California Legislature—2015–16 Regular Session

Assembly Bill No. 2863

Introduced by Assembly Members Gray and Jones-Sawyer

February 19, 2016

An act to add Section 19619.8 to, and to add and repeal Chapter 5.2 (commencing with Section 19990.101) of 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 2863, as introduced, Gray. Gambling: Internet poker.

(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. Existing law, the Horse Racing Law, generally regulates horse racing and vests the administration and enforcement of its provisions in the California Horse Racing Board.

This bill, which would be known as the Internet Poker Consumer Protection Act of 2016, would establish a framework to authorize intrastate Internet poker, as specified. The bill would authorize eligible entities to apply for a 7-year license to operate an authorized 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 7 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 these provisions. The bill would provide that it is unlawful for a person to aggregate computers or any other Internet access device in a place of public accommodation within the state, including a club or other association, or a public or other setting, that can accommodate multiple players to simultaneously play an authorized Internet poker game, or to promote, facilitate, or market that activity. The bill would provide that any violation of the Internet Poker Consumer Protection Act of 2016 is punishable as a felony. 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 to implement the provisions within 270 days after the operative date of this bill, in consultation with the department and federally recognized California Indian tribes, 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 review of the entity’s suitability for licensure and 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. The bill would require an entity seeking to act as a service provider to apply for a service provider license, employees of a licensed operator or a licensed service provider 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. The bill would require an agreement between a licensed operator and a service provider that is a California-owned and operated horse racing association to ensure that at least 50% of the gross gaming revenue that the licensed operator derives from the service provided by the service provider is paid to the service provider. The bill would establish a tribal gaming regulatory authority process for the purpose of processing tribal 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 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 an unspecified amount. The license deposit would be credited against quarterly fees equivalent to an unspecified percentage 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. The bill would require the first $60,000,000 collected each fiscal year pursuant to the license deposit and quarterly fees provisions to be deposited into the California Horse Racing Internet Poker Account, which the bill would establish in the General Fund. The bill would continuously appropriate 95% of the funds in the account to the California Horse Racing Board for distribution, as specified, and would transfer 5% of those funds to the Fair and Exposition Fund, a continuously appropriated fund.

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 in connection with the use of an Internet access device. 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.

The bill would provide that specified provisions are not severable, and would repeal its provisions on January 1, 2024.

(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.  

Section 19619.8 is added to the Business and
Professions Code, to read:

19619.8.  

The first sixty million dollars ($60,000,000) collected
each fiscal year pursuant to subdivisions (a) and (b) of Section
19990.519 shall be deposited as follows:

(a) Ninety-five percent in the California Horse Racing Internet
Poker Account, which is hereby created in the General Fund.
Notwithstanding Section 13340 of the Government Code, the funds
in the California Horse Racing Internet Poker Account are
continuously appropriated to the board, which shall annually
distribute the funds in the California Horse Racing Internet Poker
Account according to all of the following:

(1) One and three-twentieths percent to the defined contribution
retirement plan for California-licensed jockeys established pursuant
to paragraph (1) of subdivision (i) of Section 19604 and
administered as specified in this chapter.

(2) One and three-twentieths percent to provide health and
welfare benefits for California-licensed jockeys, former
California-licensed jockeys, and their dependents pursuant to
Section 19612.9.

(3) Two and three-tenths percent to supplement the pension
plan for pari-mutuel employees administered on behalf of the labor
organization that has historically represented the employees who
accept or process any form of wagering at the horse racing meetings
and for other entities licensed to conduct wagering on horse races
in California. Moneys distributed pursuant to this paragraph shall
supplement, and not supplant, moneys distributed to that fund
pursuant to this chapter or any other law.

(4) Ninety-five and four-tenths percent to racing associations
or fairs as commissions, to horsemen participating in the racing
meeting in the form of purses, and as incentive awards, in the same
relative proportion as they were generated or earned at each racing
association or fair on races conducted or imported by that racing
association or fair during the prior calendar year. Notwithstanding
any other law, the distributions with respect to each breed of racing
may be altered upon the approval of the board, in accordance with
an agreement signed by the respective associations, fairs,
horsemen’s organizations, and breeders organizations receiving
those distributions.

(b) Five percent to the State Treasury to the credit of the Fair
and Exposition Fund, to be deposited in the separate account in
the fund specified in Section 19606.1 to benefit state designated
fairs as defined in Sections 19418, 19418.1, 19418.2, and 19418.3.
Revenues deposited into the separate account in the fund pursuant
to this section, notwithstanding Section 19606.1 or any other law
to the contrary, shall be allocated only to fairs in Class I to IV+,
inclusive, as classified by the department pursuant to Section 4507
of the Food and Agricultural Code.

SEC. 2.  

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 2016

 

Article 1.  Title and Legislative Declarations

 

19990.101.  

This chapter shall be known and may be cited as
the Internet Poker Consumer Protection Act of 2016.

19990.102.  

The Legislature hereby finds and declares all of
the following:

(a) In October 2006, the United States Congress passed the
Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA)
(31 U.S.C. Secs. 5361 et seq.), which generally prohibits the use
of banking instruments, including credit cards, checks, and fund
transfers, for interstate Internet gambling.

(b) UIGEA essentially prohibits online gambling by United
States citizens, but includes exceptions that permit individual states
to create a regulatory framework to enable intrastate Internet
gambling, if the bets or wagers are made exclusively within a
single state under certain circumstances.

 

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 department 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) “Department” means the Department of Justice.

(j) “Determination of suitability” or “suitability review” means
the process, including, but not limited to, conducting a background
investigation, to determine whether an applicant for a license or
employee work permit issued pursuant to this chapter meets the
qualification criteria described in this chapter or whether the
applicant is disqualified on any of the grounds specified in this
chapter.

(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 land-based gaming facility for at least five 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.

(2) A group consisting of any combination of tribes and 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.

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

(o) “Game” means any gambling game.

(p) “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.

(q) “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.

(r) (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” do 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 discounts or stakes provided to
players, or revenues from nongaming sources, such as from food,
beverages, souvenirs, advertising, clothing, and other nongaming
sources.

(s) “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.).

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

(u) “Internet access device” means a personal computer or
mobile communications device used for connecting to the Internet.

(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 gambling
establishment, as defined in subdivision (o) of Section 19805, that
is operated pursuant to Chapter 5 (commencing with Section
19800), or a casino operated by a 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 or licensed service
provider.

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

(ad) “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.

(ae) “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. An owner of a licensed
operator shall include only those persons eligible to own a
land-based gaming facility in California. “Owner” does not include
the members or government officials of a tribe.

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

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

(ah) “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.

(ai) “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.

(aj) “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.

(ak) “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.

(al) (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. 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) An authorized Internet poker game shall not include a
player-dealer position.

(H) 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.

(am) “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.

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

(ao) “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.

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

(aq) “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.

(ar) (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 who
made bets on games over the Internet that were not authorized
pursuant to this chapter.

(E) Provides any product, service, financing, or asset to a
licensed operator and is paid a percentage of gaming revenue by
the licensed operator, not including fees to financial institutions
and payment providers for facilitating a deposit by a customer.

(F) Provides intellectual property, including trademarks, trade
names, service marks, or similar intellectual property under which
a licensed operator identifies its games to its customers.

(G) Receives compensation as part of an affiliate marketing
program from bringing players or potential players to a licensed
operator’s authorized poker Web site.

(2) “Service provider” does not include a provider of goods or
services that provides similar goods or services to the public for
purposes other than the operation of an authorized poker Web site,
including, but not limited to, payment processors and geolocation
service providers.

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

(at) “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.

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

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

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

(ax) “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.

(ay) “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.

(az) “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.  Intrastate Internet Poker 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 commission 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 a felony, punishable by
imprisonment pursuant to subdivision (h) of Section 1170 of the
Penal Code.

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 Internet access device in
a place of public accommodation within the state, including a club
or other association, or a public or other setting, that can
accommodate multiple players to simultaneously play an authorized
Internet poker game.

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

19990.307.  

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

 

Article 4.  Licensing of Operators and Service Providers

 

19990.401.  

(a) (1) Within 270 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) Hardware and software standards and compliance.

(E) License and work permit issuance and processes.

(F) Suitability standards and determinations.

(G) Temporary, provisional, and emergency approvals.

(H) Effect of receiverships, bankruptcy, insolvency, inheritance,
and trusts affecting ownership of a licensee.

(I) Appeals from adverse decisions.

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

(A) Approval of an authorized Internet poker game.

(B) Authorized Internet poker game rules.

(C) Authorized Internet poker gaming activities.

(D) Registered player-assessed fees, as necessary.

(b) (1) Each state agency with a duty pursuant to this chapter
shall identify a point of contact 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 a state agency shall be deemed effective once it is
received by the agency and deemed to be complete. An application
or notice is not deemed complete until all pertinent documents,
information, and fees are submitted to the department.

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 department for a determination of suitability. If
the department determines the applicant is suitable to receive a
license, the applicant shall then apply to the commission for an
operator license. The applicant shall pay an application processing
fee sufficient to cover the reasonable costs associated with the
determination of suitability and 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 a 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 an applicant, or suspend or revoke a license of a licensed
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. This limited waiver
shall apply 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 150 days of receiving an application, if the applicant
has already been subjected to a determination of suitability by the
department and has been approved by the department to apply to
the commission for licensure. All applicants shall undergo a
determination of suitability prior to applying for an eligibility
determination by the commission.

(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 denoting full licensure shall be issued
for a term of seven 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 seven
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
the effective date of the regulations described in Section 19990.401,
unless the commission determines that good cause exists for those
licenses to take effect in unison on a subsequent date. Each initial
operator license shall be a temporary license, and shall be issued
for a term of no longer than two years. The issuance of an initial
operator license does not guarantee full licensure.

(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.

19990.403.  

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

(b) All primary servers, 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
servers, facilities, bank accounts, and accounting records.

(c) Notwithstanding subdivisions (a) and (b), a licensee may
request, and the department may approve, the licensee’s use of
personnel, servers, 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 department, 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 department for a determination of suitability. If
the department determines the applicant is suitable to receive a
license, the applicant shall then 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 determination of suitability
and 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 are awarded a
preliminary determination of suitability based on a partial
investigation are not guaranteed full licensure. Those service
providers that do not pass the partial investigation may appeal the
decision to the commission.

(d) Before the commission issues 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) 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 a determination 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 after the investor has been issued a license.

(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. An institutional investor
shall not vote prior to being issued a license. 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.).

(g) An agreement between a licensed operator and a service
provider that is a horse racing association operating pursuant to
Chapter 4 (commencing with Section 19400) shall ensure that at
least 50 percent of the gross gaming revenue that the licensed
operator derives from the service provided by the service provider
is paid to the service provider.

19990.405.  

(a) The department shall issue a finding that a
license applicant is suitable to obtain a license only if, based on
all of the information and documents submitted, the department
is satisfied that each of the persons subject to a determination of
suitability pursuant to this article 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 department shall issue a finding that a license applicant
is not suitable to obtain a license if it finds that a person subject
to a determination of suitability pursuant to this article is described
by any of the following:

(1) The person failed to clearly establish eligibility and
qualifications in accordance with this chapter.

(2) The person 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) The person has 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) The person has 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) The person has associated with criminal profiteering activity
or organized crime, as defined in Section 186.2 of the Penal Code.

(6) The person 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) The person is less than 21 years of age.

(8) (A) The person has been convicted in a court of competent
jurisdiction of a felony consisting of either having accepted a bet
over the Internet in violation of United States or California law,
or having aided or abetted that unlawful activity.

(B) A licensee shall not enter into a contract or agreement with
a person or entity described in subparagraph (A).

(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.

19990.406.  

(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:

(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.

(2) 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.

(3) The licensed operator shall verify that the name and physical
billing address on the check or credit card offered for payment by
the person seeking to be a registered player matches the name and
address listed in the database.

(4) If the licensed operator is unable to verify that the person is
21 years of age or older pursuant to paragraph (1), 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. The licensed operator
shall verify that the physical billing address on the check or credit
card provided by the person matches the address listed on his or
her government identification.

(5) The licensed operator shall not permit registered players to
make payments or withdrawals by money order or cash, except
that a licensed operator may permit registered players to make
payments or withdrawals by money order or cash in person at the
land-based gaming facility operated by the licensed operator. The
licensed operator shall submit information to each credit card
company through which it makes credit card sales, in an
appropriate form and format so that the words “Internet poker” or
equivalent description is printed on the purchaser’s credit card
statement with that credit card company, when a payment to a
licensed operator is made by credit card and the transaction is
categorized as required by law.

(e) A licensed operator is not in violation of this section if the
operator complies 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 a civil penalty 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 licensee to exclude from play any person who has filled out an
online self-exclusion form.

(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 department with both of the following
via electronic means or via mail:

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

(2) Documentation from an independent gaming test laboratory
that is licensed or registered in any United States jurisdiction to
test, approve, and certify the game’s software.

(b) A licensed operator shall not offer a game for play until the
department 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 the play of the game.

(3) The rules of the game.

(4) All instructions on how to play.

(5) The unit and total bets permitted.

(6) Per hand charges assessed to registered players.

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

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

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

(1) Tournament rules.

(2) Tournament charge.

(3) Games offered during the tournament.

(4) Prize structure and number of registered players that will be
paid.

(5) Buy-in amount, re-buy amount, and add-on amount.

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

(e) 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.

(f) 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.

(g) 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
approved by the department and published by the licensed operator
prior to the commencement of the tournament.

(h) 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.

(i) 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) A registered player account may be established in person,
or by United States mail, telephone, or by any electronic means.

(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 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.

19990.507.  

Prior to completing the registration process, a
licensed operator shall explain in a conspicuous fashion 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.

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

19990.512.  

(a) A licensed operator shall 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) At the time a registered player registers with a licensed
operator, and at least one time per year thereafter, a licensed
operator shall provide notice in the form of a separate, written
statement, delivered via the United States Postal Service or
electronic mail, to the registered player that clearly and
conspicuously informs the registered player of all of the following:

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

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

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

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

(5) The limitations provided by this section with respect to the
collection and disclosure of personally identifiable information by
a licensed operator.

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

(e) A licensed operator may 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.

(f) Except as provided in subdivision (g), 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 necessary to prevent
unauthorized access to that information by a person other than the
registered player or licensed operator.

(g) 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 (j), 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 and the department 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.

(h) 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.

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

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

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

(j) 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, the department,
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 180 days, and, thereafter,
archived and retained for two years.

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 an independent gaming test laboratory that is licensed or
registered in any United States jurisdiction to test, approve, and
certify the software.

(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 preventive 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.

(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 or work permit, the applicant shall deposit
the applicable application processing fee as provided in subdivision
(a) of Section 19990.402, subdivision (e) of Section 19990.403,
subdivision (b) of Section 19990.404, or Section 19990.605. Any
balance of the application processing fee that remains after
completion of the determination of suitability shall be refunded to
the applicant. If additional moneys are needed to complete the
determination of suitability of the license applicant, the applicant
shall pay the funds necessary to complete the determination of
suitability.

(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 ____
dollars ($____), to be deposited into the General Fund, subject to
Section 19619.8, and credited against charges imposed pursuant
to subdivision (b) on the licensed operator’s gross gaming revenues.
Upon depletion of the license deposit, the department 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, subject to Section 19619.8, an
amount equal to ____ 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 department immediately and work with the
department to develop a plan to rectify the violation.

(c) If the department becomes aware of any violation of this
chapter, or if it becomes aware of any activities that might lead to
a violation, the department shall provide notice of that violation
to the licensee and a reasonable opportunity for the licensee to
cure the violation. If the violation is not timely cured, the
department shall investigate the violation further and may take
enforcement actions. If the commission becomes aware of any
violation of this chapter, the commission shall notify the
department of the violation immediately so that the department
may take appropriate action pursuant to this chapter.

(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 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) (1) A license issued pursuant to this chapter
is not transferable.

(2) If a licensed operator seeks to change the ownership of its
land-based gaming facility, both of the following apply:

(A) The license held by the licensed operator under this chapter
shall be rendered void upon the date of any change of ownership
in the land-based gaming facility.

(B) Prior to a change in ownership, the acquiring person shall
apply to become a licensed operator, at which point the commission
shall determine whether the person is legally qualified to be a
licensed operator under this chapter.

(b) The department shall investigate to ensure that any person
acquiring an interest in a licensee is 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.

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 review of the department and 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.

19990.525.  

(a) (1) The department or commission may
contract with other public or private entities, including, but not
limited to, state, tribal, and international regulatory agencies, for
the provision of services related to a responsibility imposed on the
department or commission by this chapter if all of the following
are satisfied:

(A) The contract will assist with the provision of efficient,
effective, and robust regulation of intrastate Internet poker.

(B) The contract provides access to expertise that has been tested
and proven in the poker industry.

(C) The department or commission retains administrative control
and responsibility for ensuring compliance with this chapter.

(2) In order to expedite the implementation of intrastate Internet
poker, a contract entered into pursuant to paragraph (1) is not
subject to the Public Contracts Code, or otherwise applicable
contracting provisions of the Government Code.

(b) A state agency with a duty pursuant to this chapter may enter
into agreements to share information with other regulatory and
law enforcement agencies to assist in performing the state agency’s
duty.

 

Article 6.  Employee Work Permits

 

19990.601.  

(a) Except as provided in Section 19990.602, a
licensee shall submit an application and applicable fees to the
department and 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 issue an employee work permit only
if, 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 the suitability
review and the issuance of the license.

(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 determinations of suitability
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 determination of suitability,
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 determinations of suitability,
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
determination of suitability 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, the department, and the commission.

(5) Upon completion of the necessary determination of
suitability, 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 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 determination 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 shall 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 if the applicant is described by any of the following:

(a) The applicant failed to clearly establish eligibility and
qualifications in accordance with this chapter.

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

(c) The applicant has 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.

(d) The applicant has 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.

(e) The applicant has associated with criminal profiteering
activity or organized crime, as defined in Section 186.2 of the
Penal Code.

(f) The applicant 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.

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

(h) The applicant has been convicted in a court of competent
jurisdiction of a felony consisting of either having accepted a bet
over the Internet in violation of United States or California law,
or having aided or abetted that unlawful activity.

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, the department, and, if applicable,
the tribal gaming regulatory authority, shall establish application
processing fees to be paid by a licensee for the reasonable cost of
determinations of suitability for, and issuance of, 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 licensed operator or service provider shall not
enter into, without prior approval of the commission, a contract
or agreement with either of the following:

(a) 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.

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

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.

 

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
department, and consistent with uniform standards established by
the department 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 department.

(b) The department shall establish regulations with respect to
registered player complaints.

(c) Under the regulations, the department 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 department 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 department
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 (e)
of Section 19990.403, subdivision (b) of Section 19990.404,
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
19990.803 into the fund prior to the distribution required under
subdivision (c) of Section 19990.803.

(2) All amounts or property recovered pursuant to Section
19990.804.

(3) ____ percent of the duties paid by licensed operators
pursuant to subdivision (b) of Section 19990.519, after any
distribution required by Section 19619.8.

(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) 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 in connection with the use
of an Internet access device, activities prohibited by Section 321,
322, 323, 324, 326, 330, 330a, 330b, 330c, 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, in connection with the use of an Internet access device, Sections
321, 322, 323, 324, 326, 330, 330a, 330b, 330c, 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.

19990.804.  

(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 department 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.

 

Article 11.  Partial Severability and Repeal of Chapter

 

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 been convicted in
a court of competent jurisdiction of a felony consisting of either
having accepted a bet over the Internet in violation of United States
or California law, or having aided or abetted that unlawful activity,
from being licensed under 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.

19990.1102.  

This chapter shall remain in effect only until
January 1, 2024, and as of that date is repealed, unless a later
enacted statute, that is enacted before January 1, 2024, deletes or
extends that date.

SEC. 3.  

The Legislature finds and declares that Chapter 5.2
(commencing with Section 19990.101) of Division 8 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
act 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. 4.  

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

SEC. 5.  

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

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