BILL NUMBER: SB 1366 INTRODUCED
BILL TEXT
INTRODUCED BY Senator Correa
FEBRUARY 21, 2014
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 1366, as introduced, Correa. Internet gambling.
(1) The Gambling Control Act provides for the licensure and
regulation of various legalized gambling activities and
establishments by the California Gambling Control Commission and the
investigation and enforcement of those activities and establishments
by the Department of Justice. A willful violation of those 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 recognized 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 of
$10,000,000 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, in consultation with 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
2014
Article 1. General Provisions
19990.01. This chapter shall be known and may be cited as the
Internet Poker Consumer Protection Act of 2014.
19990.02. The Legislature hereby finds and declares all of the
following:
(a) The state and the governments of numerous federally recognized
California Indian tribes 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 cardrooms 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 intrastate Internet
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 that 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 therefor 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 handling, 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, servers, 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 "play-for-free "
or "play-for-fun " 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.
(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").
( j) "Core functions" and "core functioning" mean the management,
administration, or control of the following:
(1) Bets or wagers on authorized games.
(2) The processing, qualifying, or participation of authorized
players.
(3) Payments to and from authorized players.
(4) The offering, conduct, presentation, or operation of
authorized games.
(5) Intellectual property related to authorized games and poker
rooms, including the trademarks, trade names, service marks, or
similar intellectual property under which a licensee identifies its
games to its customers.
(6) 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.
(k) "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.
(l) "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.
(m) "Employee work permit" means a permit issued to an employee of
a licensee by the commission after a background investigation and
finding of suitability.
(n) "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.
(o) "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 an authorized poker room under its management and control.
(p) "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.
(q) "Game" means a contest in which players may win or lose
depending on skill, chance, or a combination thereof, depending on
the rules of play.
(r) "Gaming system" means the combination of hardware, software,
and data networks specifically described in Section 19990.35.
(s) "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 has
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.
(t) "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, clothing, and other nongaming
sources.
(u) "Initial license" means a license issued under this chapter on
or before a date set in the regulations adopted 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.
(v) "Intermediary" means a party that enters into an agreement
with a licensee to recruit players to the licensee's authorized poker
room.
(w) "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, deposit, 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.
(x) "Internet poker" means an authorized game.
(y) "Internet Poker Fund" means the fund established pursuant to
Section 19990.86.
(z) "Internet Poker Licensing Fund" means the fund established
pursuant to Section 19990.20.
(aa) "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.
(ab) "Intrastate" means within the borders of California.
(ac) "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.
(ad) "Land-based gaming entity" means a licensee that is a card
club operated pursuant to Chapter 5 (commencing with Section 19800).
(ae) "Licensee" means a licensed operator, a service provider, or
any other person holding a license under this chapter.
(af) "Licensed operator" means an authorized poker room operator,
an authorized poker platform operator, or both.
(ag) "Operator" means a person that operates an authorized
platform or poker room.
(ah) "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.
(ai) "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.
(aj) "Per hand game" means a game for which the operator charges
the player for each hand played.
(ak) "Person" means a 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.
(al) "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.
(am) "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.
(an) "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.
(ao) "Play settings" means the options and default parameters made
available by an operator to a player in the play of games.
(ap) "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.
(aq) "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.
(ar) "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.
(as) 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.
(at) "Poker enterprise" means a person or entity meeting the
definition of a "gambling enterprise" under subdivision (m) of
Section 19805 that conducts poker, and any other requirements under
law for operating a land-based gaming entity.
(au) "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.
(av) "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.
(aw) "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.
(ax) "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.
(ay) "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.
(az) "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.
(ba) "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 to a licensed platform or poker room operator, or
to an authorized player, that are not principally used in connection
with the operation of an authorized 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.
(bb) "State" means the State of California.
(bc) "Tournament" means a competition in which players play a
series of games to decide the winner.
(bd) "Tournament charge" means the amount charged by the operator
for an authorized player to play in a tournament.
(be) "Tournament winnings" means the amount of a prize awarded to
an authorized player in a tournament.
(bf) "Tribe" means a federally recognized Indian tribal government
located within California.
(bg) "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.
(bh) "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.
(bi) "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
"play-for-fun" or "play-for-free" 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 cardroom.
(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 authorized poker platform or an
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 Section 19990.05, 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 federal 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 California.
(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 ($____).
(g) Poker room operator licenses issued under this chapter shall
be for a term of 10 years and shall require a license fee payment of
____ dollars ($____).
(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, shall, if required by the tribal gaming agency,
obtain a license from the tribal regulatory agency exercising
jurisdiction over that platform or poker room, under the procedures
set forth in this section. However, if no tribal gaming agency
process is required, this subdivision does not apply. 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
19990.22 and 19990.23, 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 19990.22 and 19990.23. 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 19990.22 and
19990.23.
(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) As a part of any application process required by a tribal
regulatory agency under this subdivision, the 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. 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.
(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 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.
(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 who meet gaming suitability requirements may participate in
intrastate Internet poker 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. 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 the approval of designs, logos, graphics, 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.
(3) All games played through a skin shall be treated the same as
other authorized games played in the host poker room and shall be
offered only to authorized players.
(4) Players 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.
(5) 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.
(6) 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.
(7) Additional rules governing advertisements, identifications,
and notifications to players regarding skins shall be issued by the
regulatory agency.
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
gaming compact.
(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, if required under subdivision (k) of
Section 19990.20, 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, if required under subdivision (k) of Section 19990.20,
following approval of the license by the tribal regulatory agency.
(d) Notwithstanding any provision of this chapter to the contrary,
an applicant that is a tribe and that 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. 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. 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. 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.
(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 Office of the 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.
(k) 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) or (9) of subdivision (j) for 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. 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. This section does
not waive the need to comply with all otherwise applicable license
and suitability requirements.
(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.
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. 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.
(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, including, 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 Licensees
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. (a) The licensee is responsible for providing current
and accurate documentation on a timely basis to all state agencies,
as provided in this chapter.
(b) 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, functions, 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, functions, 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 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 cardroom operator and any applicable
regulations.
(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 system,
except to the extent expressly authorized in writing by the poker
room operator and in conformity with applicable regulations.
(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
system, except to the extent expressly authorized in writing by the
poker room operator and in conformity with applicable regulations.
(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, and funds and data related to authorized
players in that poker room, 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, prior to any play,
prominently display a link to the department's Responsible Gambling
Internet Web page and display the self-exclusion form when either of
the following occurs:
(A) A person registers to be a player.
(B) An authorized player accesses the authorized poker room.
(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 Internet poker 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 number or taxpayer identification number.
(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 have multiple gaming accounts with any given
licensed poker room 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.
(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. 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.
(c) At the time that a player establishes an online gaming
account, he or she shall designate the bank account or credit card
into which funds associated with his or her play are to be withdrawn
or deposited, in accordance with the poker room rules.
(d) A licensed operator shall not permit a player to increase the
amount of money available in the account designated for use in a game
after a hand in that game has started.
(e) A licensed poker room operator shall maintain records on the
balance of funds in each of the player's deposit accounts.
(f) A licensed operator shall not permit a player to place a bet
unless the player has sufficient funds in the designated account to
cover the amount of all bets required for that hand.
(g) A licensed operator shall not provide credit to a player or
act as agent for a credit provider to facilitate the provision of
funds.
(h) 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 to, 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 to, 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 authorized 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 authorized 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 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 system, 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 December 31, 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
ten million dollars ($10,000,000). 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 affects 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, state, tribal, 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 State Department of Public Health, Office of Problem
Gambling, 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.