BILL ANALYSIS �
Bill No: AB
156
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2011-2012 Regular Session
Bill Analysis
AB 156 Author: Lara
As Amended: June 23, 2011
Hearing Date: June 28, 2011
Consultant: Paul Donahue
SUBJECT : Gambling Control
SUMMARY : Amends the Gambling Control Act to provide an
absolute defense to any civil or criminal action if a
gambling establishment conducts play of a controlled game
that is later deemed unlawful, as specified. Provides for
disposition and redemption of outstanding gaming chips in
connection with the sale of a gambling enterprise.
Existing law :
1) Establishes the California Gambling Control Commission
("Commission"), prescribes the requirements for obtaining a
gambling license, and defines a gambling establishment or
licensed premises for these purposes.
2) Provides for the enforcement of those gambling
activities by the Bureau of Gambling Control within the
Department of Justice (DOJ).
3) Limits the transfer of property if the Commission must
approve or license the transferee, and specifically
prohibits a contract for sale or lease of real or personal
property that requires approval of the Commission from
specifying a closing date earlier than 90 days after the
submission of the contract to the Commission.
4) Requires DOJ to approve the play of any controlled game,
including, but not limited to, placing restrictions and
limitations on how a controlled game is played.
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This bill :
1) Provides that a contract for the sale or lease of real
or personal property that requires the approval or
licensing of the purchaser by the Commission shall not
specify a transaction closing date that is prior to the
approval or licensing by the Commission.
2) Specifies that if the commission has approved a contract
for sale or lease, it may permit the contract to specify a
closing date that is earlier than 90 days after submission
of the completed application, if so requested by the
parties to the contract.
3) Provides that a gambling enterprise that conducts play
of a controlled game that has been approved by DOJ, but is
later found to be unlawful, has an absolute defense to any
criminal, administrative, or civil action provided the game
was being played in the manner approved and, during the
time for which it was approved, and play ceases upon notice
that the game has been found unlawful.
4) Requires a contract for the sale of a gambling
enterprise shall state whether any outstanding gaming chips
from the seller will be honored by the purchaser, and
provides for redemption of gaming chips by either the
seller or the purchaser in the event the purchaser does not
intend to use the same gaming chips in use by the seller.
COMMENTS :
1) Rationale : The author states that AB 156 will allow the
Commission to permit a purchase and sale agreement of real
or personal property of a gambling establishment to close
earlier than 90 days after submission to the Commission.
The author states that in the past, the Attorney General
brought an administrative action against several card rooms
and an appellate court held that the "manner in which
jackpot poker was played was unlawful even though it had
been earlier approved." The author states further that,
after the court ruling, the Attorney General required the
clubs to disgorge money they had made; the Commerce Casino
had to give almost a million dollars.
The author believes that there is minimal protection for
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card clubs from civil, criminal and administrative action
when a game that is approved by DOJ is later found to be
operating unlawfully, and that if a card club follows the
law and receives approval from DOJ, that they should be
able to defend against any enforcement action stemming from
the approved game that was subsequently declared to be
unlawful.
The author states that other provisions of AB 156 clarify
that a contract for the sale of a gambling enterprise shall
state whether the purchaser will honor any outstanding
gaming chips from the sale.
2) Background on the absolute defense provisions in this
bill : In 1989 the California Attorney General notified
licensed card rooms, which were offering jackpots, of his
opinion that jackpot poker was unlawful because it violated
California constitutional and Penal Code proscriptions
against lotteries. The letter from the Attorney General
advised card room owners and operators that, beginning
November 1, 1989, the playing of illegal jackpot poker
constitutes a violation of the Penal Code, which may result
in administrative disciplinary action, as well as possible
criminal prosecution.
Several card rooms sought and obtained an injunction
prohibiting state and local officials from continuing to
enforce prohibitions against the play of jackpot poker.
However, an appellate court overturned the injunction and
held that the jackpot feature of the poker game is an
illegal lottery, given the predominance of the element of
chance in winning a jackpot. Among other things, the
appellate court in Bell Gardens Bicycle Club v. Department
of Justice<1> held that:
"�J]ust because poker itself is legal, this fact
does not make the jackpot variation of poker
legal, as well?The question in this case is not
whether the slim possibility of winning the
jackpot money prize transforms the legal game of
poker into an illegal lottery. The question is
whether the jackpot feature itself is an illegal
lottery as defined by Penal Code section 319 and
should be disallowed as an attempt to disguise an
illegal game within a legal one...Based upon the
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<1> 36 Cal.App.4th 717 (1995)
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law, as well as a careful and complete reading of
the record, it is clear that the jackpot feature
and the underlying poker games are completely
severable, and that jackpot is an illegal
lottery."
After this ruling, the Attorney General required the card
clubs to disgorge the profits illegally received from the
conduct of jackpot poker after having received notice from
the DOJ to cease playing the game. It appears that the
clubs may have continued to conduct jackpot poker games for
approximately a nine-month period following receipt of the
notice from the Attorney General he considered jackpot
poker unlawful.
3) Similar language providing absolute defense vetoed last
year : Senate Bill 1125 (Florez) passed the Legislature but
Governor Schwarzenegger vetoed the bill in 2010. SB 1125
contained a provision nearly identical to the language in
this bill, stating that a gambling establishment that
conducts play of an approved controlled game that is
subsequently found to be unlawful shall be protected from
any criminal, administrative, or civil action.
The only difference between the provisions of SB 1125
(Florez) and AB 156 (Lara) is that this bill additionally
requires the gambling establishment to cease play upon
notice that the game has been found unlawful in order for
the absolute defense to attach.<2> The relevant portion
of the veto message provides:
"I am unable to sign this bill because, unlike
the measure previously mentioned, this bill does
not take into account possible misconduct by a
gambling establishment that may have induced the
Bureau to erroneously approve a controlled game.
In addition, there may be other instances where a
gambling establishment may be playing a
controlled game in bad faith and in violation of
other provisions of existing law.
Notwithstanding the fact that the Bureau may have
approved such conduct, that approval alone should
not constitute an absolute defense to all civil,
criminal, or administration actions."
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<2> See, SEC. 3 of AB 156 (Lara), adding Section 19943.5 to
the Business and Professions Code.
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4) Author's amendment : The Attorney General's Office
voiced its concern about the potential effect of an
absolute defense on future enforcement actions brought by
the Office to enforce the Gambling Control Act.
In response to this concern, the author's office informs
Committee staff that it has consented to adopt the
following language as an amendment:
"In any enforcement action, the gambling
enterprise shall have the burden of proving that
the department approved the controlled game, and
that the game was played in the manner approved."
5) Related legislation :
SB 1125 (Florez, 2010) would have provided that a gambling
establishment that conducts play of a controlled game that
has been approved by DOJ, but is later found to be
unlawful, has an absolute defense to any criminal,
administrative, or civil action, so long as the game was
being played in the manner approved and during the time for
which it was approved. (Vetoed)
SUPPORT:
Artichoke Joe's Casino
Bicycle Casino
Commerce Club Casino
Hollywood Park Casino
Lucky Chances
Village Club
OPPOSE:
None on file
FISCAL COMMITTEE: Senate Appropriations Committee
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