Amended in Senate September 4, 2015

Amended in Senate July 7, 2015

California Legislature—2015–16 Regular Session

Assembly Bill No. 701

Introduced by Assembly Member Cristina Garcia

February 25, 2015

An act to amend Sections 19817 and 19858 of the Business and Professions Code, relating to gaming.

LEGISLATIVE COUNSEL’S DIGEST

AB 701, as amended, Cristina Garcia. Gaming.

Existing law, the Gambling Control Act, provides for the licensure and regulation of various legalized gambling activities and establishments by the California Gambling Control Commission and the investigation and enforcement of those activities and establishments by the Department of Justice. begin insert A willful violation of any provision of the act for which a penalty is not expressly provided, is punishable as a misdemeanor. end insert Existing law requires the commission to establish a 10-member Gaming Policy Advisory Committee for the purpose of discussing matters of controlled gambling regulatory policy and other relevant gambling-related issues. The committee is composed of representatives of controlled gambling licensees and members of the general public in equal numbers.

This bill would increase the membership of the committee from 10 to 12 members, and would instead require the committee to be composed of 5 representatives of controlled gambling licensees, 5 members of the general public, and 2 representatives from the Department of Justice.

Under the act, a person is deemed unsuitable to hold a license to own a gambling establishment if the person, or any partner, officer, director, or shareholder of the person, has any financial interest in any business or organization that is engaged in a prohibited form of gambling, whether within or without this state, except as specified.

This bill would exempt from that provision a person or entity that has begin insert (1) end insert held a license in good standing as an owner of a gambling establishment for at least 5 years as of January 1, 2015, begin insert (2) end insert has notified the California Gambling Control Commission and the Department of Justice, has received commission begin delete approval end delete begin insert approval, after completion of a background check conducted by the department, end insert to obtain a financial interest in a business or organization within the United States that conducts lawful gambling outside of California that, if conducted within California, would be unlawful, begin insert (3) end insert and has paid the commission begin insert and the department end insert for the reasonable costs of the investigation and approval for obtaining the financial interest. begin insert The bill would require the commission to adopt necessary regulations addressing, at a minimum, mandatory periodic reporting to the department by a licensee regarding the ownership and operations of a business or organization within the United States that conducts lawful gambling outside of California that, if conducted in California, would be unlawful. end insert

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The bill would make it unlawful for any cross-promotion or marketing, as defined, to occur between the business or organization within the United States that conducts lawful gambling outside of California that, if conducted within California, would be unlawful, and the gambling establishment, as described. The bill would prohibit, among other things, a licensee, in connection with a business or organization that conducts lawful gambling outside of California that, if conducted within California, would be unlawful, from knowingly engaging in an activity or entering into an association that is unsuitable for the licensee because that activity or association poses an unreasonable threat to the control of gambling in this state. By creating a new crime, this bill would impose a state-mandated local program.

end insert begin insert

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.

end insert begin insert

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

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Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program:  begin delete no end delete begin insert yes end insert .

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

SECTION 1.  

Section 19817 of the Business and Professions
Code is amended to read:

19817.  

The commission shall establish and appoint a Gaming
Policy Advisory Committee of 12 members. The committee shall
be composed of five representatives of controlled gambling
licensees, five members of the general public, and two members
from the department. The executive director shall, from time to
time, convene the committee for the purpose of discussing matters
of controlled gambling regulatory policy and any other relevant
gambling-related issue. The recommendations concerning gambling
policy made by the committee shall be presented to the
commission, but shall be deemed advisory and not binding on the
commission in the performance of its duties or functions. The
committee may not advise the commission on Indian gaming.

SEC. 2.  

Section 19858 of the Business and Professions Code
is amended to read:

19858.  

(a) Except as provided in subdivisions (b), (c), and begin delete (d), end delete
begin insert (g), end insert a person shall be deemed to be unsuitable to hold a state
gambling license to own a gambling establishment if the person,
or any partner, officer, director, or shareholder of the person, has
any financial interest in any business or organization that is
engaged in any form of gambling prohibited by Section 330 of the
Penal Code, whether within or without this state.

(b) Subdivision (a) does not apply to a publicly traded racing
association, a qualified racing association, or any person who is
licensed pursuant to subdivision (b) or (c) of Section 19852.

(c) Subdivision (a) does not apply to a person or entity that
meets all of the following criteria:

(1) Holds a license in good standing as an owner of a gambling
establishment pursuant to this chapter for at least five years as of
January 1, 2015. begin insert For purposes of this subdivision, “good standing”
means that the owner’s state gambling license is not the subject
of outstanding allegations by the department for any violation of
the Gambling Control Act. end insert

(2) Has notified the commission and the department and received
commission begin delete approval end delete begin insert approval, after completion of a background
check conducted by the department, end insert to obtain a financial interest
in another business or organization within the United States that
conducts lawful gambling outside of California that, if conducted
within California, would be unlawful. begin insert A licensee shall provide the
department with any information pertaining to the licensee’s
proposed participation in that business or organization as the
department may request. The commission shall not grant a
temporary approval under this section. end insert

(3) Has paid the commission begin insert and the department end insert for the
reasonable costs incurred by the commission begin insert and the department end insert
for the investigation and approval to obtain the financial interest
described in paragraph (2).

begin insert

(d) It is unlawful for any cross-promotion or marketing to occur
between the business or organization described in paragraph (2)
of subdivision (c) and the gambling establishment described in
paragraph (1) of subdivision (c). For purposes of this subdivision,
“cross-promotion or marketing” means the offering to any
customers of the gambling establishment anything of value related
to visiting or gambling at the business or organization described
in paragraph (2) of subdivision (c).

end insert begin insert

(e) A licensee shall not, in connection with a business or
organization described in paragraph (2) of subdivision (c),
knowingly do any of the following:

end insert begin insert

(1) Violate a foreign, federal, tribal, state, county, city, or
township law, regulation, ordinance, or rule, or any equivalent
thereof, concerning the conduct of gambling.

end insert begin insert

(2) Fail to conduct the operation in accordance with the
standards of honesty and integrity required for gambling in this
state.

end insert begin insert

(3) Engage in an activity or enter into an association that is
unsuitable for a licensee because that activity or association does
any of the following:

end insert begin insert

(A) Poses an unreasonable threat to the control of gambling in
this state.

end insert begin insert

(B) Reflects or tends to reflect discredit or disrepute upon this
state or gaming in this state.

end insert begin insert

(C) Is contrary to the public policy of this state concerning
gaming.

end insert begin insert

(4) Engage in an activity or enter into an association that
interferes with the ability of this state to collect all license fees
imposed by this chapter.

end insert begin insert

(5) Employ, contract with, or associate with, a person whom
the commission has found guilty of cheating or to whom the
commission has denied a gambling license, or finding of suitability,
on the ground of unsuitability.

end insert begin insert

(f) The commission shall adopt necessary regulations
addressing, at a minimum, mandatory periodic reporting to the
department by a licensee regarding the ownership and operations
of a business or organization described in paragraph (2) of
subdivision (c).

end insert begin delete

(d)

end delete

begin insert (g) end insert  Subdivision (a) does not apply to a person who meets all of
the following criteria:

(1) The person is licensed or had an application to be licensed
on file with the commission on or before February 1, 2013.

(2) The person has a financial interest in a business or
organization engaged in gambling prohibited by Section 330 of
the Penal Code that was closed and was not engaged in prohibited
gambling at the time the person was either licensed or had filed
an application to be licensed with the commission.

(3) The person has a financial interest in a gambling
establishment that is located on any portion of, or contiguous to,
the grounds on which a racetrack is or had been previously located
and horserace meetings were authorized to be conducted by the
California Horse Racing Board on or before January 1, 2012.

(4) The grounds upon which the gambling establishment
described in paragraph (3) is located are directly or indirectly
owned by a racetrack limited partnership owner. For purposes of
this paragraph, a “racetrack limited partnership owner” is defined
as a limited partnership, or a number of related limited partnerships,
that is or are at least 80 percent capitalized by limited partners that
are an “institutional investor” as defined in subdivision (w) of
Section 19805, an “employee benefit plan” as defined in Section
1002(3) of Title 29 of the United States Code, or an investment
company that manages a state university endowment.

begin delete

(e)

end delete

begin insert (h) end insert  Within three years of the date the closed business or
organization reopens or becomes engaged in any form of gambling
prohibited by Section 330 of the Penal Code, a person described
in subdivision begin delete (d) end delete begin insert (g) end insert shall either divest that person’s interest in
the business or organization, or divest that person’s interest in the
gambling enterprise or gambling establishment for which the
person is licensed or has applied to be licensed by the commission.

begin delete

(f)

end delete

begin insert (i) end insert  A person described in subdivision begin delete (d) end delete begin insert (g) end insert shall inform the
commission within 30 days of the date on which a business or
organization in which the person has a financial interest begins to
engage in any form of gambling prohibited by Section 330 of the
Penal Code.

begin delete

(g)

end delete

begin insert (j) end insert  During the three-year divestment period described in
subdivision begin delete (e), end delete begin insert (h), end insert it is unlawful for any cross-promotion or
marketing to occur between the business or organization that is
engaged in any form of gambling prohibited by Section 330 of the
Penal Code and the gambling enterprise or gambling establishment
described in paragraph (3) of subdivision begin delete (d). end delete begin insert (g). end insert For purposes of
this subdivision, “cross-promotion or marketing” means the
offering to any customers of the gambling enterprise or gambling
establishment anything of value related to visiting or gambling at
the business or organization engaged in any form of gambling
prohibited by Section 330 of the Penal Code.

begin delete

(h)

end delete

begin insert (k) end insert  During the three-year divestment period described in
subdivision begin delete (e), end delete begin insert (h), end insert any funds used in connection with the capital
improvement of the gambling enterprise or gambling establishment
described in paragraph (3) of subdivision begin delete (d) end delete begin insert (g) end insert shall not be
provided from the gaming revenues of either the business or
organization engaged in gaming prohibited under Section 330 of
the Penal Code.

begin delete

(i)

end delete

begin insert (l) end insert  If, at the end of the three-year divestment period described
in subdivision begin delete (e), end delete begin insert (h), end insert any person described in subdivision begin delete (d) end delete begin insert (g) end insert
has not divested his or her interest in either the gambling enterprise
or gambling establishment or the business or organization engaged
in any form of gaming prohibited under Section 330 of the Penal
Code, the prohibitions of Section 19858 as it read on January 1,
2013, apply.

begin insert

begin insert SEC. 3. end insert   

end insert begin insert

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.

end insert