BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Isadore Hall, III
Chair
2015 - 2016 Regular
Bill No: AB 701 Hearing Date: 7/14/2015
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|Author: |Cristina Garcia |
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|Version: |7/7/2015 Amended |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Felipe Lopez |
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SUBJECT: Gaming.
DIGEST: This bill allows a person or entity with a financial
interest in a gambling establishment outside of California, but
within the United States, to hold a California Gambling license.
The bill also increases the membership of the Gaming Policy
Advisory Committee (GPAC) from 10 to 12 members as specified.
ANALYSIS:
Existing law:
1)Provides, under the Gambling Control Act (Act), for the
licensure and regulation of various legalized gambling
activities and establishments by the California Gambling
Control Commission (CGCC) and the investigation and
enforcement of those activities and establishments by the
Department of Justice (DOJ).
2)Considers a person not suitable to hold gambling license if
that 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 prohibited
gambling, whether within or without this state. There is an
exception for publicly traded horse racing associations.
3)Allows a person or entity to hold a state gambling license if
they have a financial interest in another business that
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conducts lawful gambling outside the state that, if conducted
within California, would be unlawful, provided that an
applicant or licensee may not own more than 1% interest in
that business.
4)Creates a three-year licensing exemption for the owners of the
card room located at Hollywood Park Racetrack by authorizing
the CGCC to exempt specified limited partners in limited
partnerships form specified licensing requirements.
5)Requires the CGCC to establish a 10-member GPAC for the
purpose of discussing matters of controlled gambling
regulatory policy and other relevant gambling-related issues.
6)Specifies that the GPAC shall be composed of representatives
of controlled gambling licensees and members of the general
public in equal numbers.
This bill:
1)Allows a person or entity with a financial interest in a
gambling establishment outside of California, but within the
United States, to hold a California gambling license if the
person or entity meets all of the following criteria:
a) Holds a license in good standing as an owner of a
gambling establishment for at least five years as of
January 1, 2015.
b) Has notified the CGCC and the DOJ and received CGCC
approval 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.
c) Has paid the CGCC for the reasonable costs incurred by
the CGCC for the investigation and approval specified in
this bill.
2)Increases the membership of GPAC from 10 to 12 members.
3)Provides that GPAC shall be composed of five representatives
of controlled gambling licensees, five members of the general
public, and two members from DOJ.
Background
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Purpose of the bill. According to the author, "there is a
barrier in existing law that prevents card room owners from
having a financial interest in a Class III establishment outside
of California. There is an exemption from this prohibition for
race tracks and does not apply to Tribal governments. AB 701
does not allow for any new card rooms in California, it does
nothing to change the voter approved Proposition 1A or allow for
any expansion of gaming in California. AB 701 simply seeks to
remove an artificial barrier for card room owners to conduct
legal gaming outside of California while maintaining their
California license."
Gaming Regulation History. California's regulation of gambling
has been expanding over the last several decades. In 1984, the
Legislature passed the Gambling Registration Act, which
increased regulatory oversight of card rooms, and established
state regulation of card room owners, employees and vendors.
The Gambling Control Act of 1997 (Act) further strengthened
state oversight of gambling. The Act created the CGCC and
Division of Gambling Control within DOJ and vested within each
specified powers.
Under this expanded structure, the State investigates the
background of individuals and businesses that want to be
involved in the gambling industry. In prior years, the state
imposed broad prohibitions against certain classes of ownership.
Specifically, the law denies a license to anyone who is
involved in gambling activities that are outlawed by state law,
such as house-banked games, even if that activity is legal in
another state.
According to the Little Hoover Commission (LHC), that law was
enacted at a time when gambling was closely associated with
organized crime. By preventing casino operators from owning
card clubs in California, lawmakers hoped to prevent organized
crime from becoming involved in gambling in the State, and to
keep Nevada casino owners from having ownership interests in
California gambling establishments.
Little Hoover Commission Report. In 2001, Governor Davis vetoed
SB 51 (Vincent), which would have authorized issuance of a
gambling license to a publicly traded corporation irrespective
of whether the person has any financial interest in a company
outside California that engages in gambling that is not legal in
the State of California. In his veto message, the Governor
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asked the LHC to study current state law that prohibits the
ownership of card rooms by anyone associated with a gambling
operation not permitted in California.
Thereafter, the LHC published a report entitled, "Card Clubs in
California: A Review of Ownership Limitations," in which the LHC
concluded that:
Given that public safety was the purpose of those
prohibitions, it is illogical to keep them in place.
Today, the State has both an expanding gambling industry
and a fortified regulatory infrastructure. Preventing
publicly traded corporations - and the companies not
experienced in the industry - from doing business in
California is inconsistent with these deliberate and highly
publicized policy decisions.
Prior/Related Legislation
SB 472 (Hill, Chapter 760, Statutes of 2013) created a
three-year licensing exemption for the owners of the card room
located at Hollywood Park Racetrack by authorizing the CGCC to
exempt specified limited partners in limited partnerships form
specified licensing requirements.
SB 356 (Yee, 2013) would have allowed a person or entity with a
financial interest in a foreign gambling operation to retain a
California gambling license. (Held in Assembly Appropriations
Committee)
AB 654 (Hall, 2013) would have required the GPAC to meet at
least twice a year. The bill was eventually amended to deal with
a different issue.
AB 1290 (Hill, 2012) would have repealed and existing body of
law in the Act relative to exemption from licensing requirements
for a card club on the grounds of a racetrack and recasts that
body of law. (Held in Assembly Appropriations Committee)
SB 175 (Vincent, 2005) would have deemed and applicant suitable
to hold a state gambling license, notwithstanding the fact that
the applicant has a financial interest in another business that
conducts lawful gambling outside the state that may violate
California law if it were conducted in California. (Held in
Assembly Appropriations Committee)
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SB 1524 (Vincent, 2004) would have removed the prohibition
precluding a person engaged in any form of prohibited gambling,
as specified, whether within or without this state, from
obtaining a state gambling license to own a gambling
establishment. (Held in Assembly Appropriations Committee)
SB 1314 (Vincent, 2002) would have authorized a publicly traded
corporation that leases a card club from a publicly traded
racing association to obtain a state gambling license for a card
club located at the racing association's racetrack irrespective
of whether the person has any financial interest in a company,
either within our outside of this state, that is engaged in a
form of gambling that is prohibited in California. (Held in
Assembly Governmental Organization Committee)
AB 572 (Firebaugh, 2001) would have authorized specified persons
and corporations to obtain a gambling license despite having a
financial interest in an establishment that offers forms of
gambling that are illegal in the state as long as the
Commission, upon recommendation by the Division of Gambling
Control, finds that the ownership interest is not detrimental to
enforcement of state gaming law. (Held on Senate Inactive File)
SB 51 (Vincent, 2001) would have authorized a publicly traded
corporation to obtain a state gambling license regardless of
whether the person has any financial interest in a company,
either within our outside of this state, that is engaged in a
form of gambling that is prohibited in California. (Vetoed by
the Governor)
SB 100 (Maddy, Chapter 387, Statutes of 1995) authorized
publicly traded racing associations and qualified racing
associations to be eligible for a state gambling license to own
a gambling establishment.
FISCAL EFFECT: Appropriation: No Fiscal
Com.: Yes Local: No
SUPPORT:
City of Gardena
Crystal Casino
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OPPOSITION:
None received
ARGUMENTS IN SUPPORT: Supporters argue that this bill will
only allow a licensed card room owner, holding a valid
California license in good standing for at least five years as
of January 2015 to seek commission approval to obtain financial
interest in another business organization outside of the state
but within the United States that conducts lawful gaming.
Supporters also argue that this bill has no impact on the
current moratorium on new card rooms in California through 2020
and that it does not threaten existing California brick and
mortar gaming establishments in the state.
In addition supporters argue that this bill does nothing to
change the voter approved Proposition 1A and it will not allow
for any expansion of gaming in California and will only allow a
very narrowly crafted exemption for licensed card room owners to
apply for the exemption to allow out of state gaming interest
ownership currently available to race tracks and that do not
apply to tribal governments.