BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SJR 14|
|Office of Senate Floor Analyses | |
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THIRD READING
Bill No: SJR 14
Author: Wright (D), et al.
Amended: 9/6/11
Vote: 21
SUBJECT : Internet gambling
SOURCE : Author
DIGEST : This resolution respectfully urges the members
of Californias Congressional delegation to preserve the
right of the State of California to opt out of any federal
Internet gambling system, and retain the right to operate
its own intrastate Internet gambling system, or opt into,
any federal legislation for Internet gambling system.
ANALYSIS : Resolution findings state:
1.Leading gaming consultants estimate that in 2005, United
States citizens illegally wagered $4 billion online at
off-shore, non-United States Internet gambling Web sites,
and that every week more than 1.5 million Californians
participate in illegal online gambling on the Internet.
2.Currently hundreds of Internet gambling Web sites
operates outside the United States, unregulated by any
United States governmental entity and in violation of
United States laws. Questions often arise about the
honesty and the fairness of the games played on these
Internet Web sites, and about the true purpose for, and
use of, proceeds generated by these unregulated Internet
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Web sites, particularly since the United States
Department of Justice has indicted the owners and
operators of several of the leading Internet gaming Web
sites for money laundering, bank fraud, and other federal
felony offenses.
3.In October 2006, the United States Congress passed, and
the President signed, the SAFE Port Act to increase the
security of United States ports. Embedded within the
language of that bill was a section called the Unlawful
Internet Gambling Enforcement Act of 2006 (UIGEA), which
prohibits the use of banking instruments such as credit
cards, checks, or fund transfers for interstate Internet
gambling. The statute, however, has not eliminated
illegal, unregulated Internet gambling, nor has it
provided any increased protection for participants from
game operators and others who would impair the integrity
of online gambling activity.
4.Congress included specific provisions in UIGEA for
individual states to permit intrastate Internet gambling,
provided that state laws permitting and regulating that
activity could impose reasonable protections against
participation by underage persons or by persons located
outside the boundaries of the states authorizing that
activity. While the federal Indian Gaming Regulatory Act
(IGRA) balanced the interests of three sovereigns
sovereign governments, the state, Indian tribes, and the
federal government, UIGEA was designed to balance the
federal interest in secure financial transactions with
the state power to determine how online gambling should
take place within the states.
5.The Legislature has held numerous hearings and taken
hours of testimony over the past 18 months on the issues
and challenges surrounding intrastate Internet gaming,
and those hearings have been instrumental in identifying
problems and solutions that have narrowed the differences
among various stakeholders. Witnesses have testified
that a state regulated Internet gaming framework will
ensure that the games Californians are authorized to play
are honest, that winners are paid when and in amounts
due, and that the state and its citizens, rather than
illegal off-shore companies operating outside the reach
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of, and contrary to, state and federal laws, will benefit
from economic activity in this state.
6.The Legislature has made a significant amount of progress
on intrastate Internet gaming to the point where, absent
unforeseen circumstances, a sound and objective proposal
is fully expected to be developed for consideration by
the Legislature during the 2012 portion of the 2011-12
Regular Session.
7.Congress currently has pending before it several bills
that would authorize and regulate certain forms of online
gaming that could be a disservice to all Californians and
place the state at a severe regulatory, competitive, and
financial disadvantage.
Existing Law :
The Gambling Control Act of 1997 established the California
Gambling Control Commission which has licensing
jurisdiction over the operation of card clubs and of all
persons having an interest in the ownership or operation of
card clubs.
Article IV, Section 19, subdivision (e) of the California
Constitution permits Indian tribes to conduct and operate
slot machines, lottery games, and banked and percentage
card games on Indian land if (1) the Governor and an Indian
tribe reach agreement on a compact; (2) the Legislature
approves the compact; and (3) the federal government
approves the compact.
Existing federal law, the federal Indian Gaming Regulatory
Act (IGRA) of 1988, established the jurisdictional
framework that presently governs Indian gaming. Under
IGRA, before a tribe may lawfully conduct class III gaming
(games commonly played at casinos, such as slot machines
and black jack), the following conditions must be met: (1)
The particular form of class III gaming must be permitted
in the state; (2) The tribe and the state must have
negotiated a compact that has been approved by the
Secretary of the Interior; and (3) The tribe must have
adopted a tribal gaming ordinance that has been approved by
the chairman of the National Indian Gaming Commission.
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Existing federal law, UIGEA, prevents U.S. financial
institutions from processing payments to online gambling
businesses. The UIGEA does exempt three categories of
transactions: intra-tribal, intrastate, and interstate
horse racing. The UIGEA defines intrastate transactions
are bets or wagers that are made exclusively within a
single state, whose state laws or regulations contain
certain safeguards regarding such transactions, expressly
authorize the bet or wager and the method by which the bet
or wager is made, and do not violate any provisions of
applicable federal gaming statues.
Existing California law, The Gambling Control Act of 1997
established the California Gambling Control Commission to
regulate legal gaming in California and the Bureau of
Gambling Control within the Department of Justice to
investigate and enforce controlled gambling activities in
California. It prohibits gambling in a city or county that
does not have an ordinance governing certain aspects of the
operation of gambling establishments, including the "hours
of operation" of gambling establishments.
Background
The author's office notes that the Senate Governmental
Organization Committee has held numerous hearings and has
taken hours of testimony over the past 18 months on the
issues and challenges surrounding intrastate Internet
gaming and those hearings have been instrumental in
identifying problems and solutions which have narrowed the
differences among various stakeholders. Witnesses have
testified at those hearings that well over a million
Californians are playing online games and those players are
going to illegal offshore sites where they are at the mercy
of unscrupulous operators and are occasionally cheated out
of their money with absolutely no recourse. Additionally,
witnesses have affirmed that a state regulated Internet
gaming framework will ensure that the games Californians
are authorized to play are honest, that winners are paid
when and in amounts due, and that the State and its
citizens, rather than illegal off-shore companies operating
outside the reach of, and contrary to, state and federal
laws, will benefit from economic activity in this State.
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The author's office points out that a significant amount of
progress on intrastate Internet gaming has been made over
the past year however many fiscal, legal, technical and
policy related questions remain unresolved. According to
the author's office, absent unforeseen circumstances, a
sound and objective proposal is fully expected to be
developed for consideration by the Legislature during the
second year of the 2011-12 Legislative Session.
The author's office also notes that several proposals are
currently pending in Congress which would authorize and
regulate certain forms of online gaming that could be a
disservice to all Californians and place the state at a
severe regulatory, competitive, and financial disadvantage.
According to the author's office, this resolution is
simply intended to preserve the right of the State of
California to opt out of any federal Internet gambling
system and retain the right to operate its own intrastate
Internet gambling system, or opt into, any federal Internet
gambling system.
FISCAL EFFECT : Fiscal Com.: No
PQ:do 9/7/11 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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