Amended in Senate September 6, 2013

Amended in Senate August 19, 2013

Senate Bill No. 678

Introduced by Senator Correa

February 22, 2013

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

LEGISLATIVE COUNSEL’S DIGEST

SB 678, as amended, Correa. Internet gambling.

(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.

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.

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 begin delete reorganized end delete begin insert recognized end insert Indian tribe.

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 begin insert of $10,000,000 end insert for deposit in the General Fund. The license fee would be credited against fees imposed on the licensee’s gross gaming proceeds, as specified.

This bill would authorize each licensee, subject to approval by the department, and the department, begin delete subject to approval by end delete begin insert in consultation with end insert the commission, to establish administrative procedures to resolve registered player complaints.

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.

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

(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.

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

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

Vote: ²⁄₃. Appropriation: yes. Fiscal committee: yes. State-mandated local program: yes.

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

SECTION 1.  

Chapter 5.2 (commencing with Section 19990.01)
is added to Division 8 of the Business and Professions Code, to
read:

 

Chapter  5.2. The Internet Poker Consumer Protection
Act of 2013

 

Article 1.  General Provisions

 

19990.01.  

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

19990.02.  

The Legislature hereby finds and declares all of the
following:

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

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

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

(A) Age and location verification requirements.

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

(2) Expressly authorize the betting or wagering process.

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

(A) The Interstate Horseracing Act of 1978.

(B) The Professional and Amateur Sports Protection Act.

(C) The Gambling Devices Transportation Act.

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

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

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

(1) Protect and promote its economy.

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

(3) Ensure fair and transparent Internet gambling.

(4) Protect player funds and their winnings.

(5) Protect against underage gambling.

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

(7) Enable the poker industry in California, which employs
thousands of Californians, to compete fairly in begin delete Intrastate end delete begin insert intrastate
Internet end insert poker.

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

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

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

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

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

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

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

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

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

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

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

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

19990.03.  

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

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

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

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

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

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

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

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

(h) Distribute regulatory fees begin delete which end delete begin insert that end insert have been deposited
into the Internet Poker Fund, as established in Section 19990.86,
which shall be administered by the Controller, subject to annual
appropriation by the Legislature, and which shall not be subject
to the formulas established by law directing expenditures from the
General Fund, for the following:

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

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

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

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

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

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

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

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

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

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

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

(r) Create an express exemption from disclosure, pursuant to
the California Public Records Act under subdivision (b) of Section
6253 of the Government Code, that exempts from public disclosure
proprietary information of a license applicant or a licensee in order
to permit disclosure of confidential information to state agencies
while achieving the public policy goals of deploying secure systems
that protect the interests of the state and players.

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

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

 

Article 2.  Definitions

 

19990.05.  

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

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

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

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

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

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

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

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

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

begin insert

(i) “Compact” means a tribal-state gaming compact entered
into between a federally recognized tribe and the State of
California pursuant to the IGRA, or procedures issued in lieu
thereof by the Secretary of Interior that are in effect (“Secretarial
Procedures”).

end insert begin delete

(i)

end delete

begin insert ( end insert begin insert j) end insert  “Core functions” and “core functioning” mean the
management, administration, or control of the following:

(1)  begin delete Bets. end delete begin insert Bets or wagers on authorized games. end insert

(2)  begin delete Authorized end delete begin insert The processing, qualifying, or participation of
authorized end insert players.

(3) Payments to and from authorized players.

(4)  begin delete Authorized end delete begin insert The offering, conduct, presentation, or operation
of authorized end insert games.

(5) Intellectual begin delete property, end delete begin insert property related to authorized games
and poker rooms, end insert including the trademarks, trade names, service
marks, or similar intellectual property under which a licensee
identifies its games to its customers.

(6)  begin delete A system for administering the deposit accounts, including
records of moneys owed to, or paid to or from, players by the
operator. end delete begin insert The systems internal to the authorized platform or poker
rooms that account for, or govern, the payments to or from
authorized players or the deposit accounts, or in connection with
the authorized games or other transactions related thereto,
including the maintenance of accounting records of moneys owed
to, or paid to or from, players by the operator. “Core functions”
and “core functioning” do not include the financial services or
transactions provided by banks, credit card companies, or other
financial services providers that supply funds or credit to
authorized players to enable them to participate in authorized
games. Those services or transactions shall be independent from,
and not controlled by, the licensed platform or poker room
operator and shall be operated in accordance with applicable law
governing those financial services and transactions. end insert

begin delete

(j)

end delete

begin insert (k) end insert  “Department” means the Department of Justice, except that
where the described function also involves a function to be served
by the commission, the term “department” shall also mean the
commission to the extent of those functions.

begin delete

(k)

end delete

begin insert (l) end insert  “Deposit account” is a fund maintained by an authorized
poker room on behalf of authorized players into which the players
may deposit cash for use for betting in games or for deposit of
player winnings from games.

begin delete

(l)

end delete

begin insert (m) end insert  “Employee work permit” means a permit issued to an
employee of a licensee by the commission after a background
investigation and finding of suitability.

begin delete

(m)

end delete

begin insert (n) end insert  “Finding of suitability” means a finding by the regulatory
agency that a person meets the qualification criteria described in
Article 4 (commencing with Section 19990.20), and that the person
would not be disqualified on any of the grounds specified in that
article.

begin delete

(n)

end delete

begin insert (o) end insert  “Funds management system” means an authorized software
system that is dedicated to managing player funds in authorized
games, including, but not limited to, tracking player accounts, bets,
pot collections and awards, player credits, financial reporting
requirements, and other financial transactions associated with the
operation of authorized games. Funds management systems may
only be operated by a licensed poker room operator and only in
connection with begin delete a end delete begin insert an authorized end insert poker room under its management
and control.

begin delete

(o)

end delete

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

begin delete

(p)

end delete

begin insert (q) end insert  “Game” means a contest in which players may win or lose
depending on skill, begin delete chance end delete begin insert chance, end insert or a combination thereof,
depending on the rules of play.

begin delete

(q)

end delete

begin insert (r) end insert  “Gaming system” means the combination of hardware,
begin delete software end delete begin insert software, end insert and data networks specifically described in
Section 19990.35.

begin delete

(r)

end delete

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

begin delete

(s)

end delete

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

begin delete

(t)

end delete

begin insert (u) end insert  “Initial license” means a license issued under this chapter
on or before a date set begin insert in the regulations adopted end insert by the
commission pursuant to paragraph (1) of subdivision (a) of Section
19990.70 for the issuance of the first licenses that will be issued
under this chapter and that shall be issued simultaneously.

begin delete

(u)

end delete

begin insert (v) end insert  “Intermediary” means a party that enters into an agreement
with a licensee to recruit players to the licensee’s authorized poker
room.

begin delete

(v)

end delete

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

begin delete

(w)

end delete

begin insert (x) end insert  “Internet poker” means an authorized game.

begin delete

(x)

end delete

begin insert (y) end insert  “Internet Poker Fund” means the fund established pursuant
to Section 19990.86.

begin delete

(y)

end delete

begin insert (z) end insert  “Internet Poker Licensing Fund” means the fund established
pursuant to Section 19990.20.

begin delete

(z)

end delete

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

begin delete

(aa)

end delete

begin insert (ab) end insert  “Intrastate” means within the borders of California.

begin delete

(ab)

end delete

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

begin delete

(ac)

end delete

begin insert (ad) end insert  “Land-based gaming entity” means a licensee that is a card
club operated pursuant to Chapter 5 (commencing with Section
19800).

begin delete

(ad)

end delete

begin insert (ae) end insert  “Licensee” means a licensed operator, a service provider,
or any other person holding a license under this chapter.

begin delete

(ae)

end delete

begin insert (af) end insert  “Licensed operator” means an authorized poker room
operator, an authorized poker platform operator, or both.

begin delete

(af)

end delete

begin insert (ag) end insert  “Operator” means a person that operates an authorized
platform or poker room.

begin delete

(ag)

end delete

begin insert (ah) end insert  “Owner” means a person that has a financial interest in or
control of a licensee, service provider, or other entity required to
be found suitable under this chapter.

begin delete

(ah)

end delete

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

begin delete

(ai)

end delete

begin insert (aj) end insert  “Per hand game” means a game for which the operator
charges the player for each hand played.

begin delete

(aj)

end delete

begin insert (ak) end insert  “Person” means begin delete an end delete begin insert a end insert natural person, corporation, business
trust, estate, trust, partnership, limited liability company,
association, joint venture, government, including a tribal
government, governmental subdivision, agency, or instrumentality,
public corporation, or any other legal or commercial entity.

begin delete

(ak)

end delete

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

begin delete

(al)

end delete

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

begin delete

(am)

end delete

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

begin delete

(an)

end delete

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

begin delete

(ao)

end delete

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

begin delete

(ap)

end delete

begin insert (aq) end insert  “Player session” means a temporary connection established
between a player’s interface and a gaming system for the exchange
of information, for the duration of the time that an authorized
player is logged into his or her account.

begin delete

(aq)

end delete

begin insert (ar) end insert  “Poker” means any of several nonbanked card games
commonly referred to as “poker” that meet all of the following
criteria:

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

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

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

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

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

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

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

begin delete

(ar)

end delete

begin insert (as) end insert  Other characteristics defining “poker” under this chapter
include the following:

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

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

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

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

begin delete

(as)

end delete

begin insert (at) end insert  “Poker enterprise” means a person or entity meeting the
begin delete requirements for that designation end delete begin insert definition of a “gambling
enterprise” end insert under subdivision begin delete (d) end delete begin insert (m) end insert of Section 19805 begin insert that
conducts poker, end insert and any other requirements under law for operating
a land-based gaming entity.

begin delete

(at)

end delete

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

begin delete

(au)

end delete

begin insert (av) end insert  “Registered player” means a player who has submitted the
required registration information to an authorized poker room
operator in order to be eligible to become an authorized player in
an authorized game in that poker room.

begin delete

(av)

end delete

begin insert (aw) end insert  “Regulatory agency” means the commission, a tribal
gaming commission with jurisdiction over the tribal license
applicant and licensee, or both, and the department, as provided
in this chapter.

begin delete

(aw)

end delete

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

begin delete

(ax)

end delete

begin insert (ay) end insert  “Registration information” means the information provided
by a person to a poker room operator in order to record the person’s
interest in becoming an authorized player in that poker room.

begin delete

(ay)

end delete

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

begin delete

(az)

end delete

begin insert (ba) end insert  “Service provider” means a person that, under a service
provider license, does any of the following:

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

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

(3) The term “service provider” does not include a provider of
goods or services begin insert to a licensed platform or poker room operator,
or to an authorized player, end insert that are not principally used in
connection with the operation of an authorized begin delete game. end delete begin insert game,
including, but not limited to, the financial services or transactions
provided by banks, credit card companies, or other financial
service providers that supply funds or credit to authorized players
to enable them to participate in authorized games. Those services
or transactions shall be independent from, and not controlled by,
the licensed platform or poker room operator, and shall be
operated in accordance with applicable law governing those
financial services and transactions. end insert

begin delete

(ba)

end delete

begin insert (bb) end insert  “State” means the State of California.

begin delete

(bb)

end delete

begin insert (bc) end insert  “Tournament” means a competition in which players play
a series of games to decide the winner.

begin delete

(bc)

end delete

begin insert (bd) end insert  “Tournament charge” means the amount charged by the
operator for an authorized player to play in a tournament.

begin delete

(bd)

end delete

begin insert (be) end insert  “Tournament winnings” means the amount of a prize
awarded to an authorized player in a tournament.

begin delete

(be)

end delete

begin insert (bf) end insert  “Tribe” means a federally recognized Indian tribal
government located within California.

begin delete

(bf)

end delete

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

begin delete

(bf)

end delete

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

begin delete

(bg)

end delete

begin insert (bi) end insert  “Wagering suspense account” means a segregated account
that temporarily holds the bets in a game pending the outcome of
the game.

 

Article 3.  Authorized Games

 

19990.10.  

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

19990.11.  

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

19990.12.  

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

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

(c) Except as stated in this chapter, this chapter does not impose
a limitation, restriction, or requirement on the offering of begin delete “play
for fun” games, or “play for free” end delete begin insert “play-for-fun” or “play-for-free” end insert
games on the Internet.

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

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

19990.13.  

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

19990.14.  

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

 

Article 4.  Licensing Internet Poker Gambling

 

19990.20.  

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

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

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

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

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

(1) A poker enterprise, as defined in begin delete subdivision (m) of Section
19805 end delete begin insert Section 19990.05 end insert , that holds an owner license to operate a
land-based gaming entity issued pursuant to subdivision (a) of
Section 19851, subject to oversight by, and in good standing with,
the commission.

(2) A federally recognized California Indian tribe with a valid
gaming ordinance or resolution and a valid compact authorizing
it to offer gaming under the begin insert federal end insert Indian Gaming Regulatory
Act of 1988, or a tribal enterprise controlled by, and subject to,
the powers and immunities of one or more members, partners, or
shareholder tribes that have that authorization. A tribal enterprise
may have as its members, partners, or shareholders any
combination of federally recognized tribes or tribal enterprises.

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

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

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

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

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

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

(g) Poker room operator licenses issued under this chapter shall
be for a term of begin delete 5 end delete begin insert 10 end insert years and shall require a license fee payment
of ____ dollars ($____).

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

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

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

(k) An operator and service provider license applicant who
intends to function as an operator licensee or service provider to
a tribal poker room or platform, including a tribe or tribal enterprise
providing those services under this chapter, and any others required
to be licensed in connection therewith under this chapter, tribal
license applicants, begin delete shall end delete begin insert shall, if required by the tribal gaming
agency, end insert obtain a license from the tribal regulatory agency
exercising jurisdiction over that platform or poker room, under the
procedures set forth in this begin delete section. end delete begin insert section. However, if no tribal
gaming agency process is required, this subdivision does not apply. end insert
The parties intend that the licensing process provided for pursuant
to this chapter shall involve joint cooperation among tribal
regulatory agencies, the commission, and the department. The
licensing process shall be as follows:

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

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

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

(4) In reviewing an application for a license, the tribal regulatory
agency shall determine whether issuance of the license would meet
the licensing standards set forth in this chapter. A license may not
be issued unless, based on all information and documents
submitted, the tribal regulatory agency is satisfied that the applicant
meets all of the criteria set forth in Sections begin delete 199022 end delete begin insert 19990.22 end insert and
begin delete 199023, end delete begin insert 19990.23 end insert including those which must be met to find that
an applicant is suitable for licensing.

(5) Each applicant for a tribal regulatory agency license shall
submit the completed application along with the required
information and a tribal regulatory agency application fee, if
required, to the tribal regulatory agency in accordance with the
rules and regulations of that agency. At a minimum, the tribal
regulatory agency shall require submission and consideration of
all information required under Sections begin delete 199022 end delete begin insert 19990.22 end insert and
begin delete 199023. end delete begin insert 19990.23. end insert For applicants who are business entities, the
licensing provisions shall apply to the entity as well as to each of
the following:

(A) Its officers and directors.

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

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

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

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

(6) The tribal regulatory agency shall conduct, or cause to be
conducted, all necessary background investigations reasonably
required to determine that the applicant is qualified for a gaming
license under the standards set forth in Sections begin delete 199022 end delete begin insert 19990.22 end insert
and begin delete 199023. end delete begin insert 19990.23. end insert

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

(8) If the tribe adopts an ordinance confirming that Article 6
(commencing with section 11140) of Chapter 1 of Title 1 of Part
4 of the Penal Code is applicable to members, investigators, and
staff of the tribal regulatory agency, and those members,
investigators, and staff thereafter comply with that ordinance, then,
for purposes of carrying out its obligations under this section, the
tribal regulatory agency shall be considered to be an entity entitled
to receive state summary criminal history information within the
meaning of paragraph (12) of subdivision (b) of Section 11105 of
the Penal Code. The Department of Justice shall provide services
to the tribal regulatory agency through the California Law
Enforcement Telecommunications System (CLETS), subject to a
determination by the CLETS advisory committee that the tribal
regulatory agency is qualified for receipt of those services, and on
those terms and conditions as are deemed reasonable by that
advisory committee.

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

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

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

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

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

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

(B) An original set of fingerprint cards.

(C) A current photograph.

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

(14)  begin delete The end delete begin insert As a part of any application process required by a
tribal regulatory agency under this subdivision, the end insert tribal
regulatory agency shall also require the applicant to file an
application with the state gaming agency, prior to issuance of any
license, for a determination of suitability for licensure under this
chapter. Upon receipt of completed license application information
from the tribal regulatory agency, the state gaming agency may
conduct a background investigation pursuant to state law to
determine whether the applicant would be suitable to be licensed
for association with a poker room or platform subject to the
jurisdiction of the gaming agency. If further investigation is
required to supplement the investigation conducted by the tribal
regulatory agency, the applicant will be required to pay the
statutory application fee charged by the state regulatory agency
pursuant to this chapter, but any deposit requested by the state
regulatory agency shall take into account the initial deposit already
provided by the applicant, reports of the background investigation
already conducted by the tribal regulatory agency, and any other
burdens on the applicant.

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

(16) The state regulatory agency and tribal regulatory agency
shall cooperate in sharing as much background information as
possible, both to maximize investigative efficiency and
thoroughness, and to minimize investigative costs. begin insert The state
regulatory agency shall not impose a greater burden or cost upon
an application originating from a tribal applicant or regulatory
agency than if the application originated in connection with a
nontribal operator. end insert

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

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

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

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

(m) There is no limit on the number of Internet poker rooms an
authorized poker room licensed operator may begin delete operate. end delete begin insert operate, or
on the number of skins that can be offered through an authorized
poker room, but each room shall require a separate license and
license fee. end insert

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

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

(1) Skins are intended to serve as an alternative means by which
those begin delete qualified to operate an authorized poker room end delete begin insert who meet
gaming suitability requirements end insert may participate in intrastate
Internet poker begin delete and through which authorized players can be
attracted to, and may participate in, authorized games being
conducted in the authorized poker room. end delete begin insert on a nonoperational basis
by permitting, through contractual arrangements with authorized
poker room operators and compliance with applicable regulations,
the opportunity to offer players authorized games in an authorized
poker room, but under the skin sponsor’s brand or other identity
rather than that of the authorized poker room operator. end insert Skins are
typically represented on an Internet Web site through graphics and
words distinguishing it from those employed directly by the
authorized poker room.

(2) Other than begin delete design end delete begin insert the approval of designs, logos, graphics, end insert
and other advertising considerations, skin sponsors shall have no
operation or control over the skin or authorized poker room, or
any access to the platform or games played thereon. begin delete All end delete

begin insert (3) end insert begin insert   end insert begin insert All end insert games begin delete offered end delete begin insert played end insert through a skin shall be treated the
same as other authorized games played in the host poker room and
shall be begin delete subject to the same rules. end delete begin insert offered only to authorized
players. end insert begin delete Players end delete

begin insert (4) end insert begin insert   end insert begin insert Players end insert entering games from skins or directly through the
poker room may be mixed among the tables in the poker room and
need not be informed as to the source from which other players
entered the room.

begin delete

(3)

end delete

begin insert (5) end insert  An unlimited number of skins for an authorized poker room
may be issued to one or more skin sponsors by the poker room
licensee. A fee to the commission for a skin sponsorship shall be
collected and paid to the commission in the amount of ____% of
the fee to be paid to the licensed poker room operator for operating
the skin on the sponsor’s behalf, but the fee to the commission
shall be equal to or greater than ____ dollars ($____) annually.

begin delete

(4)

end delete

begin insert (6) end insert  Players accessing the authorized poker room through a skin
shall be authorized and, in all other respects, treated and subject
to the same rules as any other player in the room.

begin delete

(5)

end delete

begin insert (7) end insert  Additional rules governing advertisements, identifications,
and notifications to players regarding skins shall be issued by the
regulatory begin delete agency, which shall prohibit the use of a skin to serve
as a false front for a person’s participation in intrastate Internet
poker under this chapter by any person who would not otherwise
qualify to do so as a licensee of an authorized poker room. end delete begin insert agency. end insert

19990.21.  

An entity described in subdivision (b) of Section
19990.20 is eligible for a platform operator license or a poker room
operator license. There is no limit on the total number of operating
licenses the state may issue. An eligible entity may jointly apply
for a license, either as a partnership or some other combination of
eligible entities, as long as that combination is comprised entirely
of eligible entities. An eligible entity that is a partnership,
consortium, or other combination of eligible entities may itself
have an interest in only a single license.

19990.22.  

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

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

(2) The following applies to tribal license applicants:

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

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

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

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

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

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

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

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

19990.23.  

(a) The commission or, if application for licensing
in connection with a tribal platform or poker room, the appropriate
tribal regulatory agency, begin insert if required under subdivision (k) of Section
19990.20, end insert shall review the suitability and capability of a license
applicant in conformity with the rules set forth in this chapter.

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

(c) The commission shall conduct a full investigation into the
suitability of a license applicant that initially applies to the
commission for a license, and in the case of tribal license
applicants, begin insert if required under subdivision (k) of Section 19990.20, end insert
following approval of the license by the tribal regulatory agency.

(d) Notwithstanding begin delete anything in end delete begin insert any provision of end insert this chapter
to the contrary, an applicant that is a tribe and begin insert that end insert is subject to a
tribal-state compact, secretarial procedures for class III gaming
under IGRA, or a gaming ordinance or resolution approved under
IGRA that is in effect, shall be presumed suitable and shall not be
required to pay the application fee. begin insert However, tribal officials and
other agents or representatives of the tribe are exempt from the
suitability determinations pursuant to this section only when, as
set forth in subparagraph (C) of paragraph (3), the tribe holds the
license through a separate and independent tribal entity. end insert In all
other instances the investigation shall include all of the following
persons:

(1) The license applicant.

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

(3) The owner or owners of the following:

(A) The license applicant.

(B) An affiliate of the license applicant.

(C) A person deemed by the department to have significant
influence over the license applicant or its service providers or their
respective operations. begin insert Notwithstanding any provision of this section
to the contrary, in the event the tribal applicant is a separate and
independent entity of the tribe, such as a tribally and wholly owned
corporation or limited liability company, with control vested in a
board or committee that is separate from the tribe’s governing
body, except for the basic tribal eligibility requirements set forth
in Section 19990.20, that may be met by the tribe, those tribal
entities shall meet any other requirements for licensure pursuant
to this chapter. Only the officers, directors, and key employees of
those entities, and not the elected officials of the tribal owner,
shall be required to meet the suitability requirements of this
section, except when those tribal officials have authority to exercise
direct control over the operations of the entity. end insert

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

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

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

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

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

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

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

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

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

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

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

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

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

(C) A collective investment trust organized by banks under Part
Nine of the Rules of the begin insert Office of the end insert Comptroller of the Currency.

(D) A closed-end investment trust.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(7) Is less than 21 years of age.

(8) Has knowingly and willfully accepted a bet after December
31, 2006, from a person located in the United States on any form
of Internet gambling, including, but not limited to, poker, that has
not been affirmatively authorized by law of the United States or
of each state in which a person making that bet were located, or
has been the holder of a direct or indirect financial interest in a
person or entity that has accepted that bet.

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

begin delete

(j)

end delete

begin insert (k) end insert  Actions on license applications will be treated as follows:

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

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

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

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

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

(6) The commission shall waive the application of the provisions
of paragraph (8) begin delete of subdivision (j) or paragraph end delete begin insert or end insert (9) of
subdivision (j) begin delete to end delete begin insert for end insert an applicant who can demonstrate by clear
and convincing evidence that its conduct in connection with bets
and gambling games involving persons located in the United States
was not unlawful under federal law and the laws of each state in
which persons making the bets were located. begin delete The termination of
a prosecution of that applicant under the laws of any state, the
United States, or other jurisdiction in a manner other than with a
conviction shall not be regarded as evidence that the applicant’s
conduct was not unlawful. end delete begin insert In making this determination, the
commission may consider evidence that the applicant was
prosecuted under the laws of any state, the United States, or
another jurisdiction. However, the termination of a prosecution
in a manner other than a conviction does not constitute evidence
that the applicant’s conduct was lawful. end insert This section does not
waive the need to comply with all otherwise applicable license
and suitability requirements.

begin insert

(l) This section shall not be construed to prohibit a tribal
regulatory agency from conducting its own analysis of suitability
for a person or entity applying for licensure in connection with a
tribal platform or poker room, or from providing the results of its
suitability analysis to the commission, as provided under
subdivision (k) of Section 19990.20.

end insert

19990.23.5.  

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

19990.24.  

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

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

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

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

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

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

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

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

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

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

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

(6) Documentation that demonstrates that the license applicant
is financially qualified to perform the obligations of a licensee as
described in this article. begin insert An applicant for licensure as an operator
shall provide documentation establishing that, if the license is
granted, the license applicant is qualified to pay the license fee
required by subdivision (a) of Section 19990.58 from its own assets,
or its owners’ assets, or through credit extended to the entity in
an amount not to exceed the entity’s own assets, or its owners’
assets. end insert

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

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

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

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

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

(2) The licensee’s security systems.

(3) The license applicant’s proposal for the manner in which it
will facilitate compliance with all of the standards set forth in this
chapter and federal law, including, but not limited to, Section
5362(10)(B) of Title 31 of the United States Code.

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

(1) Connectivity and level of service.

(2) The system architecture of the gaming equipment.

(3) The software architecture of the gaming system.

(4) The network architecture of the gaming system.

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

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

(7) Connectivity with systems belonging to service providers.

(8) Methods employed to maintain high service availability.

(9) Change management procedures.

(10) Information security policies.

(11) Disaster recovery procedures.

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

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

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

(A) The games are legal.

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

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

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

(15) Accounting systems, begin delete including end delete begin insert including, end insert but not limited
to, those for any of the following:

(A) Authorized player accounts.

(B) Per hand charges.

(C) Transparency and reporting to all state agencies.

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

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

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

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

(1) The department.

(2) The commission.

(3) The Treasurer.

(4) The Franchise Tax Board.

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

19990.25.  

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

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

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

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

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

 

Article 5.  Rights and Obligations of begin delete Licenses end delete begin insert Licensees end insert

 

19990.30.  

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

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

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

19990.31.  

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(2) A licensee shall not enter into a contract or agreement with
a person or entity that has knowingly and willfully accepted a bet
from a person located in the United States on a form of Internet
gambling, including, but not limited to, poker, after December 31,
2006, that has not been affirmatively authorized by a law of the
United States or of each state in which the person making that bet
was located, or has been the holder of a direct or indirect financial
interest in a person or entity that has accepted a bet. This section
does not apply to a person or entity that has demonstrated, by clear
and convincing evidence, pursuant to the process described in
paragraph (6) of subdivision (i) of Section 19990.23, that its
conduct in connection with bets and gambling games involving
persons located in the United States was not unlawful under federal
law and the laws of each state in which persons making bets were
located.

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

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

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

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

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

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

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

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

19990.32.  

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

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

19990.33.  

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

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

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

19990.34.  

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

19990.35.  

The gaming system is divided into three parts:

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

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

(c) A games management system that shall include all the
technology, begin delete functions end delete begin insert functions, end insert and internal control system
mechanisms required to set up, manage and monitor authorized
games, including games content and game logic, but does not
receive, process, or store personal information about begin delete players and
their funds. end delete begin insert players, such as their names, addresses, and other
contact information, or their funds, except to the extent necessary
for the system to function, and in accordance with any limitations
from the card room operator and any applicable regulations. end insert

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

(1) The player management system and the fund management
system shall belong to, and be the responsibility of, an authorized
poker room operator. A licensed poker platform operator shall not
have access to the player management system and fund
management begin delete system. end delete begin insert system, except to the extent expressly
authorized in writing by the poker room operator and in conformity
with applicable regulations. end insert

(2) The game management system shall belong to, and be the
responsibility of, an authorized poker platform operator. Authorized
poker room operators shall not have access to the games
management begin delete system. end delete begin insert system, except to the extent expressly
authorized in writing by the poker room operator and in conformity
with applicable regulations. end insert

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

(1) Player registration.

(2) Player settings.

(3) Player account management.

(4) Responsible gaming.

(5) Player authentication.

(6) Player authorization.

(7) Geolocation.

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

(9) Age verification.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(3) A licensed poker room operator shall begin insert , prior to any play, end insert
prominently display a link to the department’s begin delete responsible poker end delete
begin insert Responsible Gambling end insert Internet Web begin delete site end delete begin insert page end insert and begin insert display end insert the
self-exclusion form begin delete on the poker room Web site that is displayed end delete
when either of the following occurs:

(A) A person begin delete registered to be end delete begin insert registers to be end insert a player.

(B)  begin delete Each time an end delete begin insert An end insert authorized player accesses the begin insert authorized end insert
poker begin delete room prior to playing. end delete begin insert room. end insert

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

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

19990.36.  

A licensed poker platform operator shall only offer
authorized games and process bets in accordance with the
applicable game and betting rules established by the licensed
operator and approved by the department pursuant to Sections
19990.14 and 19990.37, provided that neither this chapter nor
those rules prohibit a licensed operator from offering play-for-fun
or play-for-free poker games on an begin delete authorized end delete begin insert Internet poker end insert Web
site.

19990.37.  

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

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

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

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

19990.38.  

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

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

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

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

(1) The name of the game.

(2) Any restrictions on play.

(3) The rules of the game.

(4) All instructions on how to play.

(5) The unit and total bets permitted.

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

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

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

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

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

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

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

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

19990.39.  

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

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

(1) Full legal name.

(2) Mailing address.

(3) Telephone number.

(4) Social security begin delete number. end delete begin insert number or taxpayer identification
number. end insert

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

(6) Valid email address.

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

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

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

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

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

(f) A player may begin delete only have one online gaming account end delete begin insert have
multiple gaming accounts end insert with any given licensed poker room
begin delete operator. end delete begin insert operator for any room and skin in which the player
participates, but shall not be permitted to play more than one
position at the same table at the same time. end insert

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

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

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

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

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

19990.40.  

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

(b) An authorized player shall identify the source of funds to
be used to put money into the account established once the
registration process is complete. begin insert The player shall identify the
specific account to be used for any given game prior to play and
in accordance with the poker room rules. end insert

(c) At the time that a player establishes an online gaming
account, he or she shall designate the bank account begin insert or credit card end insert
into which funds begin delete from his or her deposit account end delete begin insert associated with
his or her play end insert are to be withdrawn or deposited, in accordance
with the poker room rules.

begin delete

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

end delete begin delete

(e)

end delete

begin insert (d) end insert  A licensed operator shall not permit a player to increase the
amount of money available begin delete for his or her player’s online gaming
account end delete begin insert in the account designated for use in a game end insert after a hand
begin insert in that game end insert has started.

begin delete

(f)

end delete

begin insert (e) end insert  A licensed poker room operator shall maintain records on
the balance of begin delete each player’s funds in the deposit account. end delete begin insert funds in
each of the player’s deposit accounts. end insert

begin delete

(g)

end delete

begin insert (f) end insert  A licensed operator shall not permit a player to place a bet
unless the player has sufficient funds in the begin delete deposit end delete begin insert designated end insert
account to cover the amount of all bets required for that hand.

begin delete

(h)

end delete

begin insert (g) end insert  A licensed operator shall not provide credit to a player or
act as agent for a credit provider to facilitate the provision of funds.

begin delete

(i)

end delete

begin insert (h) end insert  Players shall not be paid interest by licensees on the funds
in the deposit accounts.

19990.41.  

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

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

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

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

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

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

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

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

19990.42.  

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

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

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

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

19990.43.  

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

19990.44.  

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

(a) A person or authorized player provided false information to
the licensed operator, including, but not limited begin delete to end delete begin insert to, end insert information
provided in the registration process.

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

(c) The authorized player has violated the begin delete intrastate Internet end delete
begin insert authorized end insert poker room’s Terms of Use Registered Player’s
Agreement.

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

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

19990.45.  

(a) Upon registration, and each time a registered
player logs into an begin delete intrastate Internet end delete begin insert authorized end insert poker room, the
licensed operator shall permit a registered player to adjust his or
her play settings to:

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

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

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

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

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

19990.46.  

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

19990.47.  

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

19990.48.  

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

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

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

(c) The identity of registered players.

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

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

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

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

19990.49.  

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

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

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

19990.50.  

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

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

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

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

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

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

19990.51.  

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

(b) Per hand charges are permitted.

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

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

(c) Tournament charges shall be permitted.

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

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

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

19990.52.  

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

19990.53.  

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

19990.535.  

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

(b) (1) A licensee shall not utilize any brand or business name,
trade or service mark, software, technology, operational begin delete system end delete
begin insert system, end insert or customer information for a core function that was used
in connection with the knowing and willful acceptance of any bet
from persons located in the United States on any form of Internet
gambling, including, but not limited to, poker, after begin delete October 16, end delete
begin insert December 31, end insert 2006, that has not been affirmatively authorized
by law of the United States or of each state in which persons
making a bet were located.

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

19990.54.  

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

19990.55.  

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

19990.56.  

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

19990.57.  

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

19990.58.  

(a) Before the collection of a registered player fee,
bet, or deposit on any authorized game in the licensed operator’s
authorized poker room, the operator shall remit to the Treasurer
for deposit in the General Fund a one-time license fee in the amount
of begin delete ____ dollars ($____). end delete begin insert ten million dollars ($10,000,000). end insert This
amount shall be credited against fees imposed pursuant to
subdivision (b) on the licensed poker room operator’s gross
revenues for the first years of operation. Upon depletion of the
license fee, the department shall notify the licensee to commence
monthly payments to the state in accordance with subdivision (b).

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

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

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

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

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

19990.59.  

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

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

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

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

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

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

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

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

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

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

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

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

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

19990.60.  

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

19990.61.  

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

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

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

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

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

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

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

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

19990.62.  

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

19990.63.  

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

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

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

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

 

Article 6.  Authority of State Agencies

 

19990.70.  

(a) (1) Within 120 days after the effective date of
this chapter, the commission, and any other state agency with a
duty pursuant to this chapter, shall, in order to comply with time
deadlines, in consultation with the department, adopt regulations
to implement this chapter, and to facilitate the operation of
intrastate Internet poker Web sites and expedite the state’s receipt
of revenues in compliance with this chapter. The initial adoption,
amendment, or repeal of a regulation authorized by this section is
deemed to address an emergency, for purposes of Sections 11346.1
and 11349.6 of the Government Code, and the commission and
those other state agencies are hereby exempted for that purpose
from the requirements of subdivision (b) of Section 11346.1 of
the Government Code. After the initial adoption, amendment, or
repeal of an emergency regulation pursuant to this section, the
commission and those other state agencies shall not request
approval from the Office of Administrative Law to readopt the
regulation as an emergency regulation pursuant to Section 11346.1
of the Government Code, but shall promulgate permanent
regulations in accordance with all applicable law. The commission
shall circulate its proposed permanent regulations to all tribes and
land-based gaming entities eligible for licensure pursuant to this
chapter along with information regarding how comments can be
submitted prior to adopting permanent regulations.

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

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

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

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

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

19990.72.  

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

 

Article 7.  Player Protection

 

19990.75.  

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

19990.76.  

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

19990.77.  

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

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

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

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

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

19990.78.  

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

 

Article 8.  Disposition of State Regulatory Proceeds

 

19990.86.  

(a) The Treasurer shall transfer all amounts received
from a licensee pursuant to subdivision (c) of Section 19990.58
to the Controller for deposit into the Internet Poker Fund, which
is hereby created in the State Treasury, to be administered by the
Controller, subject to annual appropriation by the Legislature.

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

(c) The begin delete State Department of Alcohol and Drug Programs, end delete begin insert State
Department of Public Health, end insert Office of Problem begin delete Poker, end delete begin insert Gambling, end insert
shall submit revenue needs for programs to alleviate problem poker
that results from the offering of authorized games for the upcoming
fiscal year to the Senate Committee on Budget and Fiscal Review
and the Assembly Committee on Budget, as well as the Senate and
Assembly Committees on Governmental Organization, the Senate
and Assembly Committees on Human Services, and the Department
of Finance on or before March 31 of the preceding fiscal year. A
justification of those costs shall be provided with each submission
of revenue needs.

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

 

Article 9.  Preemption of Local Regulation

 

19990.90.  

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

 

Article 10.  Reports to the Legislature

 

19990.95.  

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

19990.96.  

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

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

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

SEC. 2.  

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

SEC. 3.  

The Legislature finds and declares that Section 1 of
this act, which adds Chapter 5.2 (commencing with Section
19990.01) to Division 8 of the Business and Professions Code,
imposes a limitation on the public’s right of access to the meetings
of public bodies or the writings of public officials and agencies
within the meaning of Section 3 of Article I of the California
Constitution. Pursuant to that constitutional provision, the
Legislature makes the following findings to demonstrate the interest
protected by this limitation and the need for protecting that interest:

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

SEC. 4.  

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

SEC. 5.  

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

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