BILL ANALYSIS �
SB 1390
Page 1
Date of Hearing: June 20, 2012
ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
Isadore Hall, Chair
SB 1390 (Wright) - As Amended: June 13, 2012
SENATE VOTE : 33-2
SUBJECT : Gambling: sports wagering
SUMMARY : Establishes a statutory framework to allow a
currently licensed owner or operator of a gambling
establishment, horse racing track, or satellite wagering
facility, as well as authorizes a federally recognized Indian
tribe to conduct sports wagering on professional and collegiate
sports or athletic events. Specifically, this bill :
1)Requires an owner or operator of a gambling establishment
seeking to conduct sports wagering shall apply to the
California Gambling Control Commission (CGCC) for
authorization to conduct sports wagering.
2)Requires an owner or operator of a horse racing track or
satellite wagering facility seeking to conduct sports wagering
to apply to the California Horse Racing Board (CHRB) for
authorization to conduct sports wagering.
3)Provides that a federally recognized Indian tribe may conduct
sports wagering on Indian lands consistent with the
requirements of the federal Indian Gaming Regulatory Act of
1998 (IGRA).
4)Defines "sports wagering" as the business of accepting wagers
of 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.
5)Requires the CHRB or the CGCC, 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, licensed horse racing tracks, and
satellite wagering facilities.
6)Specifies that permission to conduct sports wagering shall not
be unreasonably withheld for any applicant that is in good
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standing and has a current license.
7)Specifies that applications for authorization to conduct
sports wagering shall be made on forms furnished by the CHRB
and the CGCC. The application should include specific
information, including the name and location of the gambling
establishment, horse racing track, or satellite wagering
facility, the names of all persons directly or indirectly
interested in the business, and the nature of the interest,
and any other information and details the CHRB or the CGCC may
require.
8)Requires the CHRB and the CGCC to adopt regulations for the
administration pursuant to this bill. Requires the CHRB and
the CGCC to consult with each other, in the adoption of
regulations, and allows the CHRB and the CGCC to adopt joint
regulations.
9)Allows the CHRB and the CGCC to adopt regulations establishing
fees in a reasonable amount necessary to recover costs
incurred relating to the administration of sports wagering
pursuant to this bill.
10) Requires that the regulations adopted by the CHRB and the
CGCC to provide for the approval of wagering rules and
equipment by the DOJ to ensure fairness to the public and
compliance with state law.
11) 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.
12) 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 as
specified.
13)Requires the proceeds of any sports wagering conducted at a
horse racing track or a satellite wagering facility to be
allocated equally to each racing meeting conducted at that
track or facility on that day and requires those proceeds to
be distributed as part of the handle.
14) Requires that the distribution for a joint sports wagering
operation conducted at a horse racing track shall be applied
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to the share of proceeds belonging to each participating horse
racing track and satellite wagering facility, but not the
share of proceeds belonging to any participating gambling
establishments.
15) Specifies that a licensed operator shall not accept a wager
on a sports event from any person who is not physically
present at the facility where the sport wagering is conducted.
16) Requires a licensed operator to establish the odds it will
pay on wagers placed on sports events.
17) Specifies that a licensed operator shall not conduct any
sports wagering in violation of any provision of this chapter,
and regulation adopted by this bill or any governing local
ordinance.
18) Makes it a misdemeanor to violate any provision of this
bill.
19) Requires DOJ to be responsible for the enforcement of sports
wagering activities conducted at a gambling establishment.
20) Allows the DOJ to adopt regulations establishing fees in a
reasonable amount necessary to recover costs incurred by the
department relating to the enforcement of this bill in
connection with gambling establishments.
21) Requires the CHRB to be responsible for the enforcement of
sports wagering activities conducted at a horse racing track
or a satellite wagering facilities.
22) Allows the CHRB to adopt regulations establishing fees in a
reasonable amount necessary to recover costs incurred by the
CHRB relating to the enforcement of this bill in connection
with horse racing tracks and satellite wagering facilities.
23)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.
24) Clarifies existing law governing investigations of
applicants for licensure under the Gambling Control Act,
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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.
EXISTING LAW
1)Prohibits 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.
2)Federal law, the Professional and Amateur Sports Protection
Act of 1992 (PASPA), effectively prohibits sports betting
nationwide excluding the states of Oregon, Delaware, and
Montana, as well as the licensed sports pools in Nevada.
Congress provided a one-year window of opportunity for states
to approve and establish sports betting within their borders,
which would thereby abolish the federal ban on sports betting
in those states.
3)Provides, under the California Constitution that the
Legislature has no power to authorize casinos of the type
currently operating in Nevada and New Jersey.
FISCAL EFFECT : Unknown
COMMENTS :
Federal Law : Federal law, under PASPA, prohibits sports wagering
except in the states of Nevada, Oregon, Montana and Delaware.
PASPA makes it unlawful for a person or government entity to
sponsor, operate, advertise, promote, license, or authorize
wagering or gambling based on a competitive sporting event. At
the passage of PASPA, Congress provided a one-year window for
states that operated licensed casino gaming for the previous ten
years period to pass legislation permitting sports wagering. It
seems that this exception was included to allow New Jersey to
pass legislation that would allow them to have an exception like
Nevada, Oregon, Montana, and Delaware. New Jersey, however,
failed to pass legislation during that one-year window.
Sports Wagering in Exempted States :
Nevada
The most recognized exemption of PASPA is that of the State of
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Nevada, which allows for sports wagering in licensed sports
books. The Nevada Gaming Commission and the state Gaming
Control Board provide oversight and regulation. Sports wagering
has been legal in Nevada since 1949 and PASPA did nothing to
disturb the industry.
Oregon
In 1989, the Oregon Lottery included a sports lottery game
called "Sports Action." This required the player to beat the
point spreads of professional football games. This type of game,
as well as a game called "Monday Night Scorecard," operated
through the end of the 2006-2007 football season. In 2007 the
Oregon Legislature repealed the provisions that allowed these
type of lottery games in an effort to attract the National
Collegiate Athletic Association (NCAA) men's and women's
basketball tournaments to the state. According to the Oregon
Lottery, the NCAA had taken a position that it would not hold
basketball tournament games as long as the state permitted
sports wagering in the state. In 2009, first and second round
games of the NCAA's men's basketball tournament were held in
Portland, Oregon.
Delaware
In 1976 the Delaware Lottery introduced its football lottery
"Scorecard" games which involved picking the winners of selected
National Football League (NFL) games, and picking against the
point spreads of selected NFL games. After only one year
Delaware's football lottery was discontinued.
In 2009, Delaware passed a bill to allow for sports wagering in
the State as a revenue-generating mechanism. The NFL, NBA, NHL,
MLB and the NCAA immediately opposed the legislation. They
argued that the Delaware legislation was illegal because the
state intended to offer single-game betting for the first time.
A three-judge panel of the 3rd U.S. Circuit Court ruled that the
state's single-game betting violated PASPA because Delaware's
exemption came because it ran a 1976 sports lottery game.
Delaware currently offers a three-team parlay.
Montana
Montana allows for certain non-banking sports pools, sports tab
games, and fantasy sports leagues. It is operated under the
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oversight of the Montana Department of Justice, Gambling Control
Division.
Recent Challenges to PASPA : In recent years, various states
have tried to convince the federal government to repeal PASPA
under the assertion that PASPA is inherently unconstitutional.
In 2009, New Jersey State Senator Raymond Lesniack filed a
lawsuit seeking to invalidate PASPA. The lawsuit claimed that
PASPA unconstitutionally discriminates among the states by
allowing four states to offer sports wagering while banning the
other 46 states from providing similar gambling opportunities.
However, the U.S. District Court in New Jersey granted the
motion to dismiss because the plaintiffs lacked standing to
bring action. The plaintiffs lacked standing because the State
had no law on the books allowing for sports betting; therefore
they could not be harmed by the statute they sought to overturn.
In response, New Jersey voters passed, by a 2-1 margin, a
nonbinding referendum to allow for sports wagering in the state.
The next year, the New Jersey Legislature passed and the
Governor signed legislation to legalize sports betting. In
addition Representative Frank LoBiondo (D-NJ) recently
introduced legislation (H.R. 3797) to amend PASPA and allow all
states a new window of opportunity to approve and establish
sports betting within their borders. This legislation is
currently pending in Congress. New Jersey Governor Chris
Christie has recently stated that New Jersey would move ahead
with its plan to allow sports wagering at casinos and racetracks
in New Jersey, setting up an expected legal showdown with the
federal government.
It should be noted that a change in federal law would be
required for the provisions of this bill to take effect.
Economic Impact of sports wagering: According to the 2011
American Gaming Association Survey of Casino Entertainment,
during 2010, individuals in Nevada wagered more than $2.7
billion on sporting events. While $2.7 billion is a large
amount of money, most of that money was returned to individuals
in the form of winnings. Gross gaming revenue from Nevada
sports books was $151.1 million, which translates to 5.5 percent
of total amount wagered.
After the successful passage of the New Jersey sports betting
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law, a research report by Union Gaming Research analysts
estimated that, using a revenue distribution methodology, sport
book revenues would average $37-$60 million annually for New
Jersey. Club CalNeva, a Las Vegas-based company which operates
over 30 sports books, estimates that sports betting will bring
in, annually, $1.3 billion in sports wagering gross revenues and
$120 million in tax revenues for New Jersey. Some industry
experts estimate that allowing for sports wagering could mean
10,000 or more jobs for California.
Will the enactment of this bill require a constitutional
change? : The California Constitution currently allows the
Legislature to authorize horse racing, and allows the
Legislature to authorize cities and counties to provide for
charitable bingo games. In addition, the California
Constitution states that the Legislature has no power to
authorize lotteries, except for the State Lottery. However,
there is nothing in the state Constitution that specifically
mentions sports wagering.
However, Article IV, Section 19, Subdivision (e), of the
California Constitution declares that "the legislature has no
power to authorize, and shall prohibit, casinos of the type
currently operating in Nevada and New Jersey." In order to
determine whether this bill would violate the California
Constitution it must first be determined what the above
provision in the Constitution is referring to with the mention
of "casinos of the type currently operating in Nevada and New
Jersey." A 1999 California Supreme Court case helps to clarify
some of the confusion.
In Hotel Employees & Restaurant Employees International Union v
Davis (1999) 21 Cal. 4th 585, the Court concluded that:
Thus, a casino of "the type?operating in Nevada and New
Jersey" may be understood, with reasonable specificity, as
one or more buildings, rooms, or facilities, whether
separate or connected, that offer gambling activities
including those statutorily prohibited in California,
especially banked table games and slot machines.
Hence the Court interprets the constitutional provision
reverenced above to mean that the Legislature has no power to
authorize casinos which it defines as "one or more building,
rooms, or facilities, whether separate or connected, that offer
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gambling activities including those statutorily prohibited in
California." This seems to imply that the Legislature has no
power to authorize sports wagering and that a constitutional
change would will probably be needed.
Furthermore, in its interpretation of "casinos of the type
currently operating in Nevada and New Jersey," the Court added,
"including those statutorily prohibited in California." Thus, if
a gambling activity is prohibited by California State law it is
also prohibited under Article IV, Section 19, Subdivision (e) of
the California Constitution. The Court in fact stated that, "the
available legislative history suggest that section 19 (e) �of
the California Constitution] was designed precisely, to elevate
statutory prohibitions on a set of gambling activities."
California Penal Code section 337a prohibits individuals from
engaging in "pool selling or bookmaking" or engaging in "bets or
bets?wages or wagers?upon the result, or purported result, of
any trial, purported trial, contest, or purported contest, of
skills, speed, or power of endurance of person or animal, or
between persons, animals, or mechanical apparatus, or upon the
result, or purported result, of any lot, chance, casualty,
unknown or contingent event whatsoever." This seems to imply,
once again, that the Legislature has no power to authorize
sports wagering and that a constitutional change would probably
be needed to allow it.
Ultimately, the California courts might need to decide whether a
constitutional change will be needed in order to allow sports
wagering in California. It must be noted however that in the
past the State Lottery, horse track wagering, and charitable
bingo have all required a constitutional change in order to
allow such wagering in the State.
Arguments in support : Supporters of the bill claim that
successful passage could have a positive impact on the future of
racing and help to address the underground sports economy that
currently exists. Supporters further state that the enactment of
SB 1390 would authorize the state to offer sports wagering in
advance of the possible new federal window which would guarantee
California will not again miss the opportunity to take advantage
of the revenues and employment associated with the economic
benefits that will occur with the successful passage of this
legislation.
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Arguments in Opposition : Opponents of the bill claim that SB
1390 violates both federal and state law. The California Police
Chiefs Association states that, "gambling on sports events is
unwise public policy and that even though there are some states
in the country that have federal permission to conduct sports
gambling activities, California does not appear to be one of
them."
Policy Considerations :
1)Current amendments deleted various specific enforcement
responsibilities by the DOJ. These included provisions that
would have required the DOJ to monitor all licensed operators
and investigate complaints against licensed operators, as well
as various others responsibilities. The current version of the
bill does include a provision that would require the DOJ to be
responsible for the enforcement of sports wagering and allows
the DOJ to create regulations. However, the committee may wish
to consider whether to include more specific enforcement
responsibilities by the DOJ, similar to those on the earlier
version of the bill.
2)The committee may wish to consider whether the bill should
include a provision stating that regulatory and oversight
bodies shall have the authority to regulate sports pools and
the conduct of sports wagering to the same extent that they
currently regulate other casino games. This would include the
ability for regulatory bodies to audit the books and records
of a licensed entity or operator contracted by a licensed
entity.
3)While the bill currently requires the CGCC and the CHRB to
consult with each other in the adoption of regulations, the
committee may wish to consider whether it should require a
single entity from being the sole regulatory body of all
licensed operators. A sole regulatory body would provide
consistency across the different types of licensed operators
and ensure that the same rules apply to all licensed operators
equally.
4)Similar legislation in New Jersey designated a percentage of
the fee paid for a license to operate sports wagering to
provide funds for compulsive gambling treatment and prevention
programs. The committee may wish to consider a similar
provision.
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5)Currently, the age to legally gamble in the State of
California depends on the licensed operator. The minimum age
at a tribal casino and horse track is 18, compared to 21 at a
card club. For consistency purposes, the committee may wish to
consider a provision that would specify the minimum age for an
individual to place a bet on a sporting event.
6)The committee may wish to consider a provision that would
specify that an individual be prohibited from placing a bet
using any form of credit.
7)Similar legislation in New Jersey provides that any person
whose name appears on a casino exclusion list or any
self-exclusion list of a casino or racetrack would not be
permitted to engage in sports wagering. The committee may wish
to consider a similar provision.
REGISTERED SUPPORT / OPPOSITION :
Support
Alameda County Agricultural Fair Association
Big Fresno Fair
California Authority of Racing Fairs
California Exposition & State Fair
California Gaming Association
California Thoroughbred Breeders Association
Del Mar Thoroughbred Club
Fairplex and Oak Tree Racing Association
Los Angeles County Fair Association
Riverside County Fair & National Date Festival
San Joaquin County Fair
Sonoma County Fair
Sutter's Place Inc. dba Bay 101
Thoroughbred Owners of California
Opposition
Blue Lake Rancheria
California Coalition against Gambling Expansion
California Nations Indian Gaming Association
California Police Chiefs Association
Elk Valley Rancheria, California
Rincon Band of Luiseno Indians
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University of Southern California
Analysis Prepared by : Felipe Lopez / G. O. / (916) 319-2531