BILL ANALYSIS �
Bill No: SB
356
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2013-2014 Regular Session
Staff Analysis
SB 356 Author: Yee
As Introduced: February
Hearing Date: April 23, 2013
Consultant: Paul Donahue
SUBJECT
Gambling establishments: owner licensing
DESCRIPTION
Allows a person or entity with a financial interest in a
foreign gambling operation to retain a California gambling
license. Specifically, this bill deems a current licensee
suitable to continue to hold a state gambling license if:
1)The licensee holds a license in good standing as an owner
of a gambling establishment for at least five years as of
January 1, 2013; and
2)The licensee has obtained a financial interest in a
gambling operation that is conducted only outside of the
United States.
EXISTING LAW
1)The Gambling Control Act provides for the licensure and
regulation of various legalized gambling activities and
establishments by the Gambling Control Commission and the
enforcement of those activities by the Bureau of Gambling
Control within the Department of Justice (DOJ).
2)Defines "person" to include a natural person,
corporation, partnership, limited partnership, trust,
joint venture, association, or any other business
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organization.
3)Considers a person not suitable to hold a gambling
license if that person, or any partner, officer,
director, or shareholder of that person, has a financial
interest in a business or organization engaged in any
form of gambling prohibited by Section 330 of the Penal
Code. There is an exception for publicly traded horse
racing associations, as specified.
4)Penal Code � 330 prohibits the play of any specified
games, including roulette, twenty-one, as well as any
banking or percentage game played with cards, dice, or
any device, for money, checks, credit, or other
representative of value.
BACKGROUND
1)Purpose of the bill : According to the author's office,
current law makes it illegal for a California gambling
license holder in good standing to have any financial
interest in gaming prohibited in California even if the
investment is in, and the gaming occurs, overseas. There
is no sound reason why responsible business people in
this state should be banned from making investments
overseas that will have no effect on the industry here in
California.
2)History : California's regulation of gambling has been
expanding over the last several years. In 1984, the
Legislature passed the Gambling Registration Act, which
increased regulatory oversight of card rooms, and
established state regulation of card room owners,
employees and vendors. The Gambling Control Act of 1997
further strengthened state oversight of gambling. The Act
created the Gambling Control Commission and Division of
Gambling Control within the Department of Justice and
vested within each specified powers.
Under this expanded structure, the State investigates the
background of individuals and businesses that want to be
involved in the gambling industry. In prior years, the
state imposed broad prohibitions against certain classes
of ownership. Specifically, the law denies a license to
anyone who is involved in gambling activities that are
outlawed by state law, such as house-banked games, even
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if that activity is legal in another state.
This law was enacted at a time when gambling was closely
associated with organized crime. By preventing casino
operators from owning card clubs in California, lawmakers
hoped to prevent organized crime from becoming involved
in gambling in the State, and to keep Nevada casino
owners from having ownership interests in California
gambling establishments.
3)Little Hoover Commission study on financial interests of
card room owners : In 2001, Governor Davis vetoed SB 51
(Vincent), which would have authorized issuance of a
gambling license to a publicly traded corporation
irrespective of whether the person has any financial
interest in a company outside California that engages in
gambling that is not legal here. In his veto message, the
Governor asked the Little Hoover Commission (LHC) to
study current state law that prohibits the ownership of
card rooms by anyone associated with a gambling operation
not permitted in California.
Thereafter, the Little Hoover Commission (LHC) published
a report entitled, "Card Clubs in California: A Review of
Ownership Limitations," in which the LHC concluded that
these limitations, originally in place to protect the
public, are no longer necessary.
4)Support : According to the supporters, no other gaming
industry in California is precluded from investing in
gaming operations outside of this Country, and there is
no rational basis for this discriminatory practice to
continue. In addition, supporters note that no other
gaming jurisdiction in the United States precludes their
licensees from investing in other Countries. They believe
that responsible business owners in this state should not
be precluded from making investments that will have no
effect on the industry here in California.
5)Opposition : The opponent to the bill states that this
proposed change in law runs counter to existing law,
which is intended to prohibit the "cross pollination" of
funds between a California-licensed card room and money
generated in out of state casinos. The concern was that a
California card room would obtain a financial interest in
a Las Vegas casino and use the profits to enhance their
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card room operations. Such a practice would provide that
card rooms with a competitive advantage compared to other
card rooms and tribal casinos in the area. It could also
lead to a situation where a Las Vegas casino was
essentially managing a California card room.
The opponent also contends that the potential for foreign
funds, generating from casinos in other countries with no
United States oversight or jurisdiction, is bad policy
and creates a business relationship that existing law was
intended to prevent, and further question how this
activity could be regulated by California governmental
entities.
PRIOR/RELATED LEGISLATION
SB 175 (Vincent) 2005-2006 Session. Would have deemed an
applicant suitable to hold a state gambling license,
notwithstanding the fact that the applicant has a financial
interest in another business that conducts lawful gambling
outside the state that may violate California law if it
were conducted in California. (Held in Assembly
Appropriations Committee)
SB 1524 (Vincent) 2003- 2004 Session. Would have removed
the prohibition precluding a person engaged in any form of
gambling prohibited by Section 330 of the Penal Code,
whether within or without this state, from obtaining a
state gambling license to own a gambling establishment.
(Failed passage in Assembly Appropriations Committee)
SB 1314 (Vincent) 2001-2002 Session. Would have authorized
a publicly traded corporation that leases a card club from
a publicly traded racing association to obtain a
state gambling license for a card club located at the
racing association's racetrack irrespective of whether the
person has any financial interest in a company, either
within or outside of this state, that is engaged in a form
of gambling that is prohibited in California. (Held in
Assembly Governmental Organization Committee)
AB 572 (Firebaugh) 2001-2002 Session. Would have authorized
specified persons and corporations to obtain a gambling
license despite having a financial interest in an
establishment that offers forms of gambling that are
illegal in the state as long as the Commission, upon
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recommendation by the Division of Gambling Control, finds
that the ownership interest is not detrimental to
enforcement of state gaming law. (Held on Senate Inactive
File)
SB 51 (Vincent) 2001-2002 Session. Would have authorized a
publicly traded corporation to obtain a state gambling
license regardless of whether the person has any financial
interest in a company, either within or outside of this
state, that is engaged in a form of gambling that is
prohibited in California. (Vetoed)
SB 1838 (Burton) 1999-2000 Session. Would have exempted a
person leasing a card club owned by a publicly traded
racing association that was licensed prior to July 1, 2000
from provisions prohibiting issuance of a gambling license.
(Vetoed)
SB 100 (Maddy), Chapter 387, Statutes of 1995. Authorizes
publicly traded racing associations and qualified racing
associations to be eligible for a state gambling license to
own a gambling establishment. Further, it requires every
owner of five percent or more of the association to obtain
a state gambling license.
SUPPORT:
Capitol Casino
Hollywood Park Casino
Lucky Chances
Oceans 11 Casino
The Village Club
OPPOSE:
Artichoke Joe's
FISCAL COMMITTEE: No.