California Legislature—2015–16 Regular Session

Assembly Bill No. 9

Introduced by Assembly Member Gatto

December 1, 2014

An act to add Chapter 5.2 (commencing with Section 19990.101) 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

AB 9, as introduced, Gatto. Gambling: Internet poker: unlawful gambling activity.

(1) Existing law, the Gambling Control Act, provides for the licensure of certain individuals and establishments that conduct controlled games, as defined, and for the regulation of these gambling activities by the California Gambling Control Commission. The Department of Justice has related investigatory and enforcement duties under the act. Any violation of these provisions is punishable as a misdemeanor, as specified.

This bill, which would be known as the Internet Poker Consumer Protection Act of 2015, would establish a framework to authorize intrastate Internet poker, as specified. The bill would authorize eligible entities to apply to the commission for a 10-year nontransferable license to operate an intrastate Internet poker Web site offering the play of authorized Internet poker games to registered players within California, as specified. The bill would require that the license be automatically renewed every 10 years upon application, as specified. The bill would prohibit the offer or play of any gambling game provided over the Internet that is not an authorized Internet poker game permitted by the state pursuant to this bill. The bill would provide that it is unlawful for a person to aggregate computers or any other device with Internet access capabilities in a place of public accommodation within the state, including a public or private club or other association, in a public or private setting, that can accommodate multiple players to simultaneously play authorized games on the Internet, or to promote, facilitate, or market that activity. The bill would provide that any violation of the Internet Poker Consumer Protection Act of 2015 is 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 180 days after the operative date of this bill, in consultation with the department and federally recognized California Indian tribes, to implement these provisions, and to facilitate the operation of authorized poker Web sites and expedite the state’s receipt of revenues. The bill would require an eligible entity, as defined, to pay an application processing fee sufficient to cover all reasonable costs associated with the issuance of the license, for deposit into the Internet Poker Fund, as created by the bill, to be continuously appropriated to the department and the commission in the amounts necessary to perform their duties pursuant to this bill. An operator license applicant that is a federally recognized Indian tribe also would be required to submit a limited waiver of its sovereign immunity. The bill would require a service provider to apply to the commission for a service provider license before providing goods or services to a licensed operator in connection with the operation of an authorized poker Web site and pay an application processing fee sufficient to cover the reasonable costs associated with the issuance of the license. The bill would require the department to review the suitability of a service provider applicant and would require the department, prior to issuing a service provider license, to issue a finding of suitability and conduct a full investigation of the service provider license applicant. The bill would require a marketing affiliate to apply to the commission for a marketing affiliate license or registration before providing marketing services to a licensed operator in connection with the operation of an authorized poker Web site and pay an application processing fee sufficient to cover the reasonable costs associated with the issuance of the license. Except as provided, the bill would require the department to review the suitability of a marketing affiliate license or registration applicant and would require the department, prior to issuing a license or registration, to issue a finding of suitability and conduct a full investigation of the marketing affiliate license or registration applicant.

The bill would require employees of a licensed operator, a licensed service provider, or a licensed or registered marketing affiliate to obtain employee work permits, and owners, officers, and directors of a licensed operator to be subject to a suitability review and obtain employee work permits, and would authorize the commission to refuse to issue a license to, or suspend or revoke a license of, a licensed operator that fails to comply with these requirements. The bill would establish a tribal gaming regulatory authority process for the purpose of processing employee work permits, and authorize a tribe that is a licensed operator to elect to participate in the tribal gaming regulatory authority process.

This bill would authorize the commission to revoke or suspend any license or work permit upon reaching a finding that the licensee or employee is in violation of the provisions described above, or any regulation adopted pursuant to these provisions. However, the bill would prohibit a tribal licensee from having its license suspended or revoked, or being fined or otherwise penalized for complying with any applicable federal law or regulation when operating an authorized poker Web site on Indian lands. The bill would specify that to the extent that any state requirement is more strict than any applicable federal law requirement, the tribal licensee is required to comply with the state requirement.

This bill would require a registered player account to be established in person, and would also require that specified deposits into and withdrawals out of those accounts be made in person. In order to satisfy those in-person requirements, the bill would authorize a licensed operator to enter into an agreement for the operation of one or more satellite service centers, which would be authorized to act on behalf of, or in coordination with, the licensed operator in carrying out those in-person requirements. The bill would require a licensed operator to ensure, among other things, that the satellite service center is financially, logistically, and technologically capable of performing specified duties in accordance with the bill’s provisions. The bill would provide that both the satellite service center and the licensed operator may be held liable for any violation of the bill’s provisions arising out of an agreement between the satellite service center and the licensed operator to provide specified in-person services. The bill would also authorize the commission to promulgate regulations regarding satellite service centers for the protection of licensed operators, registered players, and intrastate Internet poker, or that otherwise serve the purposes of the bill.

This bill would require the payment of an annual regulatory fee, for deposit into the Internet Poker Fund, to be continuously appropriated for the actual costs of license oversight, consumer protection, state regulation, and other purposes related to this bill. The bill would require each licensee to pay a one-time license deposit into the General Fund in the amount of $5,000,000. The license deposit would be credited against quarterly fees equivalent to 5% of the licensee’s gross gaming revenue proceeds, as specified. The bill would require an applicant for an operator license to provide documentation establishing that the applicant is qualified to pay the one-time license deposit through its own net position or through credit directly to the applicant, as specified.

This bill would establish the Unlawful Gambling Enforcement Fund within the General Fund for purposes of ensuring adequate resources for law enforcement charged with enforcing the prohibitions and protections of the provisions described above. The bill would authorize the Attorney General, and other public prosecutors, as specified, to bring a civil action to recover a civil penalty in an unspecified amount against a person who engages in those prohibited activities described above, or other specified unlawful gambling activities. The bill would provide for an unspecified percentage of revenues from civil penalties collected to be deposited into the fund and used for law enforcement activities pursuant to these provisions, upon appropriation by the Legislature.

This bill would require the commission, in consultation with the department, 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 operative 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.

This bill would require the state to affirmatively elect to be subject to a federal Internet gambling law, and would prohibit the state from participating in any Internet gambling agreement between states or foreign jurisdictions without an affirmative legislative act. The bill would provide that if the state elects to be subject to a federal Internet gambling law or to participate in an Internet gambling agreement between states or foreign jurisdictions, an operator licensee shall not be required to pay the one-time license fee or the quarterly fees described above and would require the state to refund within 30 days all unused license fees paid to the state, as specified. The bill would authorize a licensee to enforce this provision in the superior court.

The bill would provide that specified provisions are not severable.

(2) Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.

This bill would make legislative findings to that effect.

(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
19990.101) is added to Division 8 of the Business and Professions
Code, to read:

 

Chapter  5.2. The Internet Poker Consumer Protection
Act of 2015

 

Article 1.  Title, Legislative Declarations, and Statement of
Legislative Intent

 

19990.101.  

This chapter shall be known and may be cited as
the Internet Poker Consumer Protection Act of 2015.

19990.102.  

The Legislature hereby finds and declares all of
the following:

(a) Since the development of the Internet, Web sites offering
gambling have raised consumer protection and enforcement
concerns for federal and state governments as these Internet Web
sites are often operated by unknown persons located in many
different countries, subject to little or no oversight, and have sought
to attract customers from the United States.

(b) Californians participate in illegal online gambling on
unregulated Internet Web sites every week. Neither federal nor
California laws provide any consumer protections for California
players. California players assume all risks, any negative social or
financial impacts are borne by the citizens of California, and the
revenues generated from online gambling are being realized by
offshore operators and do not provide any benefits to the citizens
of California.

(c) The presence, operation, and expansion of offshore,
unlicensed, and unregulated Internet gambling Web sites available
to Californians endanger Californians because the current Internet
gambling Web sites operate illegally and without regulation as
demonstrated by criminal investigations of some Internet gambling
purveyors, and questions have arisen about the honesty and the
fairness of the games played on Internet gambling Web sites as
well as the true purpose for, and use of, proceeds generated by
these unregulated Internet gambling Web sites. In addition, some
of the unlicensed and unregulated Internet gambling activity
interferes with rights Californians preserved to federally recognized
tribal governments when amending the state’s Constitution, with
that amendment providing federally recognized tribes the sole and
exclusive right to engage in slot machine and house-banked
casino-style gaming in California. 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.

(d) These rights were separately guaranteed in 1999, and at
various times thereafter, when the state negotiated and entered into
compacts with tribes pursuant to the federal Indian Gaming
Regulatory Act of 1988 (IGRA), under which signatory tribes
possess the exclusive right within the state to operate “gaming
devices.” “Gaming device” is defined in those compacts to include
any electronic, electromechanical, electrical, or video device that,
for consideration, permits: individual play with or against that
device or the participation in any electronic, electromechanical,
electrical, or video system to which that device is connected; the
playing of games thereon or therewith, including, but not limited
to, the playing of facsimiles of games of chance or skill; the
possible delivery of, or entitlement by the player to, a prize or
something of value as a result of the application of an element of
chance; and a method for viewing the outcome, prize won, and
other information regarding the playing of games thereon or
therewith. Internet gaming necessitates the use of an electronic
device, whether in a private or a public setting, to participate in a
game. The authorization of Internet gaming could, therefore,
constitute a breach of those compacts and jeopardize the payments
being made to the state. As such, the Legislature recognizes that
the forms of Internet gaming authorized to be played within the
state must be strictly limited and that the authorization of any form
of Internet gaming, with the exception of poker as described in
this chapter, would violate compact exclusivity. This includes, but
is not limited to, any slot or casino-style game.

(e) Tribally owned and operated casinos have contributed to
local economies, generated tens of thousands of jobs for
Californians, provided hundreds of millions of dollars in revenues
for the state since the advent of Indian gaming, and are entitled to
the full protection of the laws of this state. As such, the state is
presently engaged in regulatory and enforcement efforts to combat
the rise of illegal gambling activity that threatens not only protected
rights, but the health and welfare of all Californians.

(f) Card rooms have been offering poker games in California
since before California became a state. Card rooms have
contributed to local economies, generated tens of thousands of
jobs for Californians, provided hundreds of millions of dollars in
revenues for state and local governments, and are entitled to the
full protection of the laws of this state.

(g) In October 2006, Congress passed the SAFE Port Act (Public
Law 109-347), to increase the security of United States ports.
Embedded within the language of that act was 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. UIGEA includes exceptions, including, but not
limited to, one that permits individual states to create a regulatory
framework to enable intrastate Internet gambling, provided the
bets or wagers are made exclusively within a single state whose
state 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 to minors
and persons located outside of that state.

(2) Expressly authorize the bet or wager and the method by
which the bet or wager is made.

(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) IGRA.

(h) State authorization to operate Internet poker consistent with
federal law, and heightened regulation and enforcement regarding
Internet gambling activity that goes beyond poker, provides
California with the means to protect its citizens and consumers
under certain conditions by providing a framework to ensure that,
among other things, the state is not subject to an unnecessary and
unprecedented expansion of gambling, minors are prevented from
gambling, citizens participating in Internet poker activities are
protected, and the state is not deprived of income tax revenues to
which it would otherwise be entitled from these activities.

(i) The Legislature recognizes that the regulation of gambling
activities within the state’s jurisdiction is of particular concern to
the public interest, particularly with the advent of the Internet, and
inherent dangers associated with online gambling activities, and
accordingly recognizes the need to protect Californians from an
unprecedented expansion of gambling activities within the state.
This chapter is a vehicle to generate additional resources to protect
Californians from this increased illegal Internet gambling activity.

(j) The state currently maintains and implements substantial
regulatory and law enforcement efforts to protect thousands of
Californians who gamble and play, among other things, real-money
poker in licensed California card rooms.

(k) Federally recognized Indian tribes in California offer
real-money poker, including electronically aided poker, on their
Indian lands as a “class II” game under IGRA.

(l) While the state, federal government, and tribal governments
exercise regulatory authority over various real-money poker games
offered in California, none of those entities presently provide
licensing requirements, regulatory structure, or law enforcement
tools to protect millions of Californians who play the same games
daily for money on the Internet.

(m) In order to protect Californians who gamble online, allow
state law enforcement to ensure consumer protection, and ensure
compliance with the California Constitution and negotiated
compacts and secretarial procedures, it is in the best interest of the
state and its citizens to authorize, implement, and create a legal
system for intrastate Internet gambling that is limited to the game
of poker.

(n) The California Gambling Control Commission and the
Department of Justice, in conjunction with other state agencies
and tribal gaming regulatory authorities, have the expertise to issue
licenses to conduct intrastate Internet poker to existing operators
of regulated gaming that are otherwise eligible to conduct
real-money poker games in California. Further, strict suitability
standards must be imposed on those persons and entities seeking
to work for or provide services to licensed operators in order to
ensure that the highest level of integrity is maintained.

(o) The state also possesses a legitimate interest in protecting
the integrity of state-authorized intrastate Internet poker by
licensing only those entities that are otherwise eligible to offer
real-money poker games within the state that have significant
experience operating in a regulated land-based gaming facility
environment. The state’s interests are best met, therefore, by
licensing only those entities in California that have experience
operating card rooms and tribal gaming facilities that are currently
permitted to offer live real-money poker games and are in good
standing with the appropriate state, federal, and tribal regulatory
agencies.

(p) In granting licenses to engage in intrastate Internet poker,
the state also has a substantial interest in carefully assessing the
suitability of any entity or person who seeks to operate Internet
poker games in the state. In order to protect the integrity of, and
promote public confidence in, intrastate Internet poker, the
Legislature finds that licenses should not be granted to those
entities and persons who knowingly engaged in unlawful Internet
gaming after December 31, 2006. In addition, the Legislature finds
that the use for intrastate Internet poker of brand names,
trademarks, customer lists, software, and other data associated
with, or developed or used in connection with, unlawful Internet
gaming after December 31, 2006, is likely to undermine public
confidence in intrastate Internet poker and to be inconsistent with
the purpose of this chapter to protect the people of California by
permitting regulated intrastate Internet poker that has no connection
to previous unlawful Internet gaming activity. In the Legislature’s
judgment, a knowing decision to purchase or otherwise acquire
that data for use in connection with Internet poker in the state bears
directly on the applicant’s suitability and must be considered in
any determination whether to license that applicant under this
chapter.

(q) This chapter will permit a qualified card room to obtain a
license from the state to operate poker games via the Internet for
players within the jurisdiction of California. In addition, this
chapter will permit a qualified federally recognized California
Indian tribe to obtain a license from the state to operate poker
games via the Internet for players physically located within
California.

(r) Participation by tribes will further the interests of the state
because tribes have significant experience operating and regulating
real-money games.

(s) The authorization of intrastate Internet poker pursuant to
this chapter does not violate any tribal-state compact or the
California Constitution. Application of UIGEA in California, as
set forth in this chapter, also does not violate federal Indian law
by impinging upon protected tribal sovereignty. Accordingly,
nothing in this chapter shall alter, diminish, or impact the rights
and obligations of tribes in existing tribal-state compacts or
secretarial procedures approved pursuant to IGRA, or require that
those compacts be renegotiated. At the same time, a tribal licensee
does not relinquish any rights under its compact with the state by
virtue of participating in intrastate Internet poker pursuant to this
chapter, which is intended to respect the regulatory obligations
and responsibilities of state, tribal, and federal authorities.

19990.103.  

It is the intent of the Legislature to create a
licensing and regulatory framework and enforcement mechanisms
to do all of the following:

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

(b) Ensure the state possesses sufficient resources to enforce
prohibitions of illegal gambling activity, in part, by establishing
a regulatory enforcement fund and by empowering the department
to retain a portion of receipts collected from illegal operations and,
as necessary, receipts collected in accordance with this chapter.

(c) Authorize and direct the commission to issue a license to
certain existing operators of card rooms and gaming facilities in
California, at which regulated real-money poker games may be
offered, and that meet the eligibility requirements and timely
submit the required application and registration fees.

(d) Ensure that each licensee complies with applicable laws and
regulations.

(e) Grant power to the state agencies authorized in this chapter
to oversee the operations of each licensee, including the operations
of those licensed by a tribal gaming regulatory authority under this
chapter whose licenses and permits have been reviewed and
approved by the commission in accordance with this chapter, 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 a background investigation
of owners, officers, directors, and key employees, requires that
each employee of a licensee receives all necessary work permits
from the state, and coordinates that investigation with any
suitability review undertaken by a participating tribe’s gaming
regulatory authority.

(g) Ensure that the state is able to collect income tax revenues
from registered players participating in Internet poker activity in
the state.

(h) Deposit regulatory fees collected by the state from each
licensed operator into the Internet Poker Fund, as established in
Section 19990.801, which shall be administered by the department,
and continuously appropriated 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, including, but not limited to, enforcement efforts related
to illegal Internet gambling activities.

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

(j) Ensure that registered players are able to have their financial
transactions processed in a secure, timely, and transparent fashion.

(k) Require that each licensed operator provide registered players
with accessible customer service.

(l) Require that each licensed operator’s Internet poker 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.

(m) Ensure that the licensed operator maintains responsibility
for the Internet poker business and is not serving as a facade for
an entity not eligible to be a licensed operator. The Internet poker
Web site shall identify who is the actual licensed operator to ensure
protection of players.

(n) 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 both the state and players.

(o) As a matter of statewide concern, preempt any city, county,
or city and county from enacting any law or ordinance regulating
or taxing any matter covered in this chapter.

 

Article 2.  Definitions

 

19990.201.  

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

(a) “Authorized Internet poker game” means any of several card
games, duly authorized by the commission and played on an
authorized poker Web site, that meet the definition of poker as
specified by this section.

(b) “Authorized poker Web site” means a Web site on which
authorized Internet poker games are offered for play by a licensed
operator pursuant to this chapter.

(c) “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 any necessary license or employee work permit issued pursuant
to this chapter.

(d) “Bet” means the placement of a wager in a game.

(e) “Card room” means a gambling enterprise, as defined in
subdivision (m) of Section 19805.

(f) “Commission” means the California Gambling Control
Commission.

(g) “Core functions” and “core functioning” mean any of the
following:

(1) The management, administration, or control of bets on
authorized Internet poker games.

(2) The management, administration, or control of the games
with which those bets are associated.

(3) The development, maintenance, provision, or operation of
a gaming system.

(h) “Corporate affiliate” means any person controlled by,
controlling, or under common ownership with, another person or
entity. A person or entity will be deemed to control another person
or entity if it possesses, directly or indirectly, the power to direct
the management or policies of the other entity, whether through
ownership of voting interests or otherwise, or if, regardless of
whether or not it has that power, it holds 10 percent or more of the
ownership or control of the other entity, whether as a stockholder,
partner, member, trust interest, or otherwise.

(i) “Covered asset” means any brand or business name, including
any derivative brand name with the same or similar wording, or
any trade or service mark, software, technology, operational
system, customer information, or other data acquired, derived, or
developed directly or indirectly from, or associated with, any
operation that has accepted a bet or engaged in a financial
transaction related to that bet from any person in the United States
on any form of Internet gaming after December 31, 2006, except
when permitted under federal law and laws of the state where the
player was located.

(j) “Department” means the Department of Justice.

(k) (1) (A) “Eligible entity” includes both of the following:

(i) A card room that operates pursuant to Chapter 5
(commencing with Section 19800) whose owner or owners have
been authorized, subject to oversight by, and in good standing
with, the applicable state regulatory authorities.

(ii) A federally recognized California Indian tribe that operates
a gaming facility pursuant to a facility license issued in accordance
with a tribal gaming ordinance approved by the Chair of the
National Indian Gaming Commission and that is eligible to conduct
real-money poker at that facility.

(B) An entity identified in this paragraph shall have operated
its card room or gaming facility for at least three years immediately
preceding its application to secure a license to operate an Internet
poker Web site pursuant to this chapter, and shall be in good
standing during that time period with the applicable federal, state,
and tribal regulatory authorities. However, an incorporation or
other change in legal form of ownership during the three years
immediately preceding application for licensure that did not alter
the beneficial ownership of a card room, shall not disqualify a card
room otherwise eligible for licensure.

(2) A group of federally recognized California tribes or
California card rooms is eligible to jointly apply for a license
pursuant to this chapter, through an entity organized under state
or federal law, if each entity within the group independently
satisfies the requisite eligibility requirements identified in this
chapter.

(3) Subject to any applicable limited waiver of sovereign
immunity as set forth in subdivision (d) of Section 19990.402, this
chapter does not restrict a tribal licensee from participating as an
instrumentality of a tribal government or a political subdivision
of a tribe, or from forming a separate business entity organized
under federal, state, or tribal law to apply for or hold any license
issued pursuant to this chapter.

(4) (A) This chapter does not restrict a card room owner from
forming a separate business entity organized under state law to
apply for or hold any license issued pursuant to this chapter.

(B) The beneficial owners of an entity described in subparagraph
(A) shall be the card room owner, except for permitted ownership
transfers pursuant to Section 19990.522.

(C) The entities described in this paragraph are “eligible
entities.”

(5) A federally recognized California Indian tribe that operates
a gaming facility that accepts bets from players within this state
but who are not physically present on Indian lands when making
those bets is not an eligible entity, unless those bets are accepted
in accordance with this chapter on authorized Internet poker games
played on an authorized poker Web site.

(l) “Employee” means any natural person employed in, or
serving as a consultant or independent contractor with respect to,
the core functioning of the actual operation of an authorized poker
Web site.

(m) “Employee work permit” means a permit issued to an
employee of the licensed operator or a service provider, or to a
nonemployee owner, officer, or director of a licensed operator, by
the commission pursuant to this chapter.

(n) “Finding of suitability” or “determination of suitability”
means a finding by the commission that a licensee meets the
qualification criteria described in Article 4 (commencing with
Section 19990.401), and that the licensee would not be disqualified
on any of the grounds specified in that article.

(o) “Gambling” means to deal, operate, carry on, conduct,
maintain, or expose for play any game for money.

(p) “Game” means any gambling game.

(q) “Gaming system” means the technology, including hardware
and software, used by a licensee to facilitate the offering of
authorized Internet poker games to registered players.

(r) “Good standing” means that a person has not had a gambling
license suspended or revoked by a final decision of the commission
or been finally ordered by a court of competent jurisdiction to
cease conducting gaming activities.

(s) (1) “Gross gaming 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 marketing affiliates and payment processing fees.

(2) “Gross gaming revenues” does not include player account
deposits or amounts bet, except to the extent any portion of those
bets are retained as fees by the operator, discounts on goods or
services, rebates or promotional awards, discounts or stakes
provided to players, or revenues from nongaming sources, such
as from food, beverages, souvenirs, advertising, clothing, and other
nongaming sources.

(t) “IGRA” means the federal Indian Gaming Regulatory Act
of 1988 (18 U.S.C. Sec. 1166 et seq. and 25 U.S.C. Sec. 2701 et
seq.).

(u) “Initial operator license” means an operator license that is
issued pursuant to subdivision (h) of Section 19990.402.

(v) “Internet Poker Fund” means the fund established pursuant
to Section 19990.801.

(w) “Intrastate” means within the borders and jurisdiction of
California.

(x) “Key employee” means any natural person employed by a
licensed operator, service provider, or marketing affiliate, or by a
holding or intermediary company of a licensed operator, service
provider, or marketing affiliate, who is an officer or director of
the licensed operator or service provider, or who, in the judgment
of the commission, has the authority to exercise significant
influence over decisions concerning the operation of the licensed
operator or service provider as that operation relates to the Internet
poker authorized by this chapter.

(y) “Land-based gaming facility” means a card room operated
pursuant to Chapter 5 (commencing with Section 19800) or a
casino operated by a federally recognized Indian tribe on Indian
land in California.

(z) “Licensed operator” means an eligible entity licensed
pursuant to this chapter to offer the play of authorized Internet
poker games to registered players on an authorized poker Web
site.

(aa) “Licensed service provider” means a person licensed
pursuant to this chapter to provide goods or services to a licensed
operator for use in the operation of an authorized poker Web site.

(ab) “Licensee” means a licensed operator, licensed service
provider, or registered or licensed marketing affiliate.

(ac) (1) “Marketing affiliate” means either of the following:

(A) Any person other than the licensed operator who, for a fee
or other consideration, provides or refers players to the licensed
operator’s authorized poker Web site.

(B) Any subaffiliate of a person described in subparagraph (A)
who, for a fee or other consideration, provides or refers players to
the licensed operator’s authorized poker Web site.

(2) “Marketing affiliate” does not include a provider of goods
or services who provides similar advertising or marketing for
purposes other than the operation of Internet gambling activities
for the same rates or fees, cost or pay per impression, or click as
charged nongambling businesses, and is not otherwise directly or
indirectly involved in the operation of an authorized poker Web
site.

(ad) “Net position” means the residual difference between assets
and liabilities, as defined by generally accepted accounting
principles.

(ae) “Online self-exclusion form” means a form on which an
individual notifies a licensed operator that he or she must be
excluded from participation in authorized Internet poker games
for a stated period of time.

(af) “Owner” means any person that is eligible to own a
land-based gaming facility in California and that has a financial
interest in, or control of, a person or entity required to be found
suitable under this chapter, including shareholders, partners, and
members of limited liability companies holding more than 10
percent of the equity or voting control of the person or entity and
any person found by the commission to be exerting management
or control of the person or entity in fact. “Owner” does not include
the members or government officials of a federally recognized
California Indian tribe.

(ag) “Per hand charge” means the amount charged by the
licensed operator for registered players to play in a per hand game.

(ah) “Per hand game” means an authorized Internet poker game
for which the licensed operator charges the player for each hand
played.

(ai) “Person” means an individual, corporation, business trust,
estate, trust, partnership, limited liability company, association,
joint venture, government, governmental subdivision, agency, or
instrumentality, public corporation, or any other legal or
commercial entity, including any federally recognized California
Indian tribe, or an entity that is wholly owned by the tribe.

(aj) “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,
including, but not limited to, games offered only for purposes of
training, education, marketing, or amusement.

(ak) “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.

(al) “Play settings” means the options and default parameters
made available by a licensed operator to a registered player in the
play of authorized Internet poker games.

(am) (1) “Poker” means any of several nonbanked card games
commonly referred to as “poker” that meet all of the following
criteria:

(A) Played by two or more individuals who bet and play against
each player and not against the house on cards dealt to each player
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.

(B) The object of the game is to hold or draw to a hand
containing a predetermined number of cards that, 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 or where the winning player is the last active player
in the hand. The pot of bets made is awarded to the player or
players holding the combination of cards that qualify as the winning
combination under the rules of play. Values may be assigned to
cards or combinations of cards in various ways, including 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.

(C) 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.

(D) 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.

(E) All bets are placed in a common pot. At one or more
predetermined points 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.

(F) A poker game that has been approved by the commission
for play in an authorized live poker room in California pursuant
to the Gambling Control Act (Chapter 5 (commencing with Section
19800)) shall be eligible for qualification by the commission as
the basis of an authorized Internet poker gambling game, except
that pai gow and any other game in which persons other than
authorized players to whom the cards in the game have been dealt,
and by whom they are held and played, are permitted to bet on a
game outcome or other game feature or may in any way control
or influence the play of the hand, shall not be authorized, offered,
or played in connection with an authorized Internet poker game.
Subject to this limitation, the rules governing play in an authorized
Internet poker game pursuant to this chapter shall generally be the
same as if the game were lawfully played in a live poker room.

(G) 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.

(2) Other characteristics defining “poker” pursuant to this
chapter include any of the following:

(A) 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.

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

(C) 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.

(3) 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.

(an) “Promotion” includes a jackpot, high hand bonus, royal
flush bonus, aces cracked, splash pot, or other promotional prize
that is appended to the play of an authorized Internet poker game,
provided that the promotion is approved by the commission and
does not create a banked or illegal game.

(ao) “Proprietary information” means all information, including,
but not limited to, computer programs, databases, data, algorithms,
formulae, 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 all related registrations
and applications that, whether or not patentable or registerable
under patent, copyright, trademark, or similar statutes, meet either
of the following:

(1) The information can be protected as a trade secret under
California law or any other applicable state, federal, or foreign
law.

(2) The information 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.

(ap) “Proxy player” means a machine, device, or agent, other
than the registered player, that is used to play an authorized Internet
poker game.

(aq) “Registered player” means a player who has registered with
a licensed operator to play authorized Internet poker games on the
licensed operator’s authorized poker Web site.

(ar) “Registration information” means the information provided
by a person to a licensed operator in order to become a registered
player.

(as) “Robotic play” means the use of a machine or software to
automate the next player action at any point in a game, including
the use of a proxy player.

(at) “Satellite service center” means a facility operated pursuant
to subdivision (c) of Section 19990.505

(au) (1) “Service provider” means any person, other than an
employee, that does any of the following:

(A) On behalf of a licensed operator, manages, administers, or
controls bets on authorized Internet poker games provided over
the Internet by a licensee pursuant to this chapter.

(B) On behalf of a licensed operator, manages, administers, or
controls the games with which the bets described in subparagraph
(A) are associated.

(C) On behalf of a licensed operator, develops, maintains,
provides, or operates a gaming system.

(D) Sells, licenses, or otherwise receives compensation for
selling or licensing, information on individuals in California, and
that person is not a marketing affiliate.

(E) Provides any product, service, financing, or intellectual
property, including patents related to the gaming system, and the
trademarks, trade names, or service marks to a licensed operator
and is paid a percentage of gaming revenue by the licensed
operator, other than employees, not including fees to financial
institutions, legal settlements, and payment providers for
facilitating a deposit by a customer.

(2) “Service provider” does not include either of the following:

(A) A provider of goods or services that provides similar goods
or services to the public for purposes other than the operation of
Internet gambling activities.

(B) A provider of goods or services that is not otherwise directly
or indirectly involved in the control or operation of an authorized
poker Web site, including via any person controlled by or under
common control with a service provider.

(av) “State” means the State of California.

(aw) “Terms of Use Registered Player’s Agreement” means the
agreement offered by a licensed operator and accepted by a
registered player delineating, among other things, permissible and
impermissible activities on an authorized poker Web site and the
consequences of engaging in impermissible activities.

(ax) “Tournament” means a competition approved by the
commission in which registered players play a series of authorized
Internet poker games to decide the winner.

(ay) “Tournament charge” means the amount charged by the
licensed operator for registered players to play in a tournament.

(az) “Tournament winnings” means the amount of any prize
awarded to a registered player in a tournament.

(ba) “Tribal gaming regulatory authority” means the gaming
regulatory authority of a federally recognized California Indian
tribe that has the authority to regulate gaming on the tribe’s Indian
lands pursuant to IGRA.

(bb) “Tribe” means a federally recognized California Indian
tribe, including, but not limited to, the governing body of that tribe
or any entity that is wholly owned by the tribe.

(bc) “Unlawful Gambling Enforcement Fund” means the fund
established pursuant to Section 19990.802, the revenue of which
is dedicated to enforcing the prohibitions of this chapter.

 

Article 3.  Authorized Internet Poker Games Offered in
California

 

19990.301.  

Under the federal Unlawful Internet Gambling
Enforcement Act of 2006, California is permitted to authorize
games played via the Internet as long as all players and the online
wagering is located within the jurisdiction of the state and the
games are not played by minors.

19990.302.  

Notwithstanding any other law, a person who is
21 years of age or older and located within California is hereby
permitted to participate as a registered player in an authorized
Internet poker game provided by a licensed operator on an
authorized poker Web site.

19990.303.  

(a) A person shall not do any of the following:

(1) Offer any game of poker on the Internet in this state unless
that person holds a valid license issued by the state to offer the
play of authorized Internet poker games on an authorized poker
Web site pursuant to this chapter.

(2) Offer to any player located within California any game
provided on the Internet that is not authorized by the state pursuant
to this chapter.

(3) As a player located in this state, play any game provided on
the Internet that is not authorized by the state pursuant to this
chapter.

(b) Subject to an opportunity to cure pursuant to Section
19990.521, a violation of this chapter is punishable as a
misdemeanor.

19990.304.  

This chapter does not limit or restrict activities or
conduct permitted pursuant to Chapter 5 (commencing with Section
19800) or IGRA.

19990.305.  

This chapter does not authorize any game offered
in Nevada or New Jersey other than poker.

19990.306.  

A person shall not do either of the following:

(a) Aggregate computers or any other device with Internet access
capabilities in a place of public accommodation within the state,
including any public or private club or other association, in a public
or other setting, that can accommodate multiple players to
simultaneously play authorized games on the Internet.

(b) Promote, facilitate, or market the activity described in
subdivision (a).

19990.307.  

(a) If a federal law authorizing Internet gambling
in the state is enacted, and that federal law provides that states may
elect to be governed by its provisions, that election by the state
shall only be through an affirmative legislative act.

(b) If a federal law authorizing Internet gambling agreements
between states or foreign jurisdictions is enacted, the state shall
participate in those agreements only through an affirmative
legislative act.

(c) If the state elects to be governed by a federal law authorizing
Internet gambling pursuant to subdivision (a) or to participate in
Internet gambling agreements between states or foreign
jurisdictions pursuant to subdivision (b), a licensed operator shall
not be required to pay the fees set forth in subdivisions (b) and (c)
of Section 19990.519. In that event, a licensed operator may apply
to the commission for a refund of any unused license deposit fee
paid to the state pursuant to subdivision (a) of Section 19990.519,
which shall be refunded to the licensed operator as follows:

(1) The state shall provide any refund owed to licensed operators
from the Unlawful Gambling Enforcement Fund.

(2) If there are insufficient funds in the Unlawful Gambling
Enforcement Fund to provide these refunds, the state shall provide
the remaining amount from the General Fund.

(d) A licensed operator may bring suit to enforce subdivision
(c) in the superior court.

 

Article 4.  Licensing of Operators, Service Providers, and
Marketing Affiliates

 

19990.401.  

(a) (1) Within 180 days after the effective date of
this chapter, the commission, and any other state agency with a
duty pursuant to this chapter, shall, in consultation with the
department and tribes, adopt regulations pursuant to the
Administrative Procedure Act (Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code) to implement this chapter, and to facilitate the operation of
authorized 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.

(2) The regulations adopted by the commission shall at a
minimum address all of the following:

(A) Underage gambling and problem gambling.

(B) Resolution of player disputes and complaints.

(C) Gaming system technical standards and practices.

(D) Approval of games and game rules.

(E) Hardware and software standards and compliance.

(F) License, registration, and work permit issuance,
investigation, and processes.

(G) Suitability standards and determinations.

(H) Temporary, provisional, and emergency approvals.

(I) Temporary licensing of, licensing of, or findings of suitability
for receivers, trustees, beneficiaries, executors, administrators,
conservators, or successors in interest affecting the ownership or
control of a licensee.

(J) The disclosure of the source of assets, including any covered
asset, intended to be used by the applicant or licensee or on the
applicant’s or licensee’s behalf, including, but not limited to,
software and marketing information or data.

(K) Appeals from adverse decisions.

(L) Accusations, disciplinary proceedings, and hearings.

(M) Accounting, minimum internal controls, and reporting
practices.

(N) Marketing affiliate agreements and reporting.

(O) Promotions.

(P) Work permits, approvals, suitability determinations, and
renewals permitting a person to use a single permit, approval,
determination or renewal for work, services, or association with
land-based gaming facilities and licensees under this chapter.

(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.

19990.402.  

(a) Authorized Internet poker games may be
offered only by entities licensed pursuant to this chapter. An
eligible entity seeking to offer authorized Internet poker games
shall apply to the commission for an operator license. The
commission shall require an application processing fee sufficient
to cover the reasonable costs associated with the issuance of the
license.

(b) Employees of the licensed operator shall undergo a suitability
review and obtain work permits pursuant to Article 6 (commencing
with Section 19990.601). Owners, officers, and directors of
licensed operators shall also undergo suitability review and obtain
employee work permits pursuant to Article 6 (commencing with
Section 19990.601). The commission may refuse to issue a license
to, or suspend or revoke a license of, an operator that fails to
comply with this requirement.

(c) In order to ensure that licensed operators are not mere
facades for unlicensed, unqualified, or undisclosed interests, an
applicant for an operator license pursuant to this chapter shall
provide documentation to the commission establishing that, if the
license is granted, the license applicant will be able, through its
own net position or through credit extended directly to the
applicant, and with full recourse to it, by a federal or state chartered
financial institution not involved with the core functions of the
authorized poker Web site, that is entirely secured by an equivalent
amount of its own net position, to pay the license deposit required
by subdivision (a) of Section 19990.519. In addition, a licensed
operator shall submit regular financial reports to the department
establishing that the operator meets financial viability requirements,
as determined by the commission. The commission may terminate
a license if the operator fails to submit the required reports or meet
the financial viability requirements.

(d) An applicant for an operator license pursuant to this chapter
that is a tribe shall include with its license application a limited
waiver of the applicant’s sovereign immunity exclusively to the
state and no other party solely for the limited purpose of enforcing
this chapter and any regulations adopted pursuant to this chapter,
and with regard to any claim, sanction, or penalty arising therefrom
against the licensed operator by the state, and for no other purpose.

(e) The commission shall issue an operator license to an
applicant determined by the commission to qualify as an eligible
entity within 90 days of receiving an application, if the applicant
submits a completed application form and pays the required
application processing fee described in subdivision (a).

(f) The state may issue operator licenses only to eligible entities
identified within this chapter. Any of the eligible entities may
jointly apply for an operator license, either as a consortium or by
forming an entity comprised entirely of eligible entities. Each
eligible entity may have an interest in only a single operator license.

(g) An operator license shall be issued for a term of 10 years.
Subject to the power of the commission to revoke, suspend,
condition, or limit any license, as provided in this chapter, a license
shall be automatically renewed every 10 years thereafter upon
application. Failure of a licensed operator to file an application for
renewal may be deemed a surrender of the license.

(h) Each initial operator license issued pursuant to this section
shall take effect on the same date. That date shall be one year after
this chapter becomes effective, unless the commission determines
that good cause exists for those licenses to take effect in unison
on a subsequent date.

(i) 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 authorized 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 as it deems necessary to protect any state interests,
including, but not limited to, the interests of registered players.

(j) This chapter does not apply to play-for-fun or play-for-free
games.

19990.403.  

(a) A licensee’s employees in direct,
individual-to-individual contact with registered players shall be
physically present in the state.

(b) All facilities, bank accounts, and accounting records of the
licensee related to authorized Internet poker shall be located in the
state, except for redundant servers and except as may be permitted
by the commission for a service provider, if the service provider
ensures access to and jurisdiction over the relevant facilities, bank
accounts, and accounting records.

(c) Notwithstanding subdivisions (a) and (b), a licensee shall
have discretion to use the expertise of personnel, facilities, bank
accounts, and accounting records not physically present in the state
when necessary to protect registered players and state interests for
the purposes of diagnosing and addressing technological problems,
investigating fraud and collusion, and developing and supervising
software and configuration changes.

(d) In addition to any other confidentiality protections afforded
to license applicants, the state and its agencies shall treat the
proprietary information of a license applicant as confidential to
protect the license applicant and to protect the security of any
prospective authorized poker Web site. This chapter does not
prohibit the exchange of confidential information among state
agencies considering a license application. The confidentiality
provisions of this chapter exempt proprietary information supplied
by a license applicant to a state agency from public disclosure
consistent with subdivision (b) of Section 6253 of the Government
Code.

(e) A license applicant shall submit to the commission, together
with its application, an application processing fee as specified in
subdivision (a) of Section 19990.402. All moneys collected by the
state pursuant to this subdivision shall be deposited into the Internet
Poker Fund.

19990.404.  

(a) An entity seeking to act as a service provider
shall apply to the commission for a service provider license, and
obtain a service provider license, before providing goods or
services to a licensed operator in connection with the operation of
an authorized poker Web site.

(b) The department shall review the suitability of an applicant
for a service provider license. The applicant for a service provider
license shall pay an application processing fee sufficient to cover
the reasonable costs associated with the issuance of the license.

(c) The department may establish a process to conduct a
preliminary determination of suitability based on a partial
investigation. A partial investigation is intended to screen out
applicants that do not meet 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
any civil litigation. A partial investigation shall also include a
review of the service provider’s financial status, which shall include
the submission of a report prepared by a forensic accounting, audit,
or investigative firm approved by the department, in a format
developed by the department, and at the service provider’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. A full investigation shall
be conducted of only those service providers that pass the partial
investigation and that will undergo a full investigation pursuant
to subdivision (d). Those service providers that do not pass the
partial investigation may appeal the decision to the commission.

(d) Before issuing a service provider license to an applicant, the
department shall conduct the full investigation required by this
section of all of the following persons:

(1) All officers of the license applicant.

(2) The owner or owners of either of the following:

(A) The license applicant.

(B) Any corporate affiliate of the license applicant.

(3) Any persons otherwise providing goods to, or performing
services for, the license applicant related to core functions.

(4) Any person deemed by the department to have significant
influence over the license applicant or its service providers or their
respective operations.

(5) In the case of a tribe or a wholly owned tribal entity that is
a service provider, the investigation shall be limited to the business
officers of the tribal entity that will serve as the service provider.

(e) A full investigation shall include a review and evaluation of
the service provider’s qualifications and experience to provide the
services anticipated, which shall include the required submission
of a report prepared on each service provider by an outside firm
contracted and supervised by the department, in a format developed
by the department, and at the service provider’s expense. The
report shall include information necessary for the department to
make a determination of suitability, as specified in regulations
adopted pursuant to this chapter, 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, including whether the applicant or an affiliate
of the applicant has a financial interest in any business or
organization that is or was engaged in any form of gaming or
transactions related to gaming prohibited by the law of the federal
or state jurisdiction in which those activities took place. The
department may specify additional requirements regarding the
contents of the report and other information or documentation
required to be submitted.

(f) (1) Unless the service provider or its affiliate was licensed
or authorized pursuant to this chapter or comparable federal or
state law in the jurisdiction in which the bet was accepted or the
transaction was permitted, there is a rebuttable presumption that
an applicant for a service provider license is unsuitable if either
of the following apply:

(A) The service provider, or any corporate or marketing affiliate
of the service provider, accepted any bet, or engaged in transactions
related to those bets, from persons in the United States in any form
of Internet gaming after December 31, 2006.

(B) The service provider, or any corporate or marketing affiliate
of the service provider, proposes to use covered assets, whether
owned by the applicant or any other entity, that were used to accept
the bets described in subparagraph (A) or engage in a financial
transaction related to those bets.

(2) (A) A service provider may rebut the presumption described
in subparagraph (A) of paragraph (1) by presenting clear and
convincing evidence of both of the following:

(i) The acceptance of the bet or engagement in the transaction
was not knowing or intentional.

(ii) The bet was accepted or the related financial transaction
was engaged in notwithstanding reasonable efforts by the service
provider, its affiliate or subsidiary, to exclude bets from persons
located in a jurisdiction in which it was not licensed or authorized
to accept bets.

(B) A service provider may rebut the presumption described in
subparagraph (B) of paragraph (1) by presenting clear and
convincing evidence of either of the following:

(i) The applicant did not know, and should not reasonably have
known, of the prior unauthorized activity when it purchased or
acquired the covered assets.

(ii) Use of the covered assets would not adversely affect the
integrity of, or undermine public confidence in, intrastate Internet
poker or otherwise pose a threat to the public interest or to the
effective regulation and control of intrastate Internet poker. In
making that determination, the department shall consider, along
with any other factors the department deems relevant, the extent
to which the service provider proposes to make use of covered
assets for intrastate Internet poker and the extent to which the
covered assets have been developed or used in connection with,
or publicly associated or identified with, unlawful gaming activity.

(g) 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 for a
finding 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 do all of
the following:

(A) 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 purposes 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 of any of its affiliates.

(B) Indicate any changes to the structure or operations of the
institutional investor that could affect its classification as an
institutional investor, as that term is listed in paragraph (8).

(C) State that the institutional investor and corporation shall
maintain gaming compliance policies and procedures to implement
and ensure compliance with this chapter and regulations adopted
pursuant to this chapter.

(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 gaming regulatory authority, 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 department 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 by 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
9 of the Rules of the Office of the Comptroller of the Currency
(12 C.F.R. Sec. 9.1 et seq.).

(D) A closed-end investment trust.

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

(F) A federally 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) The commission and department shall give priority
consideration to service provider applications from persons with
contractual agreements with licensed operators or licensed operator
applicants.

19990.405.  

(a) An entity seeking to act as a marketing affiliate
shall apply to the commission for a marketing affiliate license or
registration, and obtain a marketing affiliate license or registration,
before providing marketing services to a licensed operator in
connection with the operation of an authorized poker Web site.

(b) (1) A marketing affiliate that is a card room or a tribe
operating a land-based gambling facility in good standing shall
register with the commission as a marketing affiliate.

(2) A background investigation shall not be required for a
marketing affiliate registrant described in this subdivision.

(3) A marketing affiliate registrant described in this subdivision
shall pay a registration processing fee sufficient to cover the
reasonable costs associated with the issuance of the registration.

(4) A marketing affiliate registrant described in this subdivision
shall provide annual reports to the commission regarding its
marketing affiliate activity.

(c) (1) A marketing affiliate that is not eligible to register
pursuant to subdivision (b) and that receives a flat fee per customer
referral or customer registration that is not directly or indirectly
related to player deposits or activity, and with revenues from those
referrals of less than thirty thousand dollars ($30,000) per quarter
shall register with the commission.

(2) The department shall conduct a background investigation
of the registrants described in this subdivision, as provided in
commission regulations. The investigation shall include for the
applicant and its owners fingerprint-based state and federal criminal
history checks and clearances, work and business history, and
inquiries into various public databases regarding any criminal
proceedings or civil litigation.

(3) A marketing affiliate registrant described in this subdivision
shall pay a registration processing fee sufficient to cover the
reasonable costs associated with the issuance of the registration
and background investigation.

(4) A marketing affiliate registrant described in this subdivision
shall provide quarterly reports to the commission regarding its
marketing affiliate activity.

(d) Notwithstanding subdivisions (b) and (c), the commission
may, at its discretion, require any person to apply for a marketing
affiliate license under subdivision (e), including any person
suspected of having any financial interest in any business or
organization that is or was engaged in any form of gaming or
transactions related to gaming prohibited by the law of the federal
or state jurisdiction in which those activities or transactions
originated or took place.

(e) A marketing affiliate that is not eligible to register pursuant
to subdivision (b) or (c), or that is required by the commission
pursuant to subdivision (d), shall apply to the commission for a
marketing affiliate license. The department shall review the
suitability of an applicant for a marketing affiliate license. An
applicant for a marketing affiliate license shall pay a license
processing fee sufficient to cover the reasonable costs associated
with the issuance of the license. Before issuing a marketing affiliate
license to an applicant, the department shall conduct the full
investigation required by this section of all of the following
persons:

(1) All officers of the license applicant.

(2) The owner or owners of either of the following:

(A) The license applicant.

(B) Any corporate affiliate of the license applicant.

(3) Any persons otherwise providing goods to, or performing
services for, the license applicant in exchange for a payment based
on volume or revenues.

(4) Any person deemed by the department to have significant
influence over the license applicant.

(5) Any other person specified by the commission.

(f) A full investigation shall include a review and evaluation of
the information necessary for the department to make a
determination of suitability, as specified in regulations adopted
pursuant to this chapter, 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, including whether the applicant or an affiliate
of the applicant has a financial interest in any business or
organization that is or was engaged in any form of gaming or
transactions related to gaming prohibited by the law of the federal
or state jurisdiction in which those activities or transactions
originated or took place. The commission or department may
specify additional information or documentation required to be
submitted.

(g) (1) Unless the applicant for a marketing affiliate license or
registration or its affiliate was licensed or authorized pursuant to
this chapter or comparable federal or state law in the jurisdiction
in which the bet was accepted or the transaction was permitted,
there is a rebuttable presumption that an applicant for a marketing
affiliate license or registration is unsuitable if either of the
following apply:

(A) The applicant, an owner of the applicant, or any affiliate of
the applicant accepted any bet, or engaged in transactions related
to those bets, from persons in the United States in any form of
Internet gaming after December 31, 2006.

(B) The applicant, an owner of the applicant, or any affiliate of
the applicant proposes to use covered assets, whether owned by
the applicant or any other entity, that were used to accept the bets
described in subparagraph (A) or engage in a financial transaction
related to those bets.

(2) An applicant may rebut the presumption described in
paragraph (1) by presenting clear and convincing evidence of both
of the following:

(A) The acceptance of the bet or engagement in the transaction
was not knowing or intentional.

(B) The bet was accepted or the related financial transaction
was engaged in notwithstanding reasonable efforts by the applicant,
an owner of the applicant, or any affiliate of the applicant to
exclude bets from persons located in a jurisdiction in which it was
not licensed or authorized to accept bets.

(h) The commission and department shall give priority
consideration to marketing affiliate applications from persons with
contractual agreements with licensed operators or licensed operator
applicants.

19990.406.  

(a) The department 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 Section 19990.404 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 the state, or to the effective regulation and control
of authorized Internet poker games, or create or enhance the
dangers of unsuitable, unfair, or illegal practices, methods, and
activities in the conduct of authorized Internet poker games or in
the carrying on of the business and financial arrangements
incidental thereto.

(b) 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 article 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 licensed 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, or engaged in
a financial transaction related to that 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 the law of the United States or of the
state in which the person initiating the bet or where the related
financial transaction was located, or has been the holder of a direct
or indirect financial interest in a person or entity that has accepted
that bet or engaged in that transaction.

(9) Has knowingly facilitated or otherwise provided services
with respect to bets or gambling games using the Internet, or
engaged in financial transactions related to those bets, involving
persons located in the United States for a person described in
paragraph (8), acting with knowledge of the fact that these bets,
financial transactions, or gambling games involved persons located
in the United States, except when these bets were accepted after
December 31, 2006, by the holder of a federal or state license
making the acceptance of these bets or related financial transactions
lawful.

(10) Has purchased or acquired the covered assets of any entity
described in paragraph (8) or (9), and will use any of those assets
in connection with Internet poker in the state.

(c) License applications shall 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 does not require 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 commission with respect to the submission of
applications.

(5) An applicant may withdraw its application for a license at
any time prior to final action on the application by the commission
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 paragraph
(8) or (9) of subdivision (b) for an applicant who demonstrates by
clear and convincing evidence that its conduct in connection with
bets and 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
demonstrate that the applicant’s conduct was lawful. This section
does not waive the need to comply with all otherwise applicable
license and suitability requirements.

(7) The commission shall waive the application of paragraph
(10) of subdivision (b) for an applicant who demonstrates by clear
and convincing evidence any of the following:

(A) The applicant did not know and should not reasonably have
known that the covered assets were acquired, derived, or developed
directly or indirectly from or associated with any operation that
has accepted a bet or engaged in a financial transaction related to
that bet from any person in the United States on any form of
Internet gaming after December 31, 2006.

(B) (i) The applicant’s conduct involving the covered assets 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.

(ii) In making a determination pursuant to this subparagraph,
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 demonstrate that the applicant’s
conduct was lawful.

(C) (i) The applicant’s use of the covered assets in connection
with intrastate Internet gaming will not adversely affect the
integrity of, or undermine public confidence in, intrastate Internet
poker or otherwise pose a threat to the public interest or to the
effective regulation and control of intrastate Internet poker.

(ii) In making a determination pursuant to this subparagraph,
the commission shall consider, along with any other factors the
commission deems relevant, the extent to which the applicant
proposes to make use of covered assets for intrastate Internet poker
and the extent to which the covered assets have been developed
or used in connection with, or publicly associated or identified
with, unlawful gaming activity.

19990.407.  

(a) This chapter does not restrict the authority of
a tribe that is a licensed operator or that owns a tribal enterprise
that is a licensed operator to conduct suitability reviews of its
service providers.

(b) This chapter also does not prohibit a tribal gaming regulatory
authority from providing the results of its suitability investigations
or determinations to the commission or department for its
consideration in issuance of licenses pursuant to this chapter.

 

Article 5.  Requirements for the Operation of an Authorized
Poker Web Site

 

19990.501.  

(a) A licensed operator shall ensure that registered
players are eligible to play authorized Internet poker games and
implement appropriate data security standards to prevent access
by a person whose age and location have not been verified in
accordance with this chapter.

(b) A registered player shall be physically located within the
State of California at the time of gambling.

(c) A registered player shall be at least 21 years of age.

(d) Each licensed operator shall do all of the following, whether
directly or through the actions of its licensed service providers or
a satellite service center:

(1) Prior to registering a person as a registered player or
permitting a person to play an authorized Internet poker game, the
licensed operator shall verify that the person is 21 years of age or
older. The licensed operator shall attempt to match the name,
address, and date of birth provided by the person to information
contained in records in a database of individuals who have been
verified to be 21 years of age or older by reference to an appropriate
database of government records.

(2) The licensed operator shall require the person to submit
age-verification documents consisting of an attestation signed by
the person 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.

(3) The licensed operator shall verify that the name and physical
billing address associated with any financial instrument provided
by a person to make deposits matches the name and, if applicable,
the physical billing address that was verified at the time of that
person’s registration.

(4) (A) The licensed operator shall require a registered player
to make the initial deposit into his or her registered player account
in person at the land-based gaming facility operated by the licensed
operator or at a satellite service center operated pursuant to
subdivision (c) of Section 19990.505.

(B) The licensed operator shall require a registered player to
make a withdrawal from his or her registered player account in
person at the land-based gaming facility operated by the licensed
operator or at a satellite service center operated pursuant to
subdivision (c) of Section 19990.505 if either of the following
apply:

(i) The withdrawal is ____ dollars ($____) or more.

(ii) The registered player’s cumulative withdrawals in a
seven-day period total ____ dollars ($____) or more.

(C) Except as provided in subparagraphs (A) and (B), the
licensed operator may permit a registered player to make deposits
and withdrawals by any electronic means or in person at the
land-based gaming facility operated by the licensed operator or at
a satellite service center operated pursuant to subdivision (c) of
Section 19990.505.

(5) The licensed operator shall submit information to each
payment provider through which it makes sales, in an appropriate
form and format so that the words “Internet poker” or equivalent
description is printed on the purchaser’s statement with that
payment provider, when a payment to a licensed operator is made
and the transaction is categorized as required by law.

(e) A licensed operator is not in violation of this section if the
operator can demonstrate that it has complied with the requirements
of paragraphs (1) and (2) of subdivision (d), and a person under
21 years of age participates in an authorized Internet poker game
provided by the licensed operator.

(f) The department may assess civil penalties against a person
who violates this section, whether a licensed operator, owner,
service provider, or player, according to the following schedule:

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

(2) 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.

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

(4) 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.

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

(g) The commission shall, by regulation, provide a process for
a person to voluntarily restrict his or her play on an authorized
poker Web site, and for a licensee to exclude from play any person
who has filled out an online self-exclusion form. The regulations
shall also provide for a voluntary self-exclusion program that
restricts play with all licensed operators. A person shall not
self-restrict or self-exclude for more than five years at a time unless
the regulations give a person the right to petition for a change in
his or her status.

(1) The commission shall develop an online self-exclusion form
within six months of the effective date of this chapter.

(2) The commission shall deliver the form to each licensed
operator.

(3) A licensed operator shall prominently display a link to the
department’s Responsible Gambling Internet Web page and the
online self-exclusion form on the authorized poker Web site that
is displayed when either of the following occurs:

(A) A person registers as a registered player.

(B) Each time a registered player accesses the authorized poker
Web site prior to playing.

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

(5) A licensed 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 online self-exclusion
form plays despite that person’s request to be excluded.

19990.502.  

A licensed operator shall offer only authorized
Internet poker games and process bets in accordance with the
specified game and betting rules established by the licensed
operator and approved by the commission pursuant to Section
19990.503.

19990.503.  

(a) In order to propose a game for play, a licensed
operator shall provide the commission 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) A licensed operator shall not offer a game for play until the
commission has approved the game rules and betting rules.

19990.504.  

(a) A licensed operator shall ensure that games
are fair.

(b) A licensed operator shall display a link on its authorized
poker Web site that includes the following information for each
game offered:

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

(7) Any other information that a licensed operator determines
is necessary for the registered player to have in real time to compete
fairly in the game.

(c) Data used to create game results shall be unpredictable so
that it is infeasible to predict the next occurrence in a game.

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

(1) If a licensed 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 a fine against a licensed
operator to prevent fraud or cheating if the licensed operator can
demonstrate that it acted responsibly to prevent those activities as
soon as the licensed operator became aware of them.

(e) 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.

(f) 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 licensed operator prior to the commencement of
the tournament.

(g) A licensed operator shall display or allow the results from
any authorized Internet poker game, including the redemption of
winnings from any game, to be displayed or represented only by
showing the card faces of the winning hand and the dollar amount
won.

(h) A licensed operator shall not do any of the following:

(1) Display or allow the outcome from any authorized Internet
poker game, including the redemption of winnings from any game,
to be displayed or represented in a manner that mimics a slot
machine or any other casino style games, including, but not limited
to, blackjack, roulette, or craps.

(2) Use casino game graphics, themes, or titles, including, but
not limited to, depictions of slot machine-style symbols, banked
or banking card games, craps, roulette, keno, lotto, or bingo.

(3) Allow the use of robotic play at any time by itself, a service
provider, or a player.

19990.505.  

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

(b) A person shall not participate in any game provided by a
licensed operator unless the person is a registered player and holds
a registered player account.

(c) (1) A registered player account shall be established in person
at the land-based gaming facility operated by the licensed operator
or at a satellite service center operated pursuant to paragraph (2).

(2) (A) In order to satisfy the in-person registration and
transactional requirements of paragraph (1) of this subdivision and
paragraph (4) of subdivision (d) of Section 19990.501, a licensed
operator may enter into an agreement for the operation of one or
more satellite service centers. A satellite service center may act
on behalf of, or in coordination with, the licensed operator in
carrying out those requirements.

(B) Both the satellite service center and the licensed operator
may be held liable for any violation of this chapter arising out of
an agreement between the satellite service center and the licensed
operator to provide the in-person services described in clause (ii)
of subparagraph (C).

(C) A licensed operator shall ensure that a satellite service center
meets both of the following:

(i) Is either of the following:

(I) A card room with a land-based gaming facility licensed
pursuant to Chapter 5 (commencing with Section 19800).

(II) A tribe that operates a casino pursuant to a tribal-state
compact.

(ii) Is financially, logistically, and technologically capable of
performing all of the following in-person services at the satellite
service center in accordance with this chapter:

(I) Registering players for registered player accounts.

(II) Accepting funds from registered players for deposit into
registered player accounts.

(III) Making payouts from registered player accounts to
registered players.

(D) A satellite service center may make agreements to act on
behalf of, or in coordination with, any one or more licensed
operators.

(E) The commission may promulgate regulations regarding
satellite service centers for the protection of licensed operators,
registered players, and intrastate Internet poker, or that otherwise
serve the purposes of this chapter.

(d) To register and establish a registered player account to play
poker with real money, a person shall provide all of the following
registration information:

(1) First name and surname.

(2) Principal residence address.

(3) Telephone number.

(4) Social security number.

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

(6) Valid email address.

(e) A licensed operator shall provide registered players with the
means to update the registration information provided to the
licensed operator, and shall require that registered players keep
registration information current.

(f) This section does not prevent a licensed operator from
entering into a marketing agreement with a third party, who has
been determined to be suitable and licensed as a service provider,
to recruit people to become registered players if the registration
process described in this section is under the sole control of the
licensed operator.

19990.506.  

(a) A licensed operator shall provide a means for
registered players to put funds into a registered player account and
transfer funds out of that account.

(b) A registered player shall identify the source of funds to be
used to put money into the registered player account established
once the registration process is complete.

(c) At the time of establishing a registered player account, a
registered player shall designate the bank account into which funds
from the registered player’s authorized poker Web site account
are to be transferred.

(d) A registered player shall not establish more than one account
on the same authorized poker Web site.

(e) While playing an authorized Internet poker game, the game
system shall not permit a registered player to increase the amount
of money that player has available at a game table while a hand is
in play. Any increase to the funds available to a player during a
hand shall not take effect until the following hand.

(f) A licensed operator shall maintain records on the balance of
each registered player’s account.

(g) A licensed operator shall not permit a registered player to
place a bet unless the registered player’s account has sufficient
funds to cover the amount of the bet.

(h) A licensed operator shall not provide credit to a registered
player’s account or act as agent for a credit provider to facilitate
the provision of funds.

(i) Interest shall not be paid by a licensed operator with respect
to a registered player’s account.

(j) A licensed operator shall segregate funds it holds in all
registered player accounts from all of its other assets.

(k) A licensed operator shall not commingle funds in the
segregated account containing funds paid by registered players
with any other funds held by the licensed operator, including, but
not limited to, operating funds of the licensed operator. Both the
accounts of the licensed operator and its segregated registered
player accounts shall be held in financial institutions located in
the state.

(l) Funds held in a registered player’s account shall be used only
for the following purposes:

(1) To pay per hand, participation, or tournament charges owed
by a registered player to the licensed operator for play of authorized
Internet poker games.

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

(3) To transfer funds from a registered player’s account to a
temporary account to be held by a licensed operator pending the
outcome of an authorized Internet poker game.

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

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

(6) To purchase or use goods or services supplied by the licensed
operator.

19990.507.  

Prior to completing the registration process, a
licensed operator shall explain to the person who is registering the
privacy policies of the authorized poker Web site, and the person
shall assent to the following policies:

(a) Personally identifiable information shall not be shared with
any nongovernmental third parties, except as provided in Section
19990.512.

(b) All personally identifiable information about registered
players shall be shared with state 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 under applicable law.

(c) Personally identifiable information may be shared with
governmental agencies only as set forth in subdivision (b) or
subject to court order as provided in Section 19990.512.

19990.508.  

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

19990.509.  

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

(a) A person or registered player provided false information to
the licensed operator, including, but not limited to, in the
registration process.

(b) The registered player has not updated registration
information to keep it current.

(c) The registered player has violated the authorized poker Web
site’s Terms of Use Registered Player’s Agreement.

(d) The person has already been registered.

(e) The licensed operator suspects that the registered player has
participated in an illegal or unauthorized activity on the authorized
poker Web site.

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

19990.510.  

Upon registration, and each time a registered player
logs into an authorized poker Web site, the licensed operator shall
permit a registered player to adjust his or her play settings to:

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

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

(c) Set a limit on the amount of time that a registered player can
play.

19990.511.  

(a) A licensed operator shall offer customer support
that shall be available to registered players 24 hours per day, 365
days per year.

(b) The licensed operator shall give notice to the commission
when using personnel for customer support who are out of state.

19990.512.  

(a) A licensed operator shall use all reasonable
efforts to protect the privacy of registered players and their
personally identifiable information.

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

(c) A licensed operator shall not collect personally identifiable
information concerning any registered player without the prior
written or electronic consent of the registered player.

(d) A licensed operator may, without limitation, collect
personally identifiable information in order to do both of the
following:

(1) Obtain information necessary to operate the authorized poker
Web site and offer authorized Internet poker games to registered
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.

(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 and shall take actions reasonably necessary
to prevent unauthorized access to that information by a person
other than the registered player or licensed operator.

(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 Internet poker games to the
registered player by the licensed operator.

(2) Subject to subdivision (i), 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 tournament third party, if both of the following apply:

(A) The licensed 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
authorized poker Web site.

(4) A disclosure to the commission to fulfill its obligations under
this chapter or to a state agency as authorized in this chapter.

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

(6) A disclosure permitted by the terms of the privacy policy
made available on the authorized poker Web site and accepted by
the registered player.

(g) If requested in writing by a registered player, a licensed
operator shall provide a registered player with access to all
personally identifiable information regarding that registered player
that is collected and maintained by the licensed operator. The
licensed operator shall make the information available to the
registered player at reasonable times and at a place designated by
the licensed operator. A licensed operator shall provide a registered
player a reasonable opportunity to correct any error in the
information.

(h) A licensed operator shall destroy personally identifiable
information if all of the following apply:

(1) The registered player requests in writing that the licensed
operator destroy the information.

(2) The information is no longer reasonably necessary for the
purpose for which it was collected.

(3) There are no pending requests or orders for access to the
information under subdivision (i).

(i) A governmental or nongovernmental third party may obtain
personally identifiable information concerning a registered player
pursuant to a court order only if, in the court proceeding relevant
to the court order, both of the following apply:

(1) The third party offers clear and convincing evidence that
the subject of the information is reasonably suspected of engaging
in criminal activity or otherwise relevant to a pending civil action
and that the information sought would be material evidence in the
case.

(2) The registered player about whom the information is
requested is afforded the opportunity to appear and contest the
third party’s claim.

19990.513.  

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
gambling 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
server.

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

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

19990.514.  

(a) A licensed operator shall make all financial
records established and maintained pursuant to Section 19990.513,
including, but not limited to, all books, records, documents,
financial information, and financial reports, available on an
electronic basis, as required by the commission or other state
agencies so that those state agencies can fulfill their responsibilities
under this chapter. 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
by which it may be accessed online by a state agency with
responsibilities pursuant to this chapter. The commission shall
identify which state agencies require online access.

(c) Notwithstanding subdivision (b), data covered by
subdivisions (d), (e), and (f) of Section 19990.513, shall be
accessible to the state agencies online for 120 days, and, thereafter,
archived and retained for one year.

19990.515.  

A licensed operator shall do all of the following:

(a) Implement technical systems that materially aid the
commission in the protection of registered players. Software shall
meet, at a minimum, international industry standards as verified
by a gaming laboratory approved by the commission.

(b) Define and document its methodology for developing
software and applications and describe the manner in which
software protects registered players from fraud and other risks in
the play of authorized Internet poker games and in the management
of registered player accounts.

(c) Meet minimum game server connectivity requirements to
ensure that registered players are protected from losses due to
connectivity problems.

(d) Ensure that all transactions involving registered players’
funds are recoverable by the system in the event of a failure or
malfunction.

(e) Ensure that all information required for reviewing a game
interrupted due to loss of connectivity is recoverable by the licensed
operator.

(f) Document and implement preventative and detective controls
addressing money laundering and fraud risks.

19990.516.  

(a) A licensed operator may charge registered
players to play in authorized Internet poker games.

(b) (1) A licensed operator may charge a per hand charge if the
per hand charge is designated and conspicuously posted on the
licensed operator’s authorized poker Web site.

(2) A licensed operator may vary the per hand charges to
registered players based on betting limits or other factors.

(c) (1) A licensed operator may charge a tournament charge if
the tournament charge is designated and conspicuously posted on
the licensed operator’s authorized 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 commission
of the charges to registered players prior to initiating play.

19990.517.  

A licensed operator may do any of the following:

(a) Enter into an agreement with any third party to sponsor or
underwrite prizes for a tournament, subject to the approval of the
commission and, if applicable, the tribal gaming regulatory
authority.

(b) Enter into an agreement to sell advertisement space on any
Internet Web site it controls.

(c) Enter into an agreement with a third-party service provider
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. However, to the
extent any business relationships or financial arrangements with
third-party service providers were utilized or existed to further
Internet gaming or transactions related to that gaming or those
transactions in violation of federal or state law, those relationships
and arrangements shall be discontinued.

(d) Enable a chat function between registered players if it has
in place effective controls against collusion.

(e) Post Internet Web links on the Internet Web sites it controls
to permit registered players to access remote Internet Web sites.

(f) Offer authorized Internet poker games on up to two
authorized poker Web sites pursuant to its license.

(g) Enter into contractual agreements with one or more licensed
operators for the purpose of ensuring adequate player liquidity.

19990.518.  

There are three categories of application fees,
regulatory fees, and license deposits, as follows:

(a) Application Processing Fee. In order to cover the costs of
suitability investigations and other costs of processing an
application for a license, registration, or work permit, the applicant
shall deposit the applicable application processing fee as provided
in subdivision (a) of Section 19990.402, subdivision (d) of Section
19990.403, subdivision (b) of Section 19990.404, subdivision (b),
(c), or (e) of Section 19990.405, or Section 19990.605. Any balance
of the application processing fee 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.

(b) One-time License Deposit. Prior to offering any games for
play or accepting any bets on its authorized poker Web site, a
licensed operator shall pay the one-time license deposit as provided
in subdivision (a) of Section 19990.519. This deposit shall be an
advance against the duty on gross gaming revenues specified in
subdivision (b) of Section 19990.519.

(c) Ongoing Regulatory Fees. Following issuance of a license
and beginning of operations thereunder, the licensed operator shall
pay the ongoing regulatory fees set forth in subdivision (c) of
Section 19990.519.

19990.519.  

(a) In support of the application for a license
pursuant to this chapter, prior to offering games or accepting bets
on its authorized poker Web site, the licensed operator shall remit
to the Treasurer a one-time license deposit in the amount of five
million ($5,000,000), to be deposited into the General Fund, and
credited against charges imposed pursuant to subdivision (b) on
the licensed operator’s gross gaming revenues. Upon depletion of
the license deposit, the commission shall notify the licensed
operator to commence quarterly payments to the state in accordance
with subdivision (b).

(b) In consideration of the substantial value of each license, a
licensed operator shall remit to the Treasurer on a quarterly basis
for deposit in the General Fund an amount equal to 5 percent of
its gross gaming revenues.

(1) Each quarterly payment shall be due on the 10th day of the
month following the end of each quarter.

(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 commission, for the reasonable costs of license oversight,
consumer protection, state regulation, problem gambling programs,
and other purposes related to this chapter, determined on a pro rata
basis depending on the number of licensed operators in the state.

19990.520.  

(a) The licensed operator shall facilitate the
collection of personal income taxes from registered players by the
Franchise Tax Board and shall be responsible for providing current
and accurate documentation on a timely basis to all state agencies,
as provided in this chapter.

(b) The state and its agencies shall treat the proprietary
information provided by a licensed operator as confidential to
protect the licensed operator and to protect the security of the
authorized poker Web site.

(c) The confidentiality provisions of this chapter exempt
proprietary information supplied by a licensee to a state agency
from public disclosure consistent with subdivision (b) of Section
6253 of the Government Code.

19990.521.  

(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 Internet poker
games that interferes with its obligations to the state or registered
players under this chapter.

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

(c) If the commission becomes aware of any violation of this
chapter, or if it becomes aware of any activities that might lead to
a violation, the commission shall provide notice of that violation
to the licensee and the department. If the violation is not timely
cured, the commission may refer it to the department for
investigation and possible enforcement.

(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 a 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. During this time period, a licensee shall
not be subject to prosecution for the criminal penalty described in
Section 19990.303, or liable for the civil penalties described in
this article.

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

(g) The commission 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. However, a tribal
licensee shall not have its license suspended or revoked, or be
fined or otherwise penalized, for complying with any applicable
federal law or regulation when operating an authorized poker Web
site on Indian lands. To the extent that any state requirement is
more stringent than any applicable federal requirement, the tribal
licensee shall comply with the more stringent state requirement,
unless the federal requirement preempts state law.

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

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

19990.522.  

(a) A license issued pursuant to this chapter is not
transferable, unless the commission approves the transfer of the
license prior to the closing of the transaction pursuant to regulation.
The commission shall determine whether the applicant is legally
qualified to be licensed under this chapter.

(b) The commission shall investigate to ensure that any person
acquiring a licensed operator is an eligible entity, suitable, and
otherwise financially, technically, and legally qualified to be a
licensee pursuant to 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 licensed
operator or the acquiring person may challenge that determination.

(c) The commission shall investigate to ensure that any person
acquiring an ownership interest in a licensee is suitable and
otherwise financially, technically, and legally qualified to be an
owner of a licensee pursuant to this chapter. If an acquiring person
is found to be unsuitable to be an owner of a licensee, or otherwise
not financially, technically, or legally qualified to be an owner of
a licensee, the licensee or the acquiring person may challenge that
determination.

(d) A person shall not become the owner of a licensee pursuant
to this section unless both of the following apply:

(1) The person is eligible to own a card room interest pursuant
to Section 19858 or 19858.5.

(2) Either of the following apply:

(A) The transfer is a change in ownership form, including, but
not limited to, an incorporation or putting the ownership interest
in a trust that has the same noncontigent beneficiaries as the
transferor owner.

(B) Any of the following apply:

(i) The person acquiring the ownership interest is an heir or
successor beneficiary following the owner’s or beneficiary’s death
or incapacity.

(ii) The person acquiring the ownership interest receives the
interest from an immediate family member.

(iii) The person acquiring the ownership interest receives the
interest in a marital dissolution and was a spouse of the owner.

(iv) The person acquiring the ownership interest is appointed a
trustee, conservator, or receiver over the ownership interest.

(v) The transferor is bankrupt and the transfer is approved by
the bankruptcy court.

(vi) The transfer occurs within five years of the Internet poker
operator first being licensed and the buyer has had an ownership
interest in the same or another licensed operator or card room for
at least five years.

(vii) The transfer occurs more than five years after the Internet
poker operator is first licensed.

(e) Except as authorized in subdivision (d), a licensee or owner
of a licensee shall not make multiple transfers of ownership
interests in the licensee that cumulatively exceed 45 percent of the
ownership interests in the licensee.

19990.523.  

All facilities, software, including downloadable
programs, and any other property, both tangible and intangible,
used by the licensed operator in offering authorized Internet poker
games for play on an authorized poker Web site shall be the
property of the licensed operator or its licensed service providers,
and shall be subject to the approval of the commission.

19990.524.  

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

 

Article 6.  Employee Work Permits

 

19990.601.  

(a) Except as provided in Section 19990.602, a
licensee shall apply to the commission for an employee work
permit on behalf of each employee.

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

(c) The commission shall not issue an employee work permit
unless, based on all of the information and documents submitted,
the commission 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
integrity of a gaming operation or public interest of this state, or
to the effective regulation and control of controlled gambling, as
defined in Section 19805, or create or enhance the dangers of
unsuitable, unfair, or illegal practices, methods, and activities in
the conduct of controlled gambling 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.

(d) The commission shall not issue an employee work permit
unless the applicant meets the qualification standards adopted by
the commission by regulation. A tribal gaming regulatory authority
may impose additional qualifications with respect to activities on
Indian lands.

19990.602.  

(a) A tribe that is a licensed operator, or that owns
a tribal enterprise that is a licensed operator, may elect to
participate in the tribal gaming regulatory authority process
prescribed by this section for the issuance of employee work
permits. If the tribe does not elect to participate in the tribal gaming
regulatory authority process as provided in this section, then the
process specified in this section regarding submission and action
by the tribal gaming regulatory authority on the application for
employee work permit shall not apply, and the other provisions of
this chapter shall instead govern.

(b) The joint state and tribal processes required pursuant to this
section are intended to promote and involve joint cooperation
among the tribal gaming regulatory authority, the commission,
and the department.

(c) The tribal employee work permit process shall be as follows:

(1) All applications for employee work permits first shall be
filed with the tribal gaming regulatory authority, which shall
promptly file a copy of the application with the commission,
together with information regarding the filing date and the payment
of fees and deposits. The application shall be accompanied by the
fees required in Section 19990.605, except those fees shall be
deposited into a tribal account created for the purpose of holding
the deposited funds and using them for the costs of conducting the
required suitability review.

(A) Failure to pay the application processing fee may be grounds
for denial of the application.

(B) Any balance of the application processing fee from a permit
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 permit applicant, the applicant shall pay the
funds necessary to complete the investigation.

(2) In reviewing an application for a work permit, the tribal
gaming regulatory authority shall determine whether issuance of
the employee work permit would meet the suitability standards
set forth in this chapter. The tribal gaming regulatory authority
shall not issue a permit unless, based on all information and
documents submitted, the tribal gaming regulatory authority
determines that the applicant meets all of the criteria set forth in
this chapter for the issuance of the employee work permit.

(3) The tribal gaming regulatory authority shall conduct, or
cause to be conducted, all necessary background investigations
reasonably required to determine that the applicant is qualified for
an employee work permit under the standards set forth in this
chapter for the issuance of the employee work permit.

(4) 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 gaming regulatory authority may contract with
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 gaming regulatory authority’s background
investigation obligation. An applicant for a tribal employee work
permit shall provide releases to make background information
regarding the applicant available to the tribal gaming regulatory
authority and the commission.

(5) Upon completion of the necessary background investigation,
the tribal gaming regulatory authority may issue a finding that the
person or entity is eligible for an employee work permit on a
conditional or unconditional basis. This section does not create a
property or other right of an applicant in an opportunity to be
permitted, or in a permit itself, both of which shall be considered
to be privileges granted to the applicant in the sole discretion of
the tribal gaming regulatory authority.

(6) Upon receipt of a completed license application and a
determination by the tribal gaming regulatory authority that the
applicant is eligible and suitable for the employee work permit,
the tribal gaming regulatory authority shall transmit to the
commission a notice of intent to issue a permit to the applicant.
The tribal gaming regulatory authority shall not issue an employee
work permit until the process required by paragraph (7) is
complete.

(7) After receipt of the tribal gaming regulatory authority’s
notice pursuant to paragraph (6), and upon completion of the
necessary background investigation or other verification of
suitability, the commission shall issue a notice to the tribal gaming
regulatory authority stating its finding that the applicant is suitable
or is not suitable for the requested permit. The commission may
charge an additional application processing fee pursuant to Section
19990.605 to cover the reasonable costs of conducting its
verification of suitability.

(A) If the commission notices a finding that the applicant is
suitable, the tribal gaming regulatory agency shall issue an
employee work permit to the applicant. The permit shall be
effective pursuant to this chapter as though issued by the
commission.

(B) If the commission notices a finding that the applicant is not
suitable, the tribal gaming regulatory authority shall not issue the
requested permit. Prior to denying an application for a
determination of suitability, the commission shall notify the tribal
gaming regulatory authority and afford the tribe an opportunity to
be heard. If the commission denies an application for a
determination of suitability, the commission shall provide the
applicant with written notice of all appeal rights available under
state law.

(C) Upon receipt of notice that the commission or department,
collectively or individually, or the tribal gaming regulatory
authority has determined that a person would be unsuitable in a
similar application filed in connection with a nontribal operation,
the tribal gaming regulatory authority shall not issue the requested
permit or, if that notice is received after issuance of the permit,
promptly revoke that permit. However, the tribal gaming regulatory
authority may, in its discretion, reissue a permit 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 Code of Civil Procedure.

(8) A tribal permit application submitted pursuant to this section
may be denied, and any permit issued may be revoked, if the tribal
gaming regulatory authority determines that the application is
incomplete or deficient, or if the applicant is determined to be
unsuitable or otherwise unqualified for a permit. Pending
consideration of revocation, the tribal gaming regulatory authority
may suspend a permit. All rights to notice and hearing shall be
governed by the rules of the tribal gaming regulatory authority,
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 permit.

(9) The tribal gaming regulatory authority may summarily
suspend an employee work permit issued pursuant to this section
if the tribal gaming regulatory authority determines that the
continued permitting of the person or entity could constitute a
threat to the public health or safety or may violate this chapter.

(d) The commission and tribal gaming regulatory authorities
conducting suitability reviews pursuant to this section shall
cooperate in sharing as much background information as possible
in order to maximize investigative efficiency and thoroughness,
to minimize investigative costs, and to expedite the permitting
process.

(e) The commission and the tribes that have elected to conduct
suitability reviews pursuant to this section shall cooperate in
developing standard forms for tribal gaming employee work permit
applicants, on a statewide basis, that reduce or eliminate duplicative
or excessive paperwork, and that take into account the requirements
of this chapter and the expense of compliance with those
requirements.

19990.603.  

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

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

(b) Failure of the applicant to provide timely information,
documentation, and assurances required by this chapter or requested
by any state official, 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.

(c) 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.

(d) Conviction of the applicant for any 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).

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

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

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

(h) The applicant was an officer or director of, or, in the
judgment of the commission, had the authority to exercise
significant influence over decisions concerning the operation of,
an entity that has knowingly and intentionally accepted a bet, or
engaged in transactions related to those bets, from any person in
the United States on any form of Internet gaming after December
31, 2006, except as authorized by this chapter or comparable
federal or state law in the jurisdiction in which the bet was accepted
or in which a financial transaction related to the bet or transaction
was located, or has been the holder of a direct or indirect financial
interest in a person or entity that has accepted that bet, unless the
applicant presents clear and convincing evidence of both of the
following:

(1) That the acceptance of the bet or engagement in the
transaction was not knowing or intentional.

(2) That the bet was accepted or the transaction was engaged
in notwithstanding reasonable efforts by the service provider, its
affiliate or subsidiary, to exclude bets from persons located in a
jurisdiction in which it was not licensed or authorized to accept
bets.

19990.604.  

(a) If a licensed operator has any owners, officers,
or directors who are not employees, it shall ensure that each of
those persons obtains an employee work permit before having any
role or decisionmaking authority regarding the licensed operator’s
gaming operations.

(b) If the licensed operator is a tribal enterprise controlled by
an independent board of directors, the officers, directors, and
employees of that tribal enterprise are subject to suitability review
pursuant to this section. This section does not require that an
officer, director, employee, or member of the tribe that owns the
tribal enterprise be subject to suitability review if that individual
is not also an officer, director, employee, or member of the tribal
enterprise or a person who controls the core functions of the tribal
enterprise.

19990.605.  

The commission and, if applicable, the tribal
gaming regulatory authority, shall establish application processing
fees to be paid by a licensee for the reasonable cost of background
investigation on employee work permit applications. The
commission shall establish processes for the revocation or
suspension of an employee work permit, and to withdraw an
application for an employee work permit.

19990.606.  

(a) A licensed operator or service provider shall
not enter into, without prior approval of the commission, a contract
or agreement with either of the following:

(1) A person who is denied a gambling license or employee
work permit pursuant to Chapter 5 (commencing with Section
19800), or whose gambling license or employee work permit is
suspended or revoked.

(2) Any business enterprise under the control of a person
described in paragraph (1), after the date of receipt of notice of
the action.

(b) (1) Except as provided in paragraph (2), a licensed operator
or service provider shall not enter into a contract or agreement
with a person or entity that has done either of the following:

(A) Knowingly and intentionally accepted a bet, or engaged in
transactions related to those bets, from any person in the United
States on any form of Internet gaming after December 31, 2006,
except as authorized by this chapter or comparable federal or state
law in the jurisdiction in which the bet was accepted or in which
a financial transaction related to the bet was located.

(B) Has been the holder of a direct or indirect financial interest
in a person or entity that has accepted a bet or engaged in a
financial transaction related to those bets as described in
subparagraph (A).

(2) A licensed operator or service provider may enter into a
contract or agreement with a person or entity described in
paragraph (1) if the person or entity presents clear and convincing
evidence of both of the following:

(A) That the acceptance of the bet or engagement in the
transaction was not knowing or intentional.

(B) That the bet was accepted or the transaction was engaged
in notwithstanding reasonable efforts by the service provider, or
its affiliate or subsidiary, to exclude bets from persons located in
a jurisdiction in which it was not licensed or authorized to accept
bets.

19990.607.  

(a) (1) A licensed operator or service provider
shall not employ, without prior approval of the commission, a
person in any capacity for which he or she is required to have an
employee work permit, if the person has been denied a gambling
license or an employee work permit pursuant to Chapter 5
(commencing with Section 19800), or if his or her gambling license
or employee work permit has been suspended or revoked after the
date of receipt of notice of the action by the commission or tribal
gaming regulatory authority.

(2) A licensed operator or service provider shall not enter into
a contract or agreement with a person whose application for a
gambling 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 gambling license or
an employee work permit.

(b) (1) 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, the
employee shall be terminated immediately in all capacities. Upon
notifying the licensee of the denial or revocation, the employee
shall have no further involvement in the gambling operation.

(2) 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 suspension, the employee shall not
be permitted to have any involvement in the gambling operation
during the period of suspension.

(3) A licensed operator or service provider shall not designate
another employee to replace the employee whose employment was
terminated or suspended, unless the other employee has an existing
work permit.

(c) A licensed operator or service provider shall not pay to a
person whose employment has been terminated or suspended as
described in subdivision (b) any remuneration for any service
performed in any 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 the notice.

(d) Except as provided in subdivision (b), a contract or
agreement for the provision of services or property to a licensed
operator or service provider or for the conduct of any activity
pertaining to the operation of an authorized poker Web site, that
is to be performed by a person required by this chapter, or by
regulation, to hold an employee work permit, shall be terminated
upon a suspension or revocation of the person’s employee work
permit.

(e) If a contract or agreement for the provision of services or
property to a licensed operator or service provider, or for the
conduct of any activity at an authorized poker Web site, 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,
the contract or agreement shall be deemed to include a provision
for its termination without liability on the part of the licensed
operator or service provider upon a suspension or revocation of
the person’s employee work permit. In any action brought by the
commission to terminate a contract or agreement pursuant to
subdivision (d) or this subdivision, it is not a defense that the
contract or agreement does not expressly include the provision
described in this subdivision, and the lack of express inclusion of
the provision in the contract or agreement is not a basis for
enforcement of the contract or agreement by a party to the contract
or agreement.

19990.608.  

(a) Except as provided in subdivision (b), and
notwithstanding any other provision of this chapter, an individual
that possesses a key employee finding of suitability, or an owner’s
license, endorsement on an owner’s license, key employee license,
or work permit issued by the commission pursuant to Chapter 5
(commencing with Section 19800), shall not be required to undergo
a new background investigation to obtain a new work permit
pursuant to this chapter.

(b) Notwithstanding subdivision (a), the commission may, at
its discretion, require an individual to undergo a new background
investigation or obtain a new approval or work permit to work
with or for a licensee pursuant to this chapter in order to assure
compliance with this chapter, including, but not limited to, Sections
19990.602, 19990.604, and 19990.606.

 

Article 7.  Protection of Registered Players

 

19990.701.  

A licensed operator shall use its best efforts to
protect registered players. Subject to the approval of the
commission, and consistent with uniform standards established by
the commission by regulation, each licensed operator shall establish
administrative procedures to resolve registered player complaints.

19990.702.  

(a) If a registered player has a complaint against
a licensed operator, the exclusive remedy shall be to register the
complaint with the commission.

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

(c) Under the regulations, the commission shall do all of the
following:

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

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

(3) Initiate enforcement actions to require specific performance
of any obligation that the commission has determined a licensed
operator has failed to fulfill with respect to a registered player.

(d) A licensed operator may appeal any action by the
commission pursuant to this article to the superior court, which
shall review the appeal de novo.

 

Article 8.  Financial Provisions for State Regulation and
Unlawful Gambling Enforcement

 

19990.801.  

The Treasurer shall transfer all amounts received
pursuant to subdivision (a) of Section 19990.402, subdivision (d)
of Section 19990.403, subdivision (b) of Section 19990.404,
subdivisions (b), (c), or (e) of Section 19990.405, subdivision (c)
of Section 19990.519, and Section 19990.605 to the Controller for
deposit in the Internet Poker Fund, which is created in the State
Treasury, 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 chapter.

19990.802.  

(a) The Unlawful Gambling Enforcement Fund is
hereby established within the General Fund for purposes of
ensuring adequate resources for law enforcement charged with
enforcing the prohibitions and protections of this chapter. The
Unlawful Gambling Enforcement Fund shall be funded by
depositing:

(1) ____ percent of the revenue from the civil penalties
recovered by law enforcement authorities pursuant to Section
19990.804 into the fund prior to the distribution required under
subdivision (c) of Section 19990.804.

(2) All amounts or property recovered pursuant to Section
19990.805.

(3) ____ percent of the duties paid by licensed operators
pursuant to subdivision (b) of Section 19990.519.

(4) The revenue from the civil penalties recovered pursuant to
subdivision (f) of Section 19990.501.

(b) Up to ____ million dollars ($____) in the fund may be
expended annually by the Attorney General, upon appropriation
by the Legislature, for the purposes of this chapter.

19990.803.  

(a) The state agencies shall submit revenue requests
for allocation from the Unlawful Gambling Enforcement Fund 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 requests.

(b) The State Department of Public Health, Office of Problem
Gambling, shall submit revenue requests for allocation from the
Unlawful Gambling Enforcement Fund for programs to alleviate
problem gambling that result from the offering of authorized
Internet poker 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 requests.

19990.804.  

(a) Except as provided in subdivision (f) of Section
19990.501, a person who engages or conspires to engage in
activities prohibited by this chapter, or activities prohibited by
Section 321, 322, 323, 324, 326, 330, 330a, 330b, 330c, 330d,
330.1, 330.4, or 331 of the Penal Code, is liable for a civil penalty
not to exceed ____ dollars ($____) for each violation, in addition
to any other penalty or remedy that may be imposed by law, which
shall be assessed and recovered in a civil action brought in the
name of the people of the State of California by the Attorney
General, a district attorney, a county counsel authorized by
agreement with the district attorney in an action involving the
violation of a county ordinance, the city attorney of a city having
a population in excess of 750,000 persons, the city attorney of a
city and county, or, with the consent of the district attorney, the
city prosecutor in a city with a full-time city prosecutor, in a court
of competent jurisdiction.

(b) In determining the amount of the civil penalty described in
subdivision (a), the court shall consider any relevant circumstance
presented by a party to the case, including, but not limited to, any
of the following:

(1) The nature and seriousness of the misconduct.

(2) The number of violations.

(3) The persistence of the misconduct.

(4) The length of time over which the misconduct occurred.

(5) The willfulness of the defendant’s misconduct.

(6) The defendant’s assets, liabilities, and net worth.

(c) (1) Subject to paragraph (1) of subdivision (a) of Section
19990.802, civil penalties recovered by law enforcement authorities
pursuant to this section shall be allocated as follows:

(A) If the action is brought by the Attorney General, one-half
of the penalty collected shall be paid to the treasurer of the county
in which the judgment was entered for deposit into that county’s
general fund, and one-half to the Treasurer for deposit into the
Unlawful Gambling Enforcement Fund.

(B) If the action is brought by a district attorney or county
counsel, the penalty collected shall be paid to the treasurer of the
county in which the judgment was entered for deposit into that
county’s general fund.

(C) If the action is brought by a city attorney or city prosecutor,
one-half of the penalty collected shall be paid to the treasurer of
the city in which the judgment was entered for deposit into that
city’s general fund, and one-half to the treasurer of the county in
which judgment was entered for deposit into that county’s general
fund. If the action is brought by the city attorney of a city and
county, the entire amount of the penalty collected shall be paid to
the treasurer of the city and county in which the judgment was
entered.

(2) The revenue from all civil penalties allocated to the Unlawful
Gambling Enforcement Fund pursuant to subparagraph (A) of
paragraph (1), upon appropriation by the Legislature, shall be used
by the Attorney General exclusively to support the investigation
and enforcement of violations of California’s gambling laws,
including the implementation of judgments obtained from
prosecution and investigation of those violations and violations of
Sections 321, 322, 323, 324, 326, 330, 330a, 330b, 330c, 330d,
330.1, 330.4, and 331 of the Penal Code, and other activities that
are in furtherance of this chapter.

(3) The revenue from all civil penalties allocated to the treasurer
of the county, city, or city and county in which the judgment was
entered pursuant to subparagraphs (A), (B) and (C) of paragraph
(1) shall be for the exclusive use of the district attorney, the county
counsel, the city attorney, or the city prosecutor, whichever is
applicable, for the enforcement of this chapter and existing laws
prohibiting illegal gambling activity.

19990.805.  

(a) Any money, other representative of value, or
real or personal property used in, or derived from, the play of a
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.

(b) 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 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 Unlawful Gambling
Enforcement Fund established in Section 19990.802.

 

Article 9.  Preemption of Local Regulation

19990.901.  

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

 

19990.1001.  

Notwithstanding Section 10231.5 of the
Government Code, within one year of the operative date of this
chapter, and annually thereafter, the commission, in consultation
with the department, 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.

19990.1002.  

(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.

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

(c) This section shall remain in effect only until January 1, 2020,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2020, deletes or extends that date.

 

Article 11.  Partial Severability

 

19990.1101.  

(a) Except as provided in subdivision (b), the
provisions of this chapter are severable. If any provision of this
chapter, other than those listed in subdivision (b), 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.

(b) (1) The following provisions of this chapter are not
severable:

(A) Establishing poker as the only permissible Internet gambling
game.

(B) Prohibiting persons or entities who have knowingly or
intentionally engaged in Internet gambling or related financial
transactions in violation of federal or state law from being licensed
under this chapter or selling their assets used in unlawful Internet
gambling for reuse by entities licensed pursuant to this chapter.

(C) Limiting the entities that are eligible for an operator license.

(2) If any of the provisions identified in paragraph (1), or
application of those provisions to any person or circumstances, is
held invalid, the entire chapter shall be invalid.

SEC. 2.  

The Legislature finds and declares that Section
19990.403 of the Business and Professions Code, as added by
Section 1 of this act, 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 right of access set forth in this
chapter are necessary to protect the privacy and integrity of
information submitted by registered players as well as the
proprietary information of the license applicants and licensees.

SEC. 3.  

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. 4.  

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 online
gambling games and to ensure that people play fair games, that
the state realizes the revenues, and that suitable persons operate
intrastate Internet poker Web sites, it is necessary that this act take
effect immediately.