice that the commission or department, collectively or
3individually, the state regulatory agency, has determined that a
4person would be unsuitable for licensure in a similar application
5filed in connection with a nontribal operation, the tribal regulatory
6agency shall not issue the requested license or, if that notice is
7received after issuance of the license, promptly revoke that license,
8provided that the tribal regulatory agency may, in its discretion,
9reissue a license to the person following entry of a final judgment
10reversing the determination of the commission and department in
11a proceeding in state court conducted pursuant to Section 1085
12of the Civil Code.

13(12) The tribal regulatory agency may summarily suspend the
14license of any employee if the tribal regulatory agency determines
15that the continued licensing of the person or entity could constitute
16a threat to the public health or safety or may violate this chapter.

17(13) Upon receipt of a completed license application and a
18determination by the tribal regulatory agency that it intends to
19issue the license, the tribal regulatory agency shall transmit to the
20commission a notice of intent to license the applicant, together
21with all of the following:

22(A) A copy of all tribal license application materials and
23information received by the tribal regulatory agency from the
24applicant.

25(B) An original set of fingerprint cards.

26(C) A current photograph.

27(D) Except to the extent waived by the commission, those
28releases of information, waivers, and other completed and executed
29forms as the tribal regulatory agency shall require.

30(14) The tribal regulatory agency shall also require the
31applicant to file an application with the state gaming agency, prior
32to issuance of any license, for a determination of suitability for
33licensure under this chapter. Upon receipt of completed license
34application information from the tribal regulatory agency, the
35 state gaming agency may conduct a background investigation
36pursuant to state law to determine whether the applicant would
37be suitable to be licensed for association with a poker room or
38platform subject to the jurisdiction of the gaming agency. If further
39investigation is required to supplement the investigation conducted
40by the tribal regulatory agency, the applicant will be required to
P26   1pay the statutory application fee charged by the state regulatory
2agency pursuant to this chapter, but any deposit requested by the
3state regulatory agency shall take into account the initial deposit
4already provided by the applicant, reports of the background
5investigation already conducted by the tribal regulatory agency,
6and any other burdens on the applicant.

7(15) Failure to pay the application fee may be grounds for denial
8of the application by the state regulatory agency.

9(16) The state regulatory agency and tribal regulatory agency
10shall cooperate in sharing as much background information as
11possible, both to maximize investigative efficiency and
12thoroughness, and to minimize investigative costs.

13(17) Upon completion of the necessary background investigation
14or other verification of suitability, the state regulatory agency
15shall issue a notice to the tribal regulatory agency certifying that
16the state has determined that the applicant would be suitable, or
17that the applicant would be unsuitable, for licensure in connection
18with a poker room or platform under this chapter and, if unsuitable,
19stating the reasons therefor. Prior to denying an application for
20a determination of suitability, the state regulatory agency shall
21notify the tribal regulatory agency and afford the tribe an
22opportunity to be heard. If the state regulatory agency denies an
23application for a determination of suitability, that agency shall
24provide the applicant with written notice of all appeal rights
25available under state law.

26(18) The tribal regulatory agency shall require a licensee to
27apply for renewal of a determination of suitability at the time the
28licensee applies for renewal of a tribal license under this chapter.

29(19) The state regulatory agencies and the tribal gaming
30agencies under gaming compacts then in effect shall cooperate in
31developing standard licensing forms for tribal gaming license
32applicants, on a statewide basis, that reduce or eliminate
33duplicative or excessive paperwork, which forms and procedures
34shall take into account the requirements under this chapter and
35the expense thereof.

36(l) An application deposit amount from a license applicant that
37remains after completion of a background investigation and the
38finding of suitability shall be refunded to the applicant. If
39additional moneys are needed to complete the investigation of the
P27   1license applicant, the applicant shall pay the funds necessary to
2complete the investigation.

3(m) There is no limit on the number of Internet poker rooms an
4authorized poker room licensed operator may operate.

5(n) All initial licenses issued pursuant to this chapter shall take
6effect on the same date, as determined by the commission, but not
7later than one year after this chapter becomes effective.

8(o) In addition to the licenses required under this chapter, an
9application may be made to become a skin sponsor, under the
10following rules:

11(1) Skins are intended to serve as an alternative means by which
12those qualified to operate an authorized poker room may
13 participate in intrastate Internet poker and through which
14authorized players can be attracted to, and may participate in,
15authorized games being conducted in the authorized poker room.
16Skins are typically represented on an Internet Web site through
17graphics and words distinguishing it from those employed directly
18by the authorized poker room.

19(2) Other than design and other advertising considerations,
20skin sponsors shall have no operation or control over the skin or
21authorized poker room, or any access to the platform or games
22played thereon. All games offered through a skin shall be treated
23the same as other authorized games played in the host poker room
24and shall be subject to the same rules. Players entering games
25from skins or directly through the poker room may be mixed among
26the tables in the poker room and need not be informed as to the
27source from which other players entered the room.

28(3) An unlimited number of skins for an authorized poker room
29may be issued to one or more skin sponsors by the poker room
30licensee. A fee to the commission for a skin sponsorship shall be
31collected and paid to the commission in the amount of ____% of
32the fee to be paid to the licensed poker room operator for operating
33the skin on the sponsor’s behalf, but the fee to the commission
34shall be equal to or greater than ____ dollars ($____) annually.

35(4) Players accessing the authorized poker room through a skin
36shall be authorized and, in all other respects, treated and subject
37to the same rules as any other player in the room.

38(5) Additional rules governing advertisements, identifications,
39and notifications to players regarding skins shall be issued by the
40regulatory agency, which shall prohibit the use of a skin to serve
P28   1as a false front for a person’s participation in intrastate Internet
2poker under this chapter by any person who would not otherwise
3qualify to do so as a licensee of an authorized poker room.

4

begin insert19990.21.end insert  

An entity described in subdivision (b) of Section
519990.20 is eligible for a platform operator license or a poker
6room operator license. There is no limit on the total number of
7operating licenses the state may issue. An eligible entity may jointly
8apply for a license, either as a partnership or some other
9combination of eligible entities, as long as that combination is
10comprised entirely of eligible entities. An eligible entity that is a
11partnership, consortium, or other combination of eligible entities
12may itself have an interest in only a single license.

13

begin insert19990.22.end insert  

(a) Factors to be considered in evaluating the
14application for a license shall include, but are not limited to,
15quality, efficiency, reliability, financial viability, durability,
16adaptability, timely performance, integrity, and security.

17(b) (1) A nontribal license applicant shall be a resident of
18California or an entity organized in California, domiciled in
19California, and in good standing with the Secretary of State and
20Franchise Tax Board, and subject to auditing, enforcement of the
21terms of the license, and state taxation.

22(2) The following applies to tribal license applicants:

23(A) The commission shall consult with California tribal
24governments and regulatory agencies to develop a registration
25and application process that takes into account, and avoids
26duplication of, efforts by the commission and tribal governmental
27gaming agencies to perform background and other suitability tests
28applicable to tribes under their tribal-state compacts.

29(B) A tribal license applicant shall be federally recognized as
30a tribe, perform a substantial portion of its governmental functions
31within the borders of California, and be subject to a tribal-state
32compact, Secretarial procedures for class III gaming under IGRA,
33or a gaming ordinance or resolution approved under IGRA that
34is in effect.

35(C) A tribal enterprise license applicant shall include with its
36license application an express and limited waiver of all tribal
37owners’ sovereign immunity solely for the purposes of enforcing
38the terms of a license issued under this chapter and any regulations
39promulgated thereunder, and with regard to a claim, sanction, or
40penalty arising therefrom, and for no other purpose.

P29   1(D) Tribal applicants who have conducted live poker games for
2in-person players on their tribal lands for at least three continuous
3years prior to filing their license application and are in good
4standing shall be presumed to be suitable to hold a gaming license.

5(3) A licensed operator cannot accept goods for services from
6a service provider that has not been licensed as a service provider
7under this chapter.

8(4) All facilities, bank accounts, and accounting records of a
9license applicant related to authorized gaming activity shall be
10located in California.

11(5) Proprietary information supplied by a license applicant to
12a state agency shall be exempt from public disclosure to the extent
13permitted under Section 6253 of the Government Code.

14(6) In addition to other confidentiality protections afforded to
15license applicants, the state and its regulatory agencies and the
16tribe and their regulatory agencies shall treat the proprietary
17information of a license applicant as confidential to protect the
18license applicant and to protect the security of a prospective
19intrastate Internet poker platform or poker room. This chapter
20does not prohibit the exchange of confidential information among
21state agencies, tribal gaming agencies, or both, considering a
22license application, nor does it prohibit the state or its agencies
23from entering into agreements to share applicant background
24information with other gaming licensing agencies in other
25jurisdictions.

26

begin insert19990.23.end insert  

(a) The commission or, if application for licensing
27in connection with a tribal platform or poker room, the appropriate
28tribal regulatory agency, shall review the suitability and capability
29of a license applicant in conformity with the rules set forth in this
30chapter.

31(b) With respect to nontribal licenses, the commission may
32establish a process to conduct a preliminary determination of
33suitability based on a partial investigation of license applicants
34that are seeking licensure along with a determination of which
35license applicants may be subject to a partial investigation. A
36partial investigation is intended to screen out applicants that do
37not meet the prima facie evidential showing that it meets the
38suitability requirements of this chapter. A partial investigation
39shall include fingerprint-based state and federal criminal history
40checks and clearances, and inquiries into various public databases
P30   1regarding credit history and civil litigation. A partial investigation
2shall also include a review of the applicant’s financial status,
3which shall include the required submission of a report prepared
4on behalf of the applicant by a department-approved forensic
5accounting, audit, or investigative firm, in a format developed by
6the department, and at the applicant’s expense. The report shall
7include the financial information necessary for the department to
8make a preliminary determination of suitability. The department
9may specify additional requirements regarding the contents of the
10report and any other financial information or documentation
11required to be submitted with the application. A full investigation
12shall be conducted of only those persons that pass the partial
13investigation and that will undergo a full investigation pursuant
14to subdivision (c). Those applicants that do not pass the partial
15investigation may appeal the decision to the commission.

16(c) The commission shall conduct a full investigation into the
17suitability of a license applicant that initially applies to the
18commission for a license, and in the case of tribal license
19applicants, following approval of the license by the tribal
20regulatory agency.

21(d) Notwithstanding anything in this chapter to the contrary,
22an applicant that is a tribe and is subject to a tribal-state compact,
23secretarial procedures for class III gaming under IGRA, or a
24gaming ordinance or resolution approved under IGRA that is in
25effect, shall be presumed suitable and shall not be required to pay
26the application fee. In all other instances the investigation shall
27include all of the following persons:

28(1) The license applicant.

29(2) All officers, directors, partners, and members of the license
30applicant.

31(3) The owner or owners of the following:

32(A) The license applicant.

33(B) An affiliate of the license applicant.

34(C) A person deemed by the department to have significant
35influence over the license applicant or its service providers or
36their respective operations.

37(D) A person that directly or indirectly holds a beneficial interest
38or ownership interest of 10 percent or more of a service provider
39or player recruiter of the licensee. The commission may require
40a person with a smaller interest to be found suitable in the exercise
P31   1of its discretion where it deems appropriate. If the person is not
2a natural person, the department may determine which officers,
3directors, and owners of the person are significantly involved in
4the management or control of the person as it relates to core
5functions so as to require an investigation into suitability.

6(e) A full investigation shall include a review and evaluation of
7the license applicant’s qualifications and experience to provide
8the services anticipated of a licensee, which shall include the
9required submission of a report prepared on each applicant by an
10outside firm contracted and supervised by the department, in a
11format developed by the department, and at the applicant’s
12expense. The report shall include information necessary for the
13department to make a determination of suitability, as specified in
14regulation, consisting of, but not limited to, personal history, prior
15activities and associations, credit history, civil litigation, past and
16present financial affairs and standing, and business activities. The
17department may specify additional requirements regarding the
18contents of the report and other information or documentation
19required to be submitted with the application. If the license
20applicant is using or providing gaming software, the license
21applicant shall also provide compliance certification of its gaming
22software by a department-approved certification entity.

23(f) An institutional investor holding less than 10 percent of the
24equity securities of a service provider’s holding or intermediary
25companies shall be granted a waiver of an investigation of
26suitability or other requirement if all of the following apply:

27(1) The securities are those of a corporation, whether publicly
28traded or privately held.

29(2) Holdings of those securities were purchased for investment
30purposes only.

31(3) The institutional investor annually files a certified statement
32with the department to the effect that it has no intention of
33influencing or affecting the affairs of the issuer, the licensee, or
34service provider, as applicable, or its holding or intermediary
35companies.

36(4) Notwithstanding paragraph (3), the institutional investor
37may vote on matters submitted to the vote of the outstanding
38security holders.

39(5) The certification described in paragraph (3) shall include
40a statement that the institutional investor beneficially owns the
P32   1equity securities of the corporation for investment purposes only,
2and in the ordinary course of business as an institutional investor,
3and not for the purpose of causing, directly or indirectly, the
4election of members of the board of directors, or effecting a change
5in the corporate charter, bylaws, management, policies, or
6operations of the corporation or any of its affiliates. The
7certification also shall indicate any changes to the structure or
8operations of the institutional investor that could affect its
9classification as an institutional investor, as listed in paragraph
10(7). Additionally, the certification shall state that the institutional
11investor and corporation shall maintain gaming compliance
12policies and procedures to implement and ensure compliance with
13this chapter and regulations promulgated thereunder.

14(6) An institutional investor granted a waiver under this
15subdivision that subsequently decides to influence or affect the
16affairs of the issuer shall provide not less than 30 days’ notice of
17that intent and shall file with the department a request for
18determination of suitability before taking an action that may
19influence or affect the affairs of the issuer. However, the
20institutional investor may vote on matters submitted to the vote of
21the outstanding security holders. If an institutional investor
22changes its investment intent, or the department finds reasonable
23cause to believe that the institutional investor may be found
24unsuitable, the institutional investor shall take no action other
25than divestiture with respect to its security holdings until it has
26complied with any requirements established by the department,
27which may include the execution of a trust agreement. The
28institutional investor and its relevant holding, related, or subsidiary
29companies shall immediately notify the department and, if a tribal
30license is involved, the tribal regulatory agency, of any information
31about, or actions of, an institutional investor holding its equity
32securities when that information or action may impact upon the
33eligibility of the institutional investor for a waiver pursuant to
34paragraph (2).

35(7) If at any time the regulatory agency finds that an institutional
36investor holding a security of a licensee under this chapter has
37failed to comply with the terms of this chapter, or if at any time
38the department finds that, by reason of the extent or nature of its
39holdings, whether of debt or equity securities, an institutional
40investor is in a position to exercise such a substantial impact upon
P33   1the controlling interests of a licensee that investigation and
2determination of suitability of the institutional investor are
3necessary to protect the public interest, the department may take
4any necessary action otherwise authorized under this chapter to
5protect the public interest.

6(8) For purposes of this subdivision, an “institutional investor”
7includes all of the following:

8(A) A retirement fund administered by a public agency for the
9exclusive benefit of federal, state, or local public employees.

10(B) An investment company registered under the federal
11Investment Company Act of 1940 (15 U.S.C. Sec, 80a-1 et seq.).

12(C) A collective investment trust organized by banks under Part
13Nine of the Rules of the Comptroller of the Currency.

14(D) A closed-end investment trust.

15(E) A chartered or licensed life insurance company or property
16and casualty insurance company.

17(F) A federally regulated or state-regulated bank, savings and
18loan, or other federally or state-regulated lending institution.

19(G) An investment adviser registered under the federal
20Investment Advisers Act of 1940 (15 U.S.C. Sec. 80b-1 et seq.).

21(H) Other persons as the department may determine for reasons
22consistent with the public interest.

23(g) The tribe or tribes that own a tribal enterprise, and the
24officers, directors, and employees of that tribe or tribes, are not
25subject to suitability review as a condition of the tribal enterprise
26obtaining a license pursuant to this chapter, provided that the
27tribal enterprise is controlled by an independent board of directors.
28The officers, directors, and employees of the tribal enterprise are
29not hereby exempted from suitability review.

30(h) Except as otherwise provided by statute or regulation, every
31person, that, by statute or regulation, is required to hold a license
32shall obtain a license prior to engaging in the activity, or occupying
33the position, with respect to which the license is required. An
34applicant for licensing, or for any approval or consent, shall make
35a full and true disclosure of all information to the appropriate
36regulatory agencies as necessary to carry out the policies of the
37state relating to the licensing and control of poker. The burden of
38proving a person’s qualifications to receive a license is on the
39applicant.

P34   1(i) The regulatory agencies may issue a finding of suitability
2for a license applicant to obtain a license only if, based on all of
3the information and documents submitted, the commission is
4satisfied that each of the persons subject to investigation pursuant
5to this section is both of the following:

6(1) A person of good character, honesty, and integrity, or, if an
7entity, in good standing in its jurisdiction of organization and in
8all other jurisdictions in which it is qualified, or should be
9qualified, to do business.

10(2) A person whose prior activities, criminal record, if any,
11reputation, habits, and associations do not pose a threat to the
12public interest of this state, or to the effective regulation and
13control of controlled poker, or create or enhance the dangers of
14unsuitable, unfair, or illegal practices, methods, and activities in
15the conduct of controlled poker or in the carrying on of the business
16and financial arrangements incidental thereto.

17(j) The commission shall issue a finding that a license applicant
18is not suitable to obtain a license if it finds that a person subject
19to investigation pursuant to this section is described by any of the
20following:

21(1) Failed to clearly establish eligibility and qualifications in
22accordance with this chapter.

23(2) Failed to timely provide information, documentation, and
24assurances required by this chapter or requested by the
25department, or, with respect to a license applicant, failed to reveal
26any fact material to qualification, or supplied information that is
27untrue or misleading as to a material fact pertaining to the
28suitability criteria.

29(3) Been convicted of a felony, including a conviction by a
30federal court or a court in another state or foreign jurisdiction for
31a crime that would constitute a felony if committed in California,
32except that a conviction of a felony involving the hunting or fishing
33rights of a tribal member while on his or her reservation shall not
34be included among the class of disqualifying felonies.

35(4) Been convicted of a misdemeanor in a jurisdiction involving
36dishonesty or moral turpitude within the 10-year period
37immediately preceding the submission of the application, unless
38the applicant has been granted relief pursuant to Section 1203.4,
391203.4a, or 1203.45 of the Penal Code. However, the granting of
40relief pursuant to Section 1203.4, 1203.4a, or 1203.45 of the Penal
P35   1Code shall not constitute a limitation on the discretion of the
2department or affect the applicant’s burden.

3(5) Has associated with criminal profiteering activity or
4organized crime, as defined in Section 186.2 of the Penal Code.

5(6) Has contemptuously defied a legislative investigative body,
6or other official investigative body of a state or of the United States
7or a foreign jurisdiction, when that body is engaged in the
8investigation of crimes relating to poker, official corruption related
9to poker activities, or criminal profiteering activity or organized
10crime, as defined in Section 186.2 of the Penal Code.

11(7) Is less than 21 years of age.

12(8) Has knowingly and willfully accepted a bet after December
1331, 2006, from a person located in the United States on any form
14of Internet gambling, including, but not limited to, poker, that has
15not been affirmatively authorized by law of the United States or
16of each state in which a person making that bet were located, or
17has been the holder of a direct or indirect financial interest in a
18person or entity that has accepted that bet.

19(9) Has knowingly facilitated or otherwise provided services
20with respect to bets or gambling games using the Internet involving
21persons located in the United States for a person described in
22paragraph (8), acting with knowledge of the fact that these bets
23or gambling games involved persons located in the United States.

24(j) Actions on license applications will be treated as follows:

25(1) The commission shall reject the license application of an
26applicant found to be ineligible for licensure.

27(2) If denial of the application, or approval of the license with
28restrictions or conditions on the license, is recommended, the
29department shall prepare and file with the commission written
30reasons upon which the recommendation is based. Prior to filing
31its recommendation with the commission, the department shall
32meet with the applicant, or the applicant’s duly authorized
33representative, and inform the applicant generally of the basis for
34a proposed recommendation that the application be denied,
35restricted, or conditioned.

36(3) This section neither requires the department to divulge to
37the applicant confidential information received from a law
38enforcement agency or information received from a person with
39assurances that the information would be maintained confidential,
P36   1nor to divulge any information that might reveal the identity of an
2informant or jeopardize the safety of a person.

3(4) Denial of an application shall be without prejudice to a new
4and different application filed in accordance with any regulations
5adopted by the department with respect to the submission of
6applications.

7(5) A request to withdraw an application for a license may be
8made by the license applicant at any time prior to final action on
9the application by the department by filing a written request with
10the commission to withdraw the application, absent knowledge of
11a specific reason to suspect that the person or entity may be found
12unsuitable.

13(6) The commission shall waive the application of the provisions
14of paragraph (8) of subdivision (j) or paragraph (9) of subdivision
15(j) to an applicant who can demonstrate by clear and convincing
16evidence that its conduct in connection with bets and gambling
17games involving persons located in the United States was not
18unlawful under federal law and the laws of each state in which
19persons making the bets were located. The termination of a
20prosecution of that applicant under the laws of any state, the United
21States, or other jurisdiction in a manner other than with a
22conviction shall not be regarded as evidence that the applicant’s
23conduct was not unlawful. This section does not waive the need
24to comply with all otherwise applicable license and suitability
25requirements.

26

begin insert19990.23.5.end insert  

A finding of suitability by a state gaming agency
27within the United States with expertise recognized within the
28gaming industry that is also recognized as meeting this standard
29by the department, shall be grounds for a state provisional finding
30of suitability with respect to a particular person or entity until a
31permanent suitability finding is issued by the department as to that
32person or entity.

33

begin insert19990.24.end insert  

In addition to any other data that the department
34shall request from a license applicant as a matter of law, and to
35ensure that a license applicant is legally, technically, and
36financially qualified to become a licensee, the department shall
37request that a license applicant name, describe, or provide all of
38the following:

P37   1(a) The license applicant’s experience and qualifications to
2provide the services anticipated of a licensee as set forth in Article
35 (commencing with Section 19990.30).

4(b) The names of all of the license applicant’s owners,
5executives, and employees at the time the application is submitted,
6as well as sufficient personally identifiable information on each
7of those persons to conduct background investigations as required
8by the department.

9(c) For those owners, executives, and employees who would be
10required to hold a work permit if the license application were
11granted, the application shall include information regarding their
12qualifications to obtain that permit. That information may be in
13the form of work permit applications to be processed by the
14department along with the license application.

15(d) The fingerprints of the owners, directors, managers,
16executives, and employees of the licensee and its affiliates, using
17live scan technology.

18(e) Documentation and information relating to the license
19applicant and its direct and indirect owners, including, but not
20limited to, all of the following:

21(1) Proof of the license applicant’s formation in California,
22including, as applicable, articles of incorporation, articles of
23organization, bylaws, operating agreement, partnership agreement,
24or other formation or charter documents. For a tribe or tribal
25enterprise, this requirement shall be satisfied by providing
26documentation regarding the tribe’s federal recognition and its
27operation of a substantial portion of its governmental activities in
28California.

29(2) Current and historical audited financial and accounting
30records performed in accordance with Generally Accepted
31Accounting Principles (GAAP) or International Financial
32Reporting Standards (IFRS).

33(3) Documents describing legal and regulatory proceedings in
34which the license applicant has been or is a party.

35(4) Documents relating to the license applicant’s business
36history and structure.

37(5) Documents relating to the nature and sources of the license
38applicant’s financing, including, but not limited to, operating
39agreements, partnership agreements, stock purchase agreements,
40loan capital agreements, pro forma cap tables, pro forma
P38   1statements of profits and loss, investor rights agreements, voting
2agreements, and shareholder agreements. These materials may
3be submitted subject to a request for confidentiality.

4(6) Documentation that demonstrates that the license applicant
5is financially qualified to perform the obligations of a licensee as
6described in this article.

7(7) An independent financial audit report by a certified public
8accountant.

9(f) A description of the functions, goods, or services that the
10license applicant intends to provide through licensed service
11providers, rather than conducting directly.

12(g) A description of the games and services the license applicant
13proposes to offer to authorized players, in the case of an applicant
14for an operator’s license, or of the goods or services the license
15applicant proposes to offer to licensed operators, in the case of
16an applicant for a service provider’s license.

17(h) In the case of an applicant for an operator’s license, a
18description of the manner in which the licensee’s facilities will
19accomplish the goals of this chapter, including, but not limited to:

20(1) The licensee’s location within the state.

21(2) The licensee’s security systems.

22(3) The license applicant’s proposal for the manner in which it
23will facilitate compliance with all of the standards set forth in this
24chapter and federal law, including, but not limited to, Section
255362(10)(B) of Title 31 of the United States Code.

26(i) In the case of an applicant for a license, the system
27requirements that the license applicant plans to implement to
28achieve the state’s goals under this chapter, including, but not
29limited to, the following:

30(1) Connectivity and level of service.

31(2) The system architecture of the gaming equipment.

32(3) The software architecture of the gaming system.

33(4) The network architecture of the gaming system.

34(5) The security employed for the protection of the gaming
35system.

36(6) The security employed for the protection of online players.

37(7) Connectivity with systems belonging to service providers.

38(8) Methods employed to maintain high service availability.

39(9) Change management procedures.

40(10) Information security policies.

P39   1(11) Disaster recovery procedures.

2(12) Policies to ensure transparency and integrity in gaming.

3(13) Financial policies for the protection of player funds.

4(14) Gaming systems, including, but not limited to, hardware
5and software that ensure all of the following:

6(A) The games are legal.

7(B) The games are independent and fair and played by live
8persons.

9(C) Game and betting rules are available to all registered
10players.

11(D) All data used for the conduct of each game are randomly
12generated and unpredictable to the same extent that a properly
13shuffled finite deck of tangible playing cards would be random
14and unpredictable.

15(15) Accounting systems, including but not limited to, those for
16any of the following:

17(A) Authorized player accounts.

18(B) Per hand charges.

19(C) Transparency and reporting to all state agencies.

20(D) Distribution of funds, pursuant to the license and this
21chapter, to the state and authorized players.

22(E) Ongoing auditing and ongoing internal control and
23compliance reviews.

24(16) Facility security systems to protect the intrastate Internet
25poker Web site from internal and external threats.

26(j) The license applicant’s proposal to facilitate the statutory
27duties and responsibilities of the state agencies with jurisdiction
28over aspects of the licensee’s operations, including, but not limited
29to, all of the following:

30(1) The department.

31(2) The commission.

32(3) The Treasurer.

33(4) The Franchise Tax Board.

34(k) In addition to demonstrating that the license applicant is
35legally, technically, and financially qualified to become a licensee,
36an applicant for an operator’s license shall also provide
37compliance certification of its gaming software by a
38department-approved certification entity to ensure that it complies
39with the requirements of this chapter.

P40   1

begin insert19990.25.end insert  

(a) The holder of an owner license issued pursuant
2to subdivision (a) of Section 19851 that is in good standing, is not
3unqualified to operate a land-based poker entity by reason of an
4investment in a license applicant or a licensee.

5(b) An official representative of the government of a federally
6recognized California Indian tribe with a tribal-state gaming
7compact with the state or conducting gaming activities pursuant
8to secretarial procedures, or the tribe itself or its subsidiaries, is
9not unqualified to operate a land-based poker entity by reason of
10an investment in a license applicant or a licensee.

11(c) (1) A license applicant whose application is denied by the
12state regulatory agency may bring an action to appeal that decision
13to the Superior Court of the County of Sacramento. Damages or
14other monetary awards shall not be permitted.

15(2) The Superior Court of the County of Sacramento shall uphold
16the decision by the state regulatory agency if there is substantial
17evidence to support the department’s decision to deny the license
18application.

19(3) If the Superior Court of the County of Sacramento finds for
20the license applicant, it shall return the application to the
21department for action consistent with the decision of the court.

22 

23Article begin insert5.end insert  Rights and Obligations of Licenses
24

 

25

begin insert19990.30.end insert  

(a) A licensee shall comply with the terms of this
26chapter.

27(b) A licensed operator may cease its operations after providing
28the department with a 90-day advance notice of its intent and a
29statement explaining its reasons for doing so, which may include
30the fact that continuing to operate the intrastate Internet poker
31Web site is commercially infeasible. In response to that notice, the
32state may file an action in the Superior Court of the County of
33Sacramento if it deems that action necessary to protect a state
34interest, including, but not limited to, the interests of authorized
35players.

36(c) If a dispute arises between the state and the licensee, the
37department or a licensee may file an action in the superior court
38of a county in which the department has an office for an
39interpretation of the rights and responsibilities of the state and
40the licensee pursuant to this chapter.

P41   1

begin insert19990.31.end insert  

(a) Prior to initiating operations and thereafter, a
2licensee shall ensure that each employee has been issued an
3employee work permit by the department, pursuant to standards
4adopted by the department, prior to that person having access to
5the licensee’s facilities. The permit shall be renewed every two
6years.

7(b) An employee work permit shall not be issued unless, based
8on all of the information and documents submitted, the department
9is satisfied that the applicant is, at a minimum, all of the following:

10(1) A person of good character, honesty, and integrity.

11(2) A person whose prior activities, criminal record, if any,
12reputation, habits, and associations do not pose a threat to the
13public interest of this state, or to the effective regulation and
14control of controlled poker, or create or enhance the dangers of
15unsuitable, unfair, or illegal practices, methods, and activities in
16the conduct of controlled poker or in the carrying on of incidental
17business and financial arrangements.

18(3) A person who is in all other respects qualified to hold an
19employee work permit as provided in this chapter.

20(c) An applicant for an employee work permit is disqualified
21for any of the following reasons:

22(1) Failure of the applicant to clearly establish eligibility and
23qualification in accordance with this chapter.

24(2) Failure of the applicant to provide timely information,
25documentation, and assurances required by this chapter or
26requested by a state official, or failure of the applicant to reveal
27any fact material to the qualification, or the supplying of
28information that is untrue or misleading as to a material fact
29pertaining to the qualification criteria.

30(3) Conviction of a felony, including a conviction by a federal
31court, a court in another state, or a court in another country, for
32a crime that would constitute a felony if committed in California.

33(4) Conviction of the applicant for a misdemeanor involving
34dishonesty or moral turpitude within the 10-year-period
35immediately preceding the submission of the application, unless
36the applicant has been granted relief pursuant to Section 1203.4,
371203.4a, or 1203.45 of the Penal Code. However, the granting of
38relief pursuant to Section 1203.4, 1203.4a, or 1203.45 of the Penal
39Code shall not constitute a limitation on the discretion of the
40department or affect the applicant’s burden under subdivision (b).

P42   1(5) Association of the applicant with criminal profiteering
2activity or organized crime, as defined in Section 186.2 of the
3Penal Code.

4(6) Contemptuous defiance by the applicant of a legislative
5investigative body, or other official investigative body of a state
6or of the United States, when that body is engaged in the
7investigation of crimes relating to poker, official corruption related
8to poker activities, or criminal profiteering activity or organized
9crime, as defined in Section 186.2 of the Penal Code.

10(7) The applicant is less than 21 years of age.

11(d) A licensee shall apply for an employee work permit on behalf
12of each employee.

13(e) An employee work permit shall not be issued unless the
14applicant meets the qualification standards adopted by the
15commission.

16(f) The department shall establish a fee to be paid by a licensee
17for the cost of background investigation on employee work permit
18applications submitted on behalf of that licensee’s employees. The
19department and the commission shall establish processes for the
20revocation or suspension of an intrastate Internet poker license
21or employee work permit, and to withdraw an application for an
22intrastate Internet poker license or employee work permit.

23(g) (1) A licensee shall not enter into, without prior approval
24of the department, a contract or agreement with a person who is
25denied a poker license or employee work permit pursuant to
26Chapter 5 (commencing with Section 19800), or whose poker
27license or employee work permit is suspended or revoked by the
28department, or with a business enterprise under the control of that
29person, after the date of receipt of notice of the department’s
30action.

31(2) A licensee shall not enter into a contract or agreement with
32a person or entity that has knowingly and willfully accepted a bet
33from a person located in the United States on a form of Internet
34gambling, including, but not limited to, poker, after December 31,
352006, that has not been affirmatively authorized by a law of the
36United States or of each state in which the person making that bet
37was located, or has been the holder of a direct or indirect financial
38interest in a person or entity that has accepted a bet. This section
39does not apply to a person or entity that has demonstrated, by
40clear and convincing evidence, pursuant to the process described
P43   1in paragraph (6) of subdivision (i) of Section 19990.23, that its
2conduct in connection with bets and gambling games involving
3persons located in the United States was not unlawful under federal
4law and the laws of each state in which persons making bets were
5located.

6(h) A licensee shall not employ, without prior approval of the
7department, a person in a capacity for which he or she is required
8to have an employee work permit, if the person has been denied a
9poker license or an employee work permit pursuant to Chapter 5
10(commencing with Section 19800), or if his or her poker license
11or employee work permit has been suspended or revoked after the
12date of receipt of notice of the action by the department. A licensee
13shall not enter into a contract or agreement with a person whose
14application for a poker license or an employee work permit has
15been withdrawn with prejudice, or with a business enterprise under
16the control of that person, for the period of time during which the
17person is prohibited from filing a new application for a poker
18license or an employee work permit.

19(i) If an employee who is required to hold an employee work
20permit pursuant to this chapter is denied an employee work permit,
21or has his or her employee work permit revoked by the department,
22the employee shall be terminated immediately in all capacities.
23Upon notifying the licensee of the department’s action, the
24employee shall have no further involvement in the poker operation.
25Notwithstanding any provisions of this chapter to the contrary:

26(1) If an employee who is required to hold an employee work
27permit pursuant to this chapter has his or her employee work
28permit suspended, the employee shall be suspended in all
29capacities. Upon notifying the licensee of the department’s action,
30the employee shall not be permitted to have involvement in the
31poker operation during the period of suspension.

32(2) A licensee shall not designate another employee to replace
33the employee whose employment was terminated or suspended,
34unless the other employee has an existing work permit.

35(j) A licensee shall not pay to a person whose employment has
36been terminated or suspended pursuant to subdivision (i)
37remuneration for a service performed in a capacity in which the
38person is required to hold an employee work permit, except for
39amounts due for services rendered before the date of receipt of
40notice of the department’s action of suspension or termination.

P44   1(k) Except as provided in subdivision (i), a contract or
2agreement for the provision of services or property to a licensee
3for the conduct of an activity pertaining to the operation of an
4authorized game, which is to be performed by a person required
5by this chapter, or by regulations adopted pursuant to this chapter,
6to hold an employee work permit, shall be terminated upon a
7suspension or revocation of the person’s employee work permit.

8(l) In a case in which a contract or agreement for the provision
9of services or property to a licensee or an affiliate thereof, or for
10the conduct of an activity at an intrastate Internet poker Web site,
11is to be performed by a person required by this chapter or by
12regulations adopted by the department to hold an employee work
13permit, the contract shall be deemed to include a provision for its
14termination without liability on the part of the licensee or affiliate,
15upon a suspension or revocation of the person’s employee work
16permit. In an action brought by the department to terminate a
17contract pursuant to subdivision (k), it is not a defense that the
18agreement does not expressly include the provision described in
19this subdivision, and the lack of express inclusion of the provision
20in the agreement is not a basis for enforcement of the contract by
21a party thereto.

22(m) If a licensee does not comply with the requirements of this
23section, the department may impose a civil fine of not more than
24____ dollars ($____) per occurrence. In the event that a licensee
25negligently, willfully, or wantonly fails to comply with these
26requirements, the department may initiate an enforcement action
27and subject a licensee to a civil fine of ____ dollars ($____) and
28an order to suspend or revoke the licensee’s license.

29

begin insert19990.32.end insert  

The licensee is responsible for providing current
30and accurate documentation on a timely basis to all state agencies,
31as provided in this chapter.

32In addition to any other confidentiality protections provided to
33persons licensed by the state, the state and its agencies shall treat
34the proprietary information provided by a licensee as confidential
35to protect the licensee and to protect the security of the gaming
36system.

37

begin insert19990.33.end insert  

(a) Changes in ownership of the licensee shall be
38approved by the department prior to the closing of a proposed
39transaction.

P45   1(b) The department shall investigate to ensure that a person
2acquiring an interest in a licensee is suitable and otherwise
3financially, technically, and legally qualified to be a licensee
4consistent with this chapter. If an acquiring person is found to be
5unsuitable to be a licensee or otherwise not financially, technically,
6or legally qualified to be a licensee, the licensee or the acquiring
7person may challenge that determination consistent with
8subdivision (c) of Section 19990.25.

9(c) A change in the elected officers of a tribal government
10 licensee shall not be considered to be a change in interest or
11ownership of the licensee.

12

begin insert19990.34.end insert  

All facilities, software, and any other property, both
13tangible and intangible, used by the licensee in offering authorized
14games for play on an authorized platform or in an authorized
15poker room shall be owned or licensed by the licensed operator
16and shall be approved by the department.

17

begin insert19990.35.end insert  

The gaming system is divided into three parts:

18(a) A player management system that shall include all the
19technology, functions, and internal control system required to
20establish, manage, administer, and control a player’s online
21gaming account.

22(b) A funds management system that shall include all the
23technology, functions and internal control system mechanisms
24required to record and manage real money in the deposit account
25or in rewards and bonus management systems, whether those
26systems are for real or noncashable value.

27(c) A games management system that shall include all the
28technology, functions and internal control system mechanisms
29required to set up, manage and monitor authorized games,
30including games content and game logic, but does not receive,
31process, or store personal information about players and their
32funds.

33(d) This section does not prohibit a licensed operator from
34licensing software, intellectual property, or other goods, services,
35or information used by the gaming system from a licensed service
36provider.

37(1) The player management system and the fund management
38system shall belong to, and be the responsibility of, an authorized
39poker room operator. A licensed poker platform operator shall
P46   1not have access to the player management system and fund
2management system.

3(2) The game management system shall belong to, and be the
4responsibility of, an authorized poker platform operator.
5Authorized poker room operators shall not have access to the
6games management system.

7(e) The player management system shall at a minimum carry
8out the following functions:

9(1) Player registration.

10(2) Player settings.

11(3) Player account management.

12(4) Responsible gaming.

13(5) Player authentication.

14(6) Player authorization.

15(7) Geolocation.

16(8) Set up a safe and secure connection with the player terminal.

17(9) Age verification.

18(f) The licensed poker room operator is responsible to control
19and manage the player identity, funds and data related to
20authorized players in that poker room to ensure the privacy and
21funds security of authorized players. This section does not prohibit
22the licensed operator from licensing software, intellectual property,
23or other goods, services, or information used by the player
24management or funds management system from a licensed service
25provider.

26(g) The licensed poker platform operator shall ensure that
27players are eligible to play the games operated by the poker room
28licensee and implement appropriate security standards to prevent
29collusion and cheating during games and that all gaming is fair.
30This provision does not prohibit the licensed operator from
31licensing software, intellectual property, or other goods, services,
32or information used by the game management system from a
33licensed service provider.

34(h) An authorized player shall be physically located within the
35State of California at the time of engaging in an authorized game.
36However, an authorized player shall not be hindered from
37accessing his or her player’s account from anywhere outside
38California as long as he or she does not engage in gaming.

39(i) An authorized player shall be 21 years of age or older.

P47   1(1) An internet game shall not be provided, directly or indirectly,
2to an individual under 21 years of age.

3(2) Each licensed operator shall do all of the following:

4(A) Prior to permitting an individual to play an authorized
5game, the licensed poker room operator shall verify that the
6individual is 21 years of age or older. The licensed operator shall
7match the name, address, and date of birth provided by the
8individual to information contained in a database approved by the
9department as being reliable for those purposes.

10(B) If the licensed poker room operator is unable to verify that
11the individual is 21 years of age or older pursuant to subparagraph
12(A), the licensed operator shall require the individual to submit
13an age-verification kit consisting of a writing signed by the
14individual attesting that he or she is 21 years of age or older and
15a copy of a valid form of government identification. For the
16purposes of this section, a valid form of government identification
17includes a driver’s license, state identification card, passport,
18official naturalization or immigration document, such as an alien
19registration receipt card or an immigrant visa, or United States
20military identification. The licensed operator also shall verify that
21the physical billing address on the check or credit card provided
22by the person matches the address listed in the government
23identification.

24(C) The licensed poker room operator shall not permit
25authorized players to make payments by money order or cash.

26(3) If a licensed poker room operator complies with the
27requirements of paragraph (2), and a person under 21 years of
28age participates in an authorized game provided by the licensee,
29the licensee is not in violation of this section.

30(4) The department may assess civil penalties against a person
31that violates this section, according to the following schedule:

32(A) Not less than one thousand dollars ($1,000) and not more
33than two thousand dollars ($2,000) for the first violation.

34(B) Not less than two thousand five hundred dollars ($2,500)
35and not more than three thousand five hundred dollars ($3,500)
36for the second violation.

37(C) Not less than four thousand dollars ($4,000) and not more
38than five thousand dollars ($5,000) for the third violation.

P48   1(D) Not less than five thousand five hundred dollars ($5,500)
2and not more than six thousand five hundred dollars ($6,500) for
3the fourth violation.

4(E) Ten thousand dollars ($10,000) for a fifth or any subsequent
5violation.

6(j) The department shall, by regulation, provide a process for
7a licensed operator to exclude from play a person who has filled
8out a California Internet poker self-exclusion form.

9(1) The department shall develop a self-exclusion form within
10six months of the operative date of this chapter.

11(2) The department shall deliver the form to each licensed poker
12room operator.

13(3) A licensed poker room operator shall prominently display
14a link to the department’s responsible poker Internet Web site and
15the self-exclusion form on the poker room Web site that is displayed
16when either of the following occurs:

17(A) A person registered to be a player.

18(B) Each time an authorized player accesses the poker room
19prior to playing.

20(4) A licensed operator shall retain the Internet self-exclusion
21form to identify persons who want to be excluded from play.

22(5) A licensed poker room operator that has made commercially
23reasonable efforts to comply with this subdivision shall not be held
24liable in any way if a person who has filled out an Internet
25self-exclusion form plays despite that person’s request to be
26excluded.

27

begin insert19990.36.end insert  

A licensed poker platform operator shall only offer
28authorized games and process bets in accordance with the
29applicable game and betting rules established by the licensed
30operator and approved by the department pursuant to Sections
3119990.14 and 19990.37, provided that neither this chapter nor
32those rules prohibit a licensed operator from offering play-for-fun
33or play-for-free poker games on an authorized Web site.

34

begin insert19990.37.end insert  

(a) To propose an authorized game for play, a
35licensed operator shall provide the department with both of the
36following:

37(1) Game rules and betting rules it proposes to offer to
38registered players.

39(2) Documentation relating to development and testing of the
40game’s software.

P49   1(b) The department shall approve the game rules and betting
2rules before a licensee may offer the game to authorized players.

3

begin insert19990.38.end insert  

(a) A licensed operator shall ensure that games are
4fair by utilizing a gaming system approved by the commission. The
5commission may promulgate regulations specifying requirements
6for the gaming system.

7(b) The licensed poker room operator and applicable service
8providers shall, prior to commencing the operation of the gaming
9system, certify through an independent gaming certification entity
10approved by the commission the reliability, accuracy, and integrity
11of the system and its parts, as well as its ability to be effectively
12tested, in accordance with certification regulations to be issued
13by the commission. All components of the gaming system shall
14comply with all requirements of this chapter.

15(c) The hardware used by a licensed poker room operator to
16offer authorized games shall not be the subject of any voluntary
17liens, encumbrances, hypothecations, or other third party interests,
18unless those interests are disclosed to and approved by the
19department. This subdivision does not prohibit the licensed
20operator from licensing software, intellectual property, or other
21goods, services, or information used by the player management,
22funds management, or games management system from a licensed
23service provider.

24(d) The gaming system shall display for each game the following
25information:

26(1) The name of the game.

27(2) Any restrictions on play.

28(3) The rules of the game.

29(4) All instructions on how to play.

30(5) The unit and total bets permitted.

31(6) The player’s current account balance, which shall be
32updated in real time.

33(7) Any other information that a licensee determines is necessary
34for the authorized players to have in real time to compete fairly
35in the game.

36(e) Data used to create game results shall be unpredictable so
37that it is infeasible to predict the next occurrence in a game, given
38complete knowledge of the algorithm or hardware generating the
39sequence and all previously generated numbers.

P50   1(f) A licensed poker room operator shall deploy controls and
2technology to minimize fraud or cheating through collusion,
3including external exchange of information between different
4players, robotic play, or any other means.

5(1) If a licensee poker room operator becomes aware that fraud
6or cheating is taking place or has taken place, it shall take steps
7to stop those activities immediately and inform the department of
8all relevant facts.

9(2) The department shall not impose liquidated damages against
10a licensee to prevent fraud or cheating if the licensee can
11demonstrate that it acted responsibly to prevent those activities
12as soon as the licensee became aware of them.

13(g) In a per hand game, if the gaming server or software does
14not allow a game to be completed, the game shall be void and all
15funds relating to the incomplete game shall be returned to the
16registered player’s account.

17(h) In a tournament, if the gaming server or software does not
18allow the tournament to be completed, all prize money shall be
19distributed among players in accordance with the procedure
20published by the licensee prior to the commencement of the
21tournament.

22

begin insert19990.39.end insert  

(a) A licensed operator shall register players and
23establish player accounts prior to play.

24(b) The player registration process must include submitting the
25following minimum information:

26(1) Full legal name.

27(2) Mailing address.

28(3) Telephone number.

29(4) Social security number.

30(5) Identification or certification to prove that the individual is
31at least 21 years of age.

32(6) Valid email address.

33(7) A secure password to be used with the player’s account,
34unless the online service permits for an alternative method of
35authentication of the player approved by the department.

36(8) That he or she has read and agreed to the terms and
37conditions of the service, including a reference where those terms
38and conditions could be found.

39(c) A licensed poker room operator shall employ an
40authentication process before accepting a player, unless the
P51   1authentication process was previously carried out by a licensed
2service provider.

3(d) An individual under 21 years of age shall not be registered
4as an authorized player, and funds deposited or money won by an
5individual under 21 years of age shall be forfeited to the
6commission. The commission may take further action towards the
7licensed operator who registered an individual under 21 years of
8age or permitted that individual to play a game.

9(e) Only a licensed poker room operator may hold a deposit
10account.

11(f) A player may only have one online gaming account with any
12given licensed poker room operator.

13(g) A licensed poker room operator shall not permit an
14individual to participate in a game conducted by the licensed poker
15platform operator unless that individual has been verified and
16holds a deposit account with the licensed poker room operator.

17(h) Authorized players may only be permitted to play while
18physically located in the State of California. The intermediate
19routing of electronic data in connection with interactive gaming
20shall not determine the location or locations in which a bet is
21initiated, received, or otherwise made.

22(i) The licensed poker room operator shall keep a list of all
23players active at all times in the gaming system.

24(j) If a licensed poker room operator becomes aware that an
25individual has provided false information in respect of a
26registration or authorization process, the licensed poker room
27operator shall not register that individual and if he or she has
28already been registered, the licensed poker room operator shall
29immediately cancel his or her registration as a player with the
30licensed operator.

31(k) Subject to those rules that the commission may establish,
32this section does not prevent a licensed poker room operator from
33entering into a marketing agreement with a third party to recruit
34individuals to become registered players, provided that the licensed
35operator remains responsible for ensuring that the registration
36process described in this section has been completed prior to
37permitting game play.

38

begin insert19990.40.end insert  

(a) A licensed poker room operator shall provide
39a means for authorized players to deposit funds into the deposit
P52   1account and transfer funds out of that account, either for return
2to the player or for use in game play.

3(b) An authorized player shall identify the source of funds to be
4used to put money into the account established once the registration
5process is complete.

6(c) At the time that a player establishes an online gaming
7account, he or she shall designate the bank account into which
8funds from his or her deposit account are to be withdrawn or
9deposited, in accordance with the poker room rules.

10(d) A player may establish only one online gaming account in
11any authorized Internet poker room, and may not play more than
12one hand position at any poker table, whether those tables are
13operated by the poker room directly or through a skin or network
14of rooms or skins operating from the same platform, and it shall
15be the responsibility of the poker platform operator and the poker
16room operator to ensure that the prohibition is not violated.
17Players violating the rule may be barred or suspended from future
18play in that or other authorized poker rooms, as the regulatory
19agency shall determine.

20(e) A licensed operator shall not permit a player to increase the
21amount of money available for his or her player’s online gaming
22account after a hand has started.

23(f) A licensed poker room operator shall maintain records on
24the balance of each player’s funds in the deposit account.

25(g) A licensed operator shall not permit a player to place a bet
26unless the player has sufficient funds in the deposit account to
27cover the amount of all bets required for that hand.

28(h) A licensed operator shall not provide credit to a player or
29act as agent for a credit provider to facilitate the provision of
30funds.

31(i) Players shall not be paid interest by licensees on the funds
32in the deposit accounts.

33

begin insert19990.41.end insert  

(a) A licensed poker room operator shall hold all
34player funds in a deposit account and shall segregate the deposit
35account from all of its other assets.

36(b) A licensed poker room operator shall not commingle funds
37in the deposit account with any other funds held by the licensee,
38including, but not limited to, operating funds. Both the accounts
39of the licensed operator and its segregated authorized player
40accounts shall be held in financial institutions located in the state.

P53   1(c) Funds held in an authorized player’s account shall only be
2used for the following purposes:

3(1) To pay per hand or tournament charges owed by an
4authorized player to the licensed operator for authorized game
5play.

6(2) To transfer funds from one authorized player’s account to
7the account of another registered player to reconcile the result of
8a loss in the play of an authorized game.

9(3) To transfer funds from an authorized player’s account to
10an account to be held by a licensed poker operator pending the
11outcome of an authorized game. The poker platform operator shall
12establish a suspense wagering account to temporarily hold those
13funds pending the outcome of a game.

14(4) To remit tax proceeds due and owing from a registered
15player to the Franchise Tax Board.

16(5) To transfer funds from an authorized player’s account with
17the licensed poker room operator to an account specified by an
18authorized player upon that player’s request.

19

begin insert19990.42.end insert  

During the registration process, a licensed poker
20room operator shall clearly and conspicuously explain to the
21person who is registering the privacy policies of the intrastate
22Internet poker room, and the person shall assent to the following
23policies:

24(a) Personally identifiable information shall not be shared with
25a nongovernmental third party except as provided in subdivision
26(k) of Section 19990.47.

27(b) All personally identifiable information about registered
28players shall be shared with state or federal agencies, including,
29but not limited to the department, the commission, the Franchise
30Tax Board, and the Department of Child Support Services as
31necessary to assist them in fulfilling their obligations.

32(c) Personally identifiable information may be shared with
33government agencies only as provided in subdivision (b) or subject
34to court order as provided in subdivision (j) of Section 19990.47.

35

begin insert19990.43.end insert  

A licensed operator may require that an authorized
36player, or a person registering as a player, agree to a Terms of
37Use Registered Player’s Agreement.

38

begin insert19990.44.end insert  

A licensed operator may suspend or revoke the
39account of an authorized player for any of the following reasons:

P54   1(a) A person or authorized player provided false information
2to the licensed operator, including, but not limited to information
3provided in the registration process.

4(b) The authorized player has not updated registration
5information as required to keep it current.

6(c) The authorized player has violated the intrastate Internet
7poker room’s Terms of Use Registered Player’s Agreement.

8(d) The person has already been registered and authorized.

9(e) The licensed poker room operator is directed by a state
10agency to suspend or revoke the registered player’s account.

11

begin insert19990.45.end insert  

(a) Upon registration, and each time a registered
12player logs into an intrastate Internet poker room, the licensed
13operator shall permit a registered player to adjust his or her play
14settings to:

15(1) Set a limit on the deposits that can be made per day.

16(2) Set a limit on the aggregate losses in a registered player’s
17account within a specified period of time.

18(b) During play, in order to assist a registered player to decide
19if to suspend play, the registered player’s screen shall do all of
20the following:

21(1) Once an hour, indicate how long the player has been playing
22and the current value and change in value of the registered player’s
23account total since the last time he or she logged in.

24(2) At least once every six hours, require the registered player
25to confirm that the player has read the messages required in
26paragraph (1), and give an option to the player to end the session
27or return to the game.

28

begin insert19990.46.end insert  

A licensed poker room operator shall establish a
29toll-free telephone customer service hotline that shall be available
30to registered players 24 hours per day, 365 days a year. The
31licensed operator shall give notice to the department when using
32personnel who are out of state in supporting its customer service
33hotline.

34

begin insert19990.47.end insert  

(a) A licensed poker room operator shall protect
35the privacy of registered players and their personally identifiable
36information.

37(b) A licensed operator shall comply with all state and federal
38privacy and data protection laws.

39(c) At the time of registration with a licensed poker room
40operator as a registered player, and at least once a year thereafter,
P55   1a licensee shall provide notice in the form of a separate, written
2statement, delivered via United States Postal Service or electronic
3mail, to the registered player that clearly and conspicuously
4informs the registered player of all of the following:

5(1) The nature of personally identifiable information collected
6or to be collected with respect to the registered player and the
7nature of the use of that information.

8(2) The nature, frequency, and purpose of any disclosure that
9may be made of personally identifiable information, including an
10identification of the types of persons to whom the disclosure may
11be made.

12(3) The period during which personally identifiable information
13will be maintained by the licensee.

14(4) The times and place at which the registered player may have
15access to personally identifiable information in accordance with
16subdivision (h).

17(5) The limitations provided by this section with respect to the
18collection and disclosure of personally identifiable information
19by a licensee and the right of the registered player under
20subdivision (j) or (k) to enforce those limitations.

21(d) A licensed poker room operator may collect personally
22identifiable information in order to do either of the following:

23(1) Obtain information necessary to operate the intrastate
24Internet poker Web site and offer authorized games to authorized
25players pursuant to this chapter.

26(2) Detect unauthorized play, activities contrary to a licensed
27operator’s Terms of Use or Registered Player’s Agreement, or
28activities contrary to state or federal law.

29(3) A licensed operator shall not collect any other personally
30identifiable information concerning any registered player without
31the prior written or electronic consent of the registered player
32concerned and shall not permit its licensed service providers to
33do so.

34(e) Except as provided in subdivision (f), a licensed operator
35shall not disclose personally identifiable information concerning
36any registered player without the prior written or electronic
37consent of the registered player concerned and shall take actions
38necessary to prevent unauthorized access to that information by
39a person other than the registered player or licensee.

P56   1(f) A licensed operator may disclose personally identifiable
2information if the disclosure is any of the following:

3(1) Necessary to render, or conduct a legitimate business activity
4related to, the provision of authorized games to the registered
5player by the licensed operator.

6(2) Subject to subdivision (k), made pursuant to a court order
7authorizing the disclosure, if the registered player is notified of
8the order by the person to whom the order is directed.

9(3) A disclosure of the names and addresses of registered players
10to any third party, if both of the following apply:

11(A) The licensed poker room operator has provided the
12registered player the opportunity to prohibit or limit the disclosure.

13(B) The disclosure does not reveal, directly or indirectly, the
14nature of any transaction made by the registered player over the
15intrastate Internet poker Web site.

16(4) To the department to fulfill its obligations under this chapter
17or a state agency as authorized in this chapter.

18(5) To persons found suitable under this chapter if the registered
19player is notified and consents to the information being shared.

20(g) A registered player shall be provided access to all personally
21identifiable information regarding that registered player that is
22collected and maintained by a licensed operator. The information
23shall be made available to the registered player at reasonable
24times and at a place designated by the licensed operator. A
25registered player shall be provided a reasonable opportunity to
26correct any error in the information.

27(h) A licensed poker room operator may destroy personally
28identifiable information if the information is no longer necessary
29for the purpose for which it was collected, and there are no pending
30requests or orders for access to the information under subdivision
31(k).

32

begin insert19990.48.end insert  

A licensed operator shall establish a book of
33accounts and regularly audit all of its financial records and
34reports, which shall, at a minimum, include all of the following:

35(a) Monthly auditable and aggregate financial statements of
36poker transactions.

37(b) Monthly calculation of all amounts payable to the state.

38(c) The identity of registered players.

39(d) The balance on each registered player’s account at the start
40of a session of play, the amount won or lost by each registered
P57   1player during a game, and the balance on the registered player’s
2account.

3(e) The bets placed on each game, time stamped by the games
4management system.

5(f) The result of each game, time stamped by the games
6management system.

7(g) The amount, if any, as determined by the authorized player,
8withheld from winnings for federal or state income tax purposes.

9

begin insert19990.49.end insert  

(a) A licensed operator shall make all financial
10records established and maintained pursuant to Section 19990.48,
11including, but not limited to, all books, records, documents,
12financial information, and financial reports, available as required
13by the department or other state agencies so that those agencies
14can fulfill their responsibilities under this chapter. The licensed
15operator may provide records in electronic form to satisfy the
16requirements of this section. A state agency may request specific
17printed hard copies of records for good cause.

18(b) The licensed operator’s data shall be retained in a manner
19so that it may be accessed by the state agencies.

20(c) Notwithstanding subdivision (b), data covered by
21subdivisions (d), (e), and (f) of Section 19990.48 shall be accessible
22to the state agencies for 120 days, and, thereafter, archived and
23retained for no less than one year.

24

begin insert19990.50.end insert  

(a) A licensed operator shall implement technical
25systems that materially aid the department in the protection of
26authorized players. Software shall meet, at a minimum,
27international industry standards as verified by a
28department-approved certification entity.

29(b) A licensed operator shall define and document its
30methodology for developing software and applications and describe
31the manner in which software protects authorized players from
32fraud and other risks in the play of authorized games and in the
33management of authorized player accounts.

34(c) A poker room operator shall meet minimum game server
35connectivity requirements and shall involve the licensed platform
36 operator to ensure that authorized players are protected from
37losses due to connectivity problems.

38(d) An authorized poker room operator shall ensure that all
39transactions involving registered players’ funds shall be
40recoverable by the system in the event of a failure or malfunction.

P58   1(e) All information required for reviewing a game interrupted
2due to loss of connectivity shall be recoverable by the licensed
3poker platform operator.

4(f) The licensed operator shall document and implement
5preventative and detective controls addressing money laundering
6and fraud risks. If money laundering or corruption is detected by
7the authorized platform operator, that platform operator shall
8immediately inform the authorized poker room operators with
9whom the authorized players are associated.

10

begin insert19990.51.end insert  

(a) An authorized poker room operator may charge
11authorized players to play authorized games.

12(b) Per hand charges are permitted.

13(1) A per hand charge shall be designated and conspicuously
14posted on the intrastate Internet poker Web site.

15(2) An authorized poker room operator may vary the per hand
16charges to registered players based on betting limits or other
17factors.

18(c) Tournament charges shall be permitted.

19(1) A tournament charge shall be designated and conspicuously
20posted on the intrastate Internet poker Web site.

21(2) A licensed operator may vary tournament charges based on
22tournament prizes or other factors.

23(d) A licensed operator shall provide notice to the department
24of the charges to registered players prior to initiating play.

25

begin insert19990.52.end insert  

A licensed operator may enter into an agreement
26with a third party to sponsor or underwrite prizes for a tournament.

27

begin insert19990.53.end insert  

An authorized poker room may enter into an
28agreement to sell advertisement space on an Internet Web site that
29it controls.

30

begin insert19990.535.end insert  

(a) A licensee may enter into an agreement with
31a third party for marketing, or any other purpose consistent with
32this chapter, including, but not limited to, displaying the name of
33a marketing partner on a screen viewed by a registered player.

34(b) (1) A licensee shall not utilize any brand or business name,
35trade or service mark, software, technology, operational system
36or customer information for a core function that was used in
37connection with the knowing and willful acceptance of any bet
38from persons located in the United States on any form of Internet
39gambling, including, but not limited to, poker, after October 16,
402006, that has not been affirmatively authorized by law of the
P59   1United States or of each state in which persons making a bet were
2located.

3(2) The commission shall permit a licensee or the person or
4entity with whom the licensee proposes to enter into an agreement
5subject to this subdivision to seek a waiver of this paragraph. That
6waiver shall be granted only if it is demonstrated by clear and
7convincing evidence that the asset proposed to be used was not
8used in a manner that was unlawful under federal law and the
9laws of each state in which persons making bets were located.

10

begin insert19990.54.end insert  

A licensed operator may enable a chat function
11between registered players if it has in place effective controls
12against collusion.

13

begin insert19990.55.end insert  

A licensed operator may post Internet Web links on
14the Internet Web sites it controls to permit registered players to
15access remote Internet Web sites.

16

begin insert19990.56.end insert  

A licensed operator may enter into contractual
17agreements with one or more licensed operators for the purpose
18of ensuring adequate player liquidity.

19

begin insert19990.57.end insert  

A licensed platform operator may allow an
20authorized player to participate simultaneously in multiple games
21or tournaments, if the licensed operator has demonstrated to the
22department that it has technical controls that prohibit a registered
23player from playing multiple hands simultaneously in the same
24game.

25

begin insert19990.58.end insert  

(a) Before the collection of a registered player fee,
26bet, or deposit on any authorized game in the licensed operator’s
27authorized poker room, the operator shall remit to the Treasurer
28for deposit in the General Fund a one-time license fee in the
29amount of ____ dollars ($____). This amount shall be credited
30against fees imposed pursuant to subdivision (b) on the licensed
31poker room operator’s gross revenues for the first years of
32operation. Upon depletion of the license fee, the department shall
33notify the licensee to commence monthly payments to the state in
34accordance with subdivision (b).

35(b) A licensed poker room operator shall remit to the Treasurer
36on a monthly basis for deposit in the General Fund, a duty of 10
37percent on its gross gaming revenues for the prior month.

38(1) Each monthly payment shall be due on the 10th day of the
39following month.

P60   1(2) A licensed operator shall make all electronic and written
2financial records available to the Treasurer, the commission, and
3the department on an electronic basis.

4(c) Each licensed operator shall pay a regulatory fee, to be
5deposited in the Internet Poker Fund, in an amount to be
6determined by the department for the actual reasonable costs of
7license oversight, consumer protection, state regulation, problem
8poker programs, and other purposes related to this chapter.

9(d) This section does not prohibit a licensed operator from
10contracting with one or more licensed operators, or service
11providers, to allocate among themselves the total fees and deposits
12to be paid under this section, provided that nothing in this
13subdivision effects the amount due to the department from those
14licensees.

15

begin insert19990.59.end insert  

(a) The licensed poker room operator shall facilitate
16the collection of personal income taxes from registered players by
17the Franchise Tax Board.

18(b) The licensed poker room operator shall withhold 5 percent
19of tournament winnings for state income tax if the winnings less
20the tournament charge are more than six hundred dollars ($600)
21and are at least 300 times the tournament charge.

22(1) The licensed poker room operator shall transfer that
23withheld income to the Franchise Tax Board.

24(2) Winnings and losses of the authorized player from other
25tournaments sponsored by the licensed poker room operator during
26the year are not taken into account in arriving at the
27six-hundred-dollar ($600) amount. Required withholding is
28determined on a tournament-by-tournament basis.

29(c) Within six months of the effective date of this chapter, the
30Franchise Tax Board shall publish a form to be used annually by
31a licensed operator to report information concerning income tax
32revenues from registered players. The Franchise Tax Board shall
33provide a date by which the form is required to be filed. The form
34shall include, but shall not be limited to, the following information:

35(1) The registered player’s first name and surname.

36(2) The registered player’s social security number.

37(3) The total amount the authorized player deposited in his or
38her account during the year.

39(4) The authorized player’s total winnings, if any, during the
40year.

P61   1(5) The authorized player’s total losses, if any, during the year.

2(6) The total amount withheld by the licensed poker room
3operator, if any, during the year for purposes of federal or state
4income taxes.

5(7) Whether the registered player opened or closed his or her
6account during the year.

7(d) The licensed poker room operator shall electronically file
8a copy of the form with the Franchise Tax Board for each
9registered player who held an account with the licensed operator
10for all, or any portion of, the taxable year. The licensed operator
11shall electronically provide each registered player with a copy of
12the form.

13

begin insert19990.60.end insert  

A security interest in a licensee, other than a security
14interest in financed or leased equipment, shall not be enforced
15except in conformity with regulations adopted by the commission.
16If a licensee contracts to acquire or transfer any assets or property
17in circumstances where the transferor or transferee must be
18licensed or found suitable, then the transaction shall not have a
19closing date prior to the approval or licensing of the other party,
20except as provided in regulations of the commission.

21

begin insert19990.61.end insert  

(a) A licensee shall act expeditiously to cure any
22violation of this chapter, or any regulation adopted pursuant to
23this chapter, in the offer or administration of authorized games
24that interferes with its obligations to the state or registered players
25under this chapter.

26(b) If a licensee becomes aware of any violation, it shall notify
27the department immediately and work with the department to
28develop a plan to rectify the violation.

29(c) If the department becomes aware of any violation, or if it
30becomes aware of any activities that might lead to a violation, the
31department shall provide notice of that violation to the licensee
32and a reasonable opportunity to cure the violation.

33(d) All state agencies with responsibilities under this chapter
34shall report any actual or suspected violation of this chapter, or
35any regulation adopted pursuant to this chapter, or activities that
36may lead to that violation, to the department immediately so that
37the department can assess whether it needs to commence an
38investigation or enforcement action.

39(e) A licensee shall be afforded a reasonable time period to cure
40any reported violation. The department may assess penalties for
P62   1any violation of this chapter, or any regulation adopted pursuant
2to this chapter.

3(f) The department shall have the subpoena power in an
4investigation of any violation of this chapter, or any regulation
5adopted pursuant to this chapter.

6(g) The department may revoke or suspend any license or work
7permit under this chapter upon reaching a finding that the licensee
8or employee is in violation of any provision of this chapter, or any
9regulation adopted pursuant to this chapter.

10(h) A licensee may appeal any decision of the department
11pursuant to this section to the superior court. The superior court
12shall hear any appeal de novo.

13

begin insert19990.62.end insert  

The department shall protect the rights and assets
14of registered players on an intrastate Internet poker Web site if
15the licensed operator’s license pursuant to this chapter is revoked
16or the licensed operator becomes bankrupt.

17

begin insert19990.63.end insert  

(a) A licensee shall at all times indemnify, defend,
18and hold harmless the state and its agencies from and against any
19claims, damages, liabilities, costs, and expenses, including, but
20not limited to, reasonable attorney’s fees and expenses arising out
21of any third-party claim made against the state or any of its
22agencies relating to actions of the licensee and this chapter.

23However, the state shall not enter into a settlement agreement
24related to any of those claims, damages, liabilities, costs, or
25expenses without the prior written approval of the licensee.

26(b) The state and its agencies shall promptly notify a licensee
27of any claim or litigation to which the indemnity set forth in
28 subdivision (a) applies.

29(c) At the option of a licensee, it may assume the defense of any
30claim or litigation. If a licensee assumes the defense of any claim
31or litigation, the licensee’s obligation with respect thereto shall
32be limited to the payment of any settlement approved by the
33licensee, or any judgment in connection with that claim or
34litigation.

35 

36Article begin insert6.end insert  Authority of State Agencies
37

 

38

begin insert19990.70.end insert  

(a) (1) Within 120 days after the effective date of
39this chapter, the commission, and any other state agency with a
40duty pursuant to this chapter, shall, in order to comply with time
P63   1deadlines, in consultation with the department, adopt regulations
2to implement this chapter, and to facilitate the operation of
3intrastate Internet poker Web sites and expedite the state’s receipt
4of revenues in compliance with this chapter. The initial adoption,
5amendment, or repeal of a regulation authorized by this section
6is deemed to address an emergency, for purposes of Sections
711346.1 and 11349.6 of the Government Code, and the commission
8and those other state agencies are hereby exempted for that
9purpose from the requirements of subdivision (b) of Section
1011346.1 of the Government Code. After the initial adoption,
11amendment, or repeal of an emergency regulation pursuant to this
12section, the commission and those other state agencies shall not
13request approval from the Office of Administrative Law to readopt
14the regulation as an emergency regulation pursuant to Section
1511346.1 of the Government Code, but shall promulgate permanent
16regulations in accordance with all applicable law. The commission
17shall circulate its proposed permanent regulations to all tribes
18and land-based gaming entities eligible for licensure pursuant to
19this chapter along with information regarding how comments can
20be submitted prior to adopting permanent regulations.

21(2) The regulations adopted by the commission shall address
22underage poker and problem poker.

23(3) The regulations of the commission also shall provide for
24temporary or provisional approvals, licenses, or certificates for
25heirs, executors, receivers, trustees, conservators, key employees,
26and other persons where an approval, license, or certificate is
27required.

28(b) (1) Each state agency with a duty pursuant to this chapter
29shall identify a contact person at that agency and describe the
30responsibility of the contact with respect to the state agency’s duty.

31(2) Any notice provided by a licensee to a state agency pursuant
32to this chapter shall be addressed to the contact identified by the
33state agency pursuant to paragraph (1).

34(3) Unless otherwise provided by this chapter, notice by a
35licensee to the state shall be deemed effectively given upon personal
36delivery, three days after deposit in the United States mail by
37certified or registered mail, return receipt requested, one business
38day after its deposit with any return receipt express courier,
39prepaid, or one business day after electronically confirmed
40transmission by facsimile.

P64   1

begin insert19990.72.end insert  

The department may outsource its regulatory
2functions under this chapter if optimal to provide efficient, effective,
3and robust regulation with access to worldwide expertise tested
4and proven in the poker industry. This may include, but is not
5limited to, state and international regulatory agencies. The
6department may also enter into agreements to share information
7with other regulatory and law enforcement agencies to assist in
8conducting background checks and suitability reviews. To expedite
9the implementation of Internet poker, contracts pursuant to this
10section shall not be subject to otherwise applicable provisions of
11the Government Code or the Public Contract Code and, for those
12purposes, the department shall not be considered a state agency
13or public entity.

14 

15Article begin insert7.end insert  Player Protection
16

 

17

begin insert19990.75.end insert  

Subject to the approval of the department, and
18consistent with uniform standards established by the department
19by regulation, each licensee shall establish administrative
20procedures to resolve registered player complaints.

21

begin insert19990.76.end insert  

If a registered player has a complaint against a
22licensee, the exclusive remedy shall be to register the complaint
23with the department, unless an action is brought pursuant to
24subdivision (j) of Section 19990.47.

25

begin insert19990.77.end insert  

(a) The department, in consultation with the
26commission, shall establish regulations with respect to registered
27player complaints.

28(b) Under the regulations, the department shall do all of the
29following:

30(1) Investigate registered player complaints to determine if a
31licensee has failed to meet its obligations to a registered player.

32(2) Attempt to resolve complaints by registered players if a
33licensee fails to meet an obligation to a registered player.

34(3) Initiate enforcement actions to require specific performance
35of any obligation that a licensee has to a registered player and
36payment by the licensee of restitution to a registered player for
37actual losses and interest thereon.

38

begin insert19990.78.end insert  

A licensee may appeal an action by the department
39pursuant to this article to the superior court, which shall review
40the appeal de novo.

 

P10   1Article begin insert8.end insert  Disposition of State Regulatory Proceeds
2

 

3

begin insert19990.86.end insert  

(a) The Treasurer shall transfer all amounts
4received from a licensee pursuant to subdivision (c) of Section
519990.58 to the Controller for deposit into the Internet Poker
6Fund, which is hereby created in the State Treasury, to be
7administered by the Controller, subject to annual appropriation
8by the Legislature.

9(b) The state agencies shall submit revenue needs to fulfill their
10obligations under this chapter for the upcoming fiscal year to the
11Senate Committee on Budget and Fiscal Review and the Assembly
12Committee on Budget, as well as the Senate and Assembly
13Committees on Governmental Organization and the Department
14of Finance on or before March 31 of the preceding fiscal year. A
15justification of those costs shall be provided with each submission
16of revenue needs.

17(c) The State Department of Alcohol and Drug Programs, Office
18of Problem Poker, shall submit revenue needs for programs to
19alleviate problem poker that results from the offering of authorized
20games for the upcoming fiscal year to the Senate Committee on
21Budget and Fiscal Review and the Assembly Committee on Budget,
22as well as the Senate and Assembly Committees on Governmental
23Organization, the Senate and Assembly Committees on Human
24Services, and the Department of Finance on or before March 31
25of the preceding fiscal year. A justification of those costs shall be
26provided with each submission of revenue needs.

27(d) All remaining proceeds not allocated to subdivisions (b)
28and (c) shall remain in the Internet Poker Fund subject to
29appropriation by the Legislature.

30 

31Article begin insert9.end insert  Preemption of Local Regulation
32

 

33

begin insert19990.90.end insert  

A city, county, or city and county shall not regulate,
34tax, or enter into a contract with respect to any matter related to
35this chapter. This section does not prohibit or limit the investigation
36and prosecution of any violation of this chapter.

 

P10   1Article begin insert10.end insert  Reports to the Legislature
2

 

3

begin insert19990.95.end insert  

Notwithstanding Section 10231.5 of the Government
4Code, within one year of the effective date of this chapter and,
5annually thereafter, the department, in consultation with the
6commission, the Treasurer, and the Franchise Tax Board, shall
7issue a report to the Legislature describing the state’s efforts to
8meet the policy goals articulated in this chapter. The report shall
9be submitted in compliance with Section 9795 of the Government
10Code.

11

begin insert19990.96.end insert  

(a) At least four years after the issue date of any
12license pursuant to this chapter, but no later than five years after
13that date, the Bureau of State Audits shall issue a report to the
14Legislature detailing the implementation of this chapter. The State
15Auditor may advise the Legislature on any recommendations
16regarding the terms of licensure, including the consideration paid
17to the state, the economic and operational impacts upon the
18licensee and the state, and any other issues that may be relevant
19to the state’s decision whether to impose modifications on existing
20licensees’ fees or terms of licensure. The report may also advise
21the Legislature as to any proposed changes to Article 5
22(commencing with Section 19990.30) of this chapter.

23(b) A report submitted pursuant to subdivision (a) shall be
24submitted in compliance with Section 9795 of the Government
25Code.

26(c) Pursuant to Section 10231.5 of the Government Code, this
27section is repealed on January 1, 2020.

end insert
begin insert
28

begin insertSEC. 2.end insert  

The provisions of this act are severable. If any
29provision of this act or its application is held invalid, that invalidity
30shall not affect other provisions or applications that can be given
31effect without the invalid provision or application.

end insert
begin insert
32

begin insertSEC. 3.end insert  

The Legislature finds and declares that Section 1 of
33this act, which adds Chapter 5.2 (commencing with Section
3419990.01) to Division 8 of the Business and Professions Code,
35imposes a limitation on the public’s right of access to the meetings
36of public bodies or the writings of public officials and agencies
37within the meaning of Section 3 of Article I of the California
38Constitution. Pursuant to that constitutional provision, the
39Legislature makes the following findings to demonstrate the interest
P67   1protected by this limitation and the need for protecting that
2interest:

3The limitations on the people’s rights of access set forth in this
4chapter are necessary to protect the privacy and integrity of
5information submitted by the registered players as well as the
6 proprietary information of the license applicants and licensees.

end insert
begin insert
7

begin insertSEC. 4.end insert  

No reimbursement is required by this act pursuant to
8Section 6 of Article XIII B of the California Constitution because
9the only costs that may be incurred by a local agency or school
10district will be incurred because this act creates a new crime or
11infraction, eliminates a crime or infraction, or changes the penalty
12for a crime or infraction, within the meaning of Section 17556 of
13the Government Code, or changes the definition of a crime within
14the meaning of Section 6 of Article XIII B of the California
15Constitution.

end insert
begin insert
16

begin insertSEC. 5.end insert  

This act is an urgency statute necessary for the
17immediate preservation of the public peace, health, or safety within
18the meaning of Article IV of the Constitution and shall go into
19immediate effect. The facts constituting the necessity are:

20In order to protect the interests of Californians who play Internet
21poker games and to ensure that people play fair games, that the
22state realizes the revenues, and that suitable persons operate
23intrastate Internet poker games, it is necessary that this act take
24effect immediately.

end insert
begin delete25

SECTION 1.  

Chapter 5.2 (commencing with Section 19990)
26is added to Division 8 of the Business and Professions Code, to
27read:

28 

29Chapter  5.2. Authorization and Regulation of Internet
30Poker and Consumer Protection Act of 2013
31

 

32

19990.  

Internet poker Web sites may be operated within the
33borders of this state in accordance with this chapter and all other
34applicable laws and regulations.

35

19991.  

The California Gambling Control Commission shall
36establish a regulatory framework for both of the following:

37(a) The licensure of eligible entities to operate Internet poker
38Web sites.

39(b) The operation of Internet poker Web sites within the borders
40of the state.

P68   1

19992.  

Eligible entities may apply to the commission for
2licensure pursuant to this chapter.

end delete


O

    98