BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 1390|
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THIRD READING
Bill No: SB 1390
Author: Wright (D) and Anderson (R)
Amended: 5/25/12
Vote: 21
SENATE GOVERNMENTAL ORGANIZATION COMM. : 13-0, 4/24/12
AYES: Wright, Anderson, Berryhill, Calderon, Cannella,
Corbett, De Le�n, Evans, Hernandez, Padilla, Walters,
Wyland, Yee
SENATE APPROPRIATIONS COMMITTEE : 7-0, 5/24/12
AYES: Kehoe, Walters, Alquist, Dutton, Lieu, Price,
Steinberg
SUBJECT : Gambling: sports wagering
SOURCE : Author
DIGEST : This bill provides for a statutory framework to
legalize sports betting in California by authorizing a
currently licensed owner or operator of a gambling
establishment, horse racing track, or satellite wagering
facility to conduct wagering on professional and collegiate
sports or athletic events by applying to its respective
licensing authority to add sports wagering to the gambling
activities for which they are currently licensed.
ANALYSIS : Existing California statutes prohibit a person
from making a betting pool or placing a bet or wager on the
result of any contest or event, including a sporting event.
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The California Constitution provides that the Legislature
has no power to authorize casinos of the type currently
operating in Nevada and New Jersey.
This bill authorizes a federally recognized Indian tribe to
conduct sports wagering, consistent with the requirements
of the federal Indian Gaming Regulatory Act of 1988 (IGRA).
Specifically, this bill:
1. Authorizes the persons or entities described above to
offer sports wagering on professional and collegiate
sports or athletic events at their facilities.
2. States that sports wagering may be conducted only at the
gambling establishment, horse racing track, satellite
facility (or Tribal gaming facility) of the licensed
operator.
3. Specifies that a licensed operator shall not accept
wagers on sports events from any person who is not
physically present at the facility where the sports
wagering is conducted.
4. Allows licensed operators of horse racing tracks,
satellite wagering facilities, and gambling
establishments to enter into an agreement to jointly
conduct a sports wagering operation. Any joint sports
wagering operation would be authorized only at a horse
racing track.
5. Defines "sports wagering" to mean the business of
accepting wagers on a sports event by any legal system
or method of wagering, including, but not limited to,
exchange wagering, parlays, over and under, money line,
and straight bets.
6. States that an authorized sports betting operator shall
establish the odds it will pay on wagers placed on
sports events.
7. Provides that, in order to obtain authorization to
conduct sports wagering:
A. The owner or operator of a gambling
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establishment shall apply to the California
Gambling Control Commission (CGCC) for
authorization;
B. An owner or operator of a horse racing track or
satellite wagering facility shall apply to the
California Horse Racing Board (CHRB) for
authorization; and
C. A federally recognized Indian tribe may conduct
sports wagering on Indian lands consistent with
the requirements of IGRA, and under terms no more
stringent than those applicable to any other owner
or operator in the state.
8. Directs the CGCC or the CHRB, as the case may be, to
hear and decide promptly, and in reasonable order, all
applications to conduct sports wagering from owners and
operators of licensed gambling establishments and
licensed horse racing tracks and satellite wagering
facilities.
9. Specifies that permission to conduct sports wagering
shall not be unreasonably withheld for any applicant
that is in good standing and has a current license.
10.Requires the regulators to develop an application form,
and provides that the application to conduct sports
wagering shall include specific information, including
the name and location of the gambling establishment,
horse racing track, or satellite wagering facility and
the names of all persons directly or indirectly
interested in the business, and the nature of the
interest.
11.Directs the CHRB and the Department of Justice (DOJ) to
adopt implementing regulations governing recordkeeping,
methods for issuing wagering tickets, and the like.
12.Directs the DOJ to investigate a request for
authorizations to conduct sports wagering made by the
CGCC or the CHRB, and may adopt regulations establishing
fees in a reasonable amount necessary to recover costs
incurred by the CHRB or the DOJ relating to the
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administration and enforcement of this bill.
13.Makes it a misdemeanor to violate any provision of this
sports wagering authorization law, and directs DOJ to
monitor the conduct of all operators and other persons
having a material involvement, directly or indirectly,
with a sports wagering operation.
14.Authorizes DOJ to investigate violations and complaints
lodged against sports wagering operators, initiate
disciplinary actions, and seek license revocations and
other sanctions when warranted. DOJ may file
administrative enforcement actions and seek penalties.
Penalties cannot exceed $20,000 for each separate
violation.
15.Exempts sports wagering conducted under the auspices of
this bill from existing laws that prohibit a person from
making a betting pool or placing a bet or wager on the
result of any contest or event, including a sporting
event.
16.Clarifies existing law governing investigations of
applicants for licensure under the Gambling Control Act,
providing that the DOJ, if recommending denial of or
restrictions on a license, shall include relevant
documents and information in its report to the CGCC.
Background
The author's office wants to allow Californians to be able
to place a bet on a sporting event without having to travel
to Nevada to do so. The author's office states that
passage of this bill will capture significant economic
activity that has historically been transferred out of the
state. About $2.6 billion is bet on sports legally in
Nevada each year. Instead, a significant amount of revenue
could be captured and infused into local economies
throughout the California. The author's office also notes
that this bill legitimizes an activity that has been
illegal in the state. The money illegally spent on sports
betting in California is a significant contributor to
California's underground, non-taxed economy. Finally, the
author's office notes that this bill authorizes sports
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wagering only for individuals who have already been deemed
suitable by state law enforcement officials to conduct
other forms of legalized gambling.
Federal sports betting law . Federal law prohibits sports
wagering, except in four states: Nevada, Oregon, Montana
and Delaware. This prohibition was enacted by Congress in
the Professional and Amateur Sports Protection Act (PASPA)
of 1992. PASPA makes it unlawful for a person or
governmental entity to sponsor, operate, advertise,
promote, license, or authorize wagering or gambling based
on competitive sporting events. The original PASPA
provided a one-year window of opportunity from its
effective date for states to pass laws permitting sports
wagering, and therefore falling outside the reach of
PASPA's sports wagering prohibitions.
In 2009, several parties in New Jersey sued the federal
government, seeking to invalidate PASPA on several
constitutional grounds, including violations of the
Commerce Clause, the Equal Protection Clause, and the Tenth
Amendment. However, the U.S. District Court in New Jersey
granted the motion to dismiss filed by the government
because the plaintiffs lacked standing to bring the action.
New Jersey lacked "standing" because the State had no law
on the books allowing sports betting; therefore they could
not be harmed by the statute they sought to overturn.
In response to this ruling, the State of New Jersey enacted
legislation in January 2012 legalizing sports betting in
New Jersey casinos. In addition, on January 23, 2012, Rep.
Frank LoBiondo (D-NJ) introduced H.R. 3797, the "Sports
Gaming Opportunity Act of 2012," which is now pending in
the US Congress. H.R. 3797 amends PASPA to allow all
states a new window of opportunity to approve and establish
sports betting within their borders, which would thereby
abolish the federal ban on sports betting in those states.
The author's office notes that passage of this bill will
serve two important purposes in connection with PASPA.
Absent a statute on the books, California would also lack
the legal standing to challenge the law in federal court.
Additionally, should Congress re-open a window of
opportunity for states to approve sports betting, this bill
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will place the state in a position to take advantage of
what might be a short period of time within which to
authorize sports wagering in California.
Economic impact . Following recent passage of the New
Jersey sports betting law, Club CalNeva, a Las Vegas-based
company which operates over 30 sports books and handles
billions of dollars in bets, estimated that sports betting
will bring in, annually, $1.3 billion in sports wagering
gross revenues and $120 million in tax revenues for New
Jersey.
A research report by Union Gaming Research analysts
estimated that, using a revenue distribution methodology,
sports book revenues would average $37 million to $60
million annually for New Jersey. Assuming a five-year
average sports book hold of Las Vegas, analysts estimate
total sports book revenues of $787 million to $1.3 billion
in annual sports book wagers in New Jersey. Industry
experts estimate that allowing sports betting could mean
10,000 or more jobs for California.
Related Legislation
SR 49 (Wright, 2010) urged the President and Congress to
remove the ban on sports wagering by repealing PASPA,a nd
urged the California Attorney General to take legal action
on behalf of the State of California to challenge
enforcement of PASPA.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee, the total
costs in excess of $2 million annually (General/Special
Fund) as follows:
Preliminary estimates by the DOJ indicate the need for 14
PYs (three administrative positions and eleven
enforcement agents) at a cost of approximately $1.7
million in the first year of implementation, and $2.2
million annually thereafter. (Special Fund).
The California Gambling Control Commission has estimated
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costs of $92,000 over a two year period to develop
regulations and minor, ongoing costs to process
applications (General Fund).
Estimates by the California Horse Racing Board indicate
the need for a minimum of 2 PYs for promulgating
regulations and processing license applications at an
estimated cost of $130,183 (General Fund).
Recent amendments allow for adoption of regulations
establishing fees in a reasonable amount necessary to
recover costs incurred by the DOJ or the CHRB relating to
administration and enforcement of this bill.
SUPPORT : (Verified 5/25/12)
Alameda County Agricultural Fair Association
Bicycle Casino
California Authority of Racing Fairs
California Gaming Association
California Thoroughbred Breeders Association
Del Mar Thoroughbred Club
Hollywood Park Casino
Los Angeles County Fair Association - Fairplex
Oak Tree Racing Association
Ocean's Eleven Casino
Sutters Place, Inc., dba Bay 101 Casino
Thoroughbred Owners of California
OPPOSITION : (Verified 5/25/12)
Blue Lake Rancheria
California Coalition Against Gambling Expansion
California Nations Indian Gaming Association
California Police Chiefs Association
Elk Valley Rancheria
Rincon Band of Luiseno Indians
University of Southern California
ARGUMENTS IN SUPPORT : Supporters note that California
failed to take advantage of a one-year window of
opportunity for states to pass a law authorizing sports
betting in advance of a federal ban, and that enactment of
this bill would authorize California to take advantage of a
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new federal window period proposed in pending federal
legislation. Therefore, California would not again miss
the opportunity to take advantage of the revenues and
employment associated with this regulated activity.
Supporters believe that this bill could have a significant
positive impact on the future of horse racing industry,
address the underground economy in which illegal sports
betting now takes place, and capture revenue for the
state-which we currently export to Nevada.
ARGUMENTS IN OPPOSITION : Opponents believe that
authorizing people to gamble on sports events is unwise
public policy, and that federal law outlaws sports betting
except in a few states. Other opponents contend that this
bill violates provisions of the State Constitution
prohibiting "casinos of the type currently operating in
Nevada and New Jersey."
DLW:do 5/25/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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