Bill Text: CA SB51 | 2013-2014 | Regular Session | Amended
Bill Title: Internet gambling.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2014-02-03 - Returned to Secretary of Senate pursuant to Joint Rule 56. [SB51 Detail]
Download: California-2013-SB51-Amended.html
BILL NUMBER: SB 51 AMENDED
BILL TEXT
AMENDED IN SENATE SEPTEMBER 12, 2013
INTRODUCED BY Senator Wright
DECEMBER 19, 2012
An act to add Chapter 5.2 (commencing with Section 19990.01) to
Division 8 of, and to repeal Sections 19990.23.5 and 19990.96 of, the
Business and Professions Code, relating to Internet gambling, making
an appropriation therefor, and declaring the urgency thereof, to
take effect immediately.
LEGISLATIVE COUNSEL'S DIGEST
SB 51, as amended, Wright. Internet gambling.
The Gambling Control Act provides for the licensure of certain
individuals and establishments that conduct controlled games, as
defined, and for the regulation of these gambling activities by the
California Gambling Control Commission. The Department of Justice has
related investigatory and enforcement duties under the act. Any
violation of these provisions is punishable as a misdemeanor, as
specified.
This bill would establish a framework to authorize intrastate
Internet gambling, as specified. The bill would authorize eligible
entities to apply to the commission for a 5-year
10-year license to operate an intrastate Internet gambling
Web site offering the play of authorized gambling games to
registered players within California. The bill would prohibit the
offer or play of any gambling game provided over the Internet that is
not authorized by the state pursuant to this bill. The bill would
provide that any violation of its provisions is punishable as a
misdemeanor. By creating a new crime, this bill would impose a
state-mandated local program.
The bill would require a license applicant to pay an application
deposit to the commission, for deposit into the Internet Gambling
Licensing Fund, as created by the bill, to be continuously
appropriated to the department and the commission for the reasonably
anticipated costs of investigating the applicant and evaluating the
suitability of the applicant. The bill would also create the Internet
Gambling Fund, for the deposit of an unspecified regulatory fee,
which would be administered by the Controller subject to annual
appropriation by the Legislature for the actual costs of license
oversight, consumer protection, state regulation, problem gambling
programs, and other purposes related to this bill, and which would
not be subject to the formulas established by statute directing
expenditures from the General Fund. The bill would require each
licensee to pay a one-time license fee in the amount of
$30,000,000 $15,000,000 for deposit in the
General Fund. The license fee would be credited against monthly fees
imposed on the licensee's gross gaming revenue proceeds, as
specified.
Existing law provides that a statute that imposes a requirement
that a state agency submit a periodic report to the Legislature is
inoperative on a date 4 years after the date the first report is due.
This bill would require the department, notwithstanding that
requirement, in consultation with the commission, the Treasurer, and
the Franchise Tax Board, to issue a report to the Legislature
describing the state's efforts to meet the policy goals articulated
in this bill within one year of the operative date of this bill and,
annually, thereafter.
The bill would also require the Bureau of State Audits, at least 4
years after the issue date of any license by the state, but no later
than 5 years after that date, to issue a report to the Legislature
detailing the implementation of this bill, as specified.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
This bill would declare that it is to take effect immediately as
an urgency statute.
Vote: 2/3. Appropriation: yes. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Chapter 5.2 (commencing with Section 19990.01) is added
to Division 8 of the Business and Professions Code, to read:
CHAPTER 5.2. THE INTERNET GAMBLING CONSUMER PROTECTION AND
PUBLIC-PRIVATE PARTNERSHIP ACT OF 2013
Article 1. Title, Legislative Declarations, and Statement of
Legislative Intent
19990.01. This chapter shall be known and may be cited as the
Internet Gambling Consumer Protection and Public-Private Partnership
Act of 2013.
19990.02. The Legislature hereby finds and declares all of the
following:
(a) Californians participate in illegal online gambling on
unregulated Internet gambling Web sites. These Internet gambling Web
sites are operated by offshore operators that are not regulated by
United States authorities. As such, neither federal nor California
laws provide any consumer protections for California players.
California players assume all risks, any negative social or financial
impacts are borne by the citizens of California, and the revenues
generated from online gambling are being realized by offshore
operators and do not provide any benefits to the citizens of
California.
(b) The presence, operation, and expansion of offshore,
unlicensed, and unregulated Internet gambling Web sites available to
Californians endanger Californians because the current Internet
gambling Web sites operate illegally and without regulation as
demonstrated by criminal prosecutions of some Internet gambling
purveyors, and questions often arise about the honesty and the
fairness of the games played on these Internet gambling Web sites as
well as about the use of proceeds generated by these unregulated
Internet gambling Web sites.
(c) In October 2006, Congress passed the SAFE Port Act (Public Law
109-347), to increase the security of United States ports. Embedded
within the language of that act was a section entitled the Unlawful
Internet Gambling Enforcement Act of 2006 (UIGEA), which prohibits
the use of banking instruments, including credit cards, checks, or
fund transfers, for interstate Internet gambling, essentially
prohibiting online gambling by United States citizens. UIGEA includes
exceptions that permit individual states to create a regulatory
framework to enable intrastate Internet gambling, provided the bets
or wagers are made exclusively within a single state, whose state
laws or regulations comply with all of the following:
(1) Contain certain safeguards regarding those transactions,
including both of the following:
(A) Age and location verification requirements.
(B) Data security standards designed to prevent access by minors
and persons located outside of that state.
(2) Expressly authorize the bet or wager and the method by which
the bet or wager is made.
(3) Do not violate any federal gaming statutes, including all of
the following:
(A) The Interstate Horseracing Act of 1978.
(B) The Professional and Amateur Sports Protection Act.
(C) The Gambling Devices Transportation Act.
(D) The Indian Gaming Regulatory Act of 1988
(IGRA).
(d) State provision of Internet gambling consistent with federal
law provides California with the means to protect its citizens and
consumers under certain conditions by providing a framework to ensure
that, among other things, minors are prevented from gambling,
citizens participating in gambling activities are protected, and the
state is not deprived of income tax revenues to which it would
otherwise be entitled.
(e) The state currently maintains and implements substantial
regulatory and law enforcement efforts to protect thousands of
Californians who gamble and play, among other things, real-money
poker in licensed California cardrooms and tribal government casinos,
yet the state provides no licensing requirements, regulatory
structure, or law enforcement tools to protect millions of
Californians who play the same games daily for money on the Internet.
(f) California has a legitimate state interest in protecting the
integrity of state-authorized intrastate Internet gaming by licensing
only entities already engaged in legal gambling operations subject
to the scrutiny and discipline of California regulatory agencies and
that are in good standing with those state agencies.
(g) In order to protect Californians who gamble online, allow
state law enforcement to ensure consumer protection, and keep the
revenues generated from Internet gambling in California, it is in the
best interest of the state and its citizens to authorize, implement,
and create a legal system for intrastate Internet gambling.
(h) It is also the interest of the state to provide hundreds of
millions of dollars annually for the public services that have been
cut repeatedly during the state's budget crisis. It is the intent of
the Legislature in enacting this act to ensure that the state
realizes a minimum of two hundred million dollars ($200,000,000) of
General Fund revenue from licensing fees during the 2013-14 fiscal
year.
(i) The state's interests are best met by a public-private
partnership between the state and private entities, the terms of
which would facilitate meeting the important consumer protection
interests of the state while ensuring, through the success of the
private entities, that the state receives the benefits of the
licensing scheme as well as tax revenues that it would otherwise not
receive.
(j) The state's interests are best met by encouraging competition
among qualified entities with the technical expertise and systems
that comply with federal law, protect registered players, and ensure
that the state collects consideration under the licensing scheme with
those qualified entities, personal income taxes owed by registered
players, corporate taxes from the earnings of licensed entities, and
property, employment, and sales and use taxes created from new
businesses, jobs, and other economic inducements from the
authorization, regulation, and control of Internet gambling.
(k) The California Gambling Control Commission and the Department
of Justice, in conjunction with other state agencies and private
partners, has the expertise to evaluate the qualifications of
applicants for a license to conduct intrastate Internet gambling
services, and to license the best qualified and most responsive
applicants to meet the needs of the state and its citizens.
(l) The authorization of intrastate Internet gambling pursuant to
this chapter does not violate the California Constitution or
interfere with any right under any compact between the state and any
federally recognized Indian tribe. Moreover, the authorization and
regulation of intrastate Internet gambling pursuant to this chapter
do not violate the exclusivity provisions of any compact between the
state and any federally recognized Indian tribe. Internet gambling
will take place throughout California. Moreover, the facilities used
in the provision of Internet gambling are not slot machines or gaming
devices as defined in any of those compacts, and it was not the
intent of any party to a tribal-state gaming compact to prohibit the
use of a gaming system, or an Internet access device not located in a
place of public accommodation, to play nonbanked games that are not
subject to the compacts, including the Internet poker authorized by
this act. While the federal Indian Gaming Regulatory Act of
1988 balanced the interests of three sovereigns, the state,
the tribes, and the federal government, UIGEA was designed to
balance the federal interest in secure financial transactions with
the state's power to determine how online gambling should take place
within that state. Finally, application of UIGEA in California does
not violate federal Indian law by impinging upon protected tribal
sovereignty.
(m) Nothing in this chapter prohibits any federally recognized
Indian tribe within California with a tribal-state gaming compact
with the state pursuant to IGRA from participating in intrastate
Internet gambling pursuant to these provisions subject to the
jurisdiction of the state.
19990.03. It is the intent of the Legislature to create a
licensing and regulatory framework to:
(a) Ensure that authorized games are offered only for play in a
manner that is consistent with federal and state law.
(b) Authorize the California Gambling Control Commission to issue
licenses, with the recommendation of the Department of Justice, to
applicants that meet the background requirements and demonstrate the
technical expertise to ensure that game play authorized by this
chapter is offered only to registered players who are physically
present within the borders of California at the time of play and who
are 21 years of age or older.
(c) Authorize the commission, after any licensee has been
providing authorized games for five 10
years, to renegotiate the fees paid by the licensees, as provided in
this chapter, based in large part on the report and recommendations
of the Bureau of State Audits to the Legislature pursuant to Section
19990.96, and subject to the statutory approval of the Legislature.
Each existing licensee shall have the opportunity to agree to any
changes in fees and continue in partnership with the state, or to
relinquish its license.
(d) Include all of the provisions in this chapter as terms of the
license between the state and each licensee, subject to the
enforcement provisions delineated in this chapter.
(e) Ensure that each licensee complies with federal and state laws
and regulations.
(f) Grant power to the state agencies authorized in this chapter
to oversee the operations of each licensee and to enforce the
provisions of this chapter to ensure that the interests of the state
and registered players are protected.
(g) Establish a process that includes a background investigation
and requires that each employee of each licensee or subcontractor
receives all necessary licenses and work permits from the state.
(h) Ensure that the state is able to collect income tax revenues
from registered players.
(i) Distribute regulatory fees collected by the state from each
licensee to the Internet Gambling Fund, as established in Section
19990.86, which shall be administered by the Controller, subject to
annual appropriation by the Legislature, and which shall not be
subject to the formulas established by law directing expenditures
from the General Fund, for the following:
(1) The actual costs of license oversight, consumer protection,
state regulation, and problem gambling programs.
(2) Other purposes related to this chapter as the Legislature may
decide.
(j) Create systems to protect each registered player's private
information and prevent fraud and identity theft.
(k) Ensure that registered players are able to have their
financial transactions processed in a secure and transparent fashion.
(l) Ensure that all applicable state agencies will have
unrestricted access to the premises and records of each licensee to
ensure strict compliance with state law concerning credit
authorization, account access, and other security provisions.
(m) Require that each licensee provide registered players with
accessible customer service.
(n) Require that each licensee's Internet Web sites contain
information relating to problem gambling, including a telephone
number that an individual may call to seek information and assistance
for a potential gambling addiction.
(o) Require that each licensee and all of its subcontractors be
organized in California. The licensee, its facilities, its bank
accounts and accounting records related to its intrastate online
gambling operations, and its registered players' deposits shall be
located entirely within the state.
(p) Ensure that there are no artificial business constraints on
the licensee, such as limits on the percentage of revenues that may
be paid to technology supply contractors or limits on the number of
intrastate Internet gambling Web sites a licensee may operate.
Licensees and suppliers are free to structure their own desired
relationships without interference from the state.
(q) Ensure that all employees of the licensee are physically
present in the state when working on the licensee's Internet gambling
Web site or in its facilities connected to the play of Internet
gambling in this state, or when in contact with registered players.
However, the licensee shall have discretion to use the expertise of
personnel not physically present in the state when necessary to
protect registered players and state interests, including, but not
limited to, for the purposes of diagnosing and addressing
technological problems, investigating fraud and collusion, and
supervising software and configuration changes.
(r) Create an express exemption from disclosure, pursuant to the
California Public Records Act under subdivision (b) of Section 6253
of the Government Code, that exempts from public disclosure
proprietary information of a license applicant or a licensee in order
to permit disclosure of confidential information to state agencies
while achieving the public policy goals of deploying secure systems
that protect the interests of the state and players.
(s) Preserve the authority of the state to opt out of, or opt
into, any federal framework for Internet gambling, or to enter into
any agreement with other states to provide Internet gambling.
(t) As a matter of statewide concern, preempt any city, county, or
city and county from enacting any law or ordinance regulating or
taxing any matter covered in this chapter.
Article 2. Definitions
19990.05. For the purposes of this chapter the following words
have the following meanings:
(a) "Authorized game" means a game approved by the department
pursuant to Section 19990.14 and played using an intrastate Internet
Web site pursuant to the authority of the state or offered by a
licensee as authorized by the state on an intrastate Internet Web
site operated by a licensee pursuant to this chapter.
(b) "Background investigation" means a process of reviewing and
compiling personal and criminal history and financial information
through inquiries of various law enforcement and public sources to
establish a person's qualifications and suitability for a license.
(c) "Bet" means the placement of a wager in a game.
(d) "Commission" means the California Gambling Control Commission.
(e) "Core functions" and "core functioning" mean any of the
following:
(1) The management, administration, or control of wagers on
authorized games provided over the Internet.
(2) The management, administration, or control of the games with
which those wagers are associated.
(3) The development, maintenance, provision, or operation of a
gaming system.
(f) "Department" means the Department of Justice.
(g) "Employee" means any natural person employed in, or serving as
a consultant or independent contractor with respect to, the core
functioning of the actual operation of an intrastate Internet
gambling Web site.
(h) "Employee work permit" means a permit issued to an employee of
the licensee or a subcontractor by the commission or by an
authorized tribal regulatory office after a background
investigation.
(i) "Finding of suitability" means a finding by the commission
that a person meets the qualification criteria described in Article 4
(commencing with Section 19990.20), and that the person would not be
disqualified from being a licensee on any of the grounds specified
in Article 4 (commencing with Section 19990.20).
(j) "Gambling" means to deal, operate, carry on, conduct,
maintain, or expose for play any game for money.
(k) "Game" means any gambling game.
(l) "Gaming system" means the technology, including hardware and
software, used by a licensee to facilitate the offering of authorized
games to registered players.
(m) "Good standing" means that a person has not had a gambling or
racing license suspended or revoked by a final decision of the board
or commission that issues that license or been finally ordered by a
court of competent jurisdiction to cease conducting gaming
activities. A suspension, revocation, or order shall be deemed final
for purposes of this definition when it is no longer subject to
challenge or appeal through administrative or court processes.
(n) "Gross revenues" means the total amount of money paid to a
licensee pursuant to activities authorized under this chapter. Gross
revenues shall not include player deposits and wagers or other
items excluded from gross revenues pursuant to generally accepted
accounting principles .
(o) "Internet Gambling Fund" means the fund established pursuant
to Section 19990.86 for annual appropriation by the Legislature.
(p) "Intrastate" means within the borders of California.
(q) "Key employee" means any natural person employed by a
licensee, subcontractor, or player recruiter, or by a holding or
intermediary company of a licensee, subcontractor, or player
recruiter, who is an officer or director of the licensee or
certificate holder, or who, in the judgment of the commission, has
the authority to exercise significant influence over decisions
concerning the operation of the licensee or certificate holder as
that operation relates to the Internet gambling authorized by this
chapter.
(r) "Land-based gaming entity" means a card club operated pursuant
to Chapter 5 (commencing with Section 19800) or a casino operated by
a federally recognized Indian tribe on Indian land in California
that provides any game for players on its premises that is offered on
an intrastate Internet gambling Web site.
(s) "Licensee" means an entity licensed pursuant to this chapter
to offer the play of authorized games to registered players on an
intrastate Internet Web site.
(t) "Online self-exclusion form" means a form on which an
individual notifies a licensee that he or she must be excluded from
participation in authorized games for a stated period of time.
(u) "Owner" means any person that has a financial interest in or
control of a licensee, subcontractor, or other entity required to be
found suitable under this chapter.
(v) "Per hand charge" means the amount charged by the licensee for
registered players to play in a per hand game.
(w) "Per hand game" means an authorized game for which the
licensee charges the player for each hand played.
(x) "Person" means an individual, corporation, business trust,
estate, trust, partnership, limited liability company, association,
joint venture, government, governmental subdivision, agency, or
instrumentality, public corporation, or any other legal or commercial
entity.
(y) "Play settings" means the options and default parameters made
available by a licensee to a registered player in the play of
authorized games.
(z) (1) "Poker" means any of several card games that meet all of
the following criteria:
(A) Not banked by either the house or by a player.
(B) Commonly referred to as "poker."
(C) Played by two or more individuals who wager against each other
on the cards dealt to them out of a common deck of cards, including
games using electronic devices that simulate a deck of cards.
(D) Players compete against each other and not against the person
or entity operating the game.
(E) Success over time is influenced by the skill of the player.
(F) Wagers of one player are often designed to affect the
decisions of another player in the game.
(G) The operator of the game may assess a fee.
(2) "Poker" includes poker tournaments in which players pay a fee
to the operator of the tournament under the authority of the state
pursuant to this chapter.
(aa) "Proprietary information" means and includes all information
that, whether or not patentable or registerable under patent,
copyright, trademark, or similar statutes, (1) can be protected as a
trade secret under California law or any other applicable state law,
federal law, or foreign law, or (2) derives independent economic
value, actual or potential, from not being generally known to the
public or to other persons that can obtain economic value from its
disclosure or use. "Proprietary information" includes, but is not
limited to, computer programs, databases, data, algorithms, formulae,
expertise, improvements, discoveries, concepts, inventions,
developments, methods, designs, analyses, drawings, techniques,
strategies, new products, reports, unpublished financial statements,
budgets, projections, billing practices, pricing data, contacts,
client and supplier lists, business and marketing records, working
papers, files, systems, plans and data, and all registrations and
applications related thereto.
(ab) "Registered player" means a player who has registered with a
licensee to play authorized games.
(ac) "Registration information" means the information provided by
a person to a licensee in order to become a registered player.
(ad) "Robotic play" means the use of a machine or software by a
registered player or licensee to automate the next player action at
any point in a game.
(ae) "State" means the State of California.
(af) (1) "Subcontractor" means any person that does any of the
following:
(A) On behalf of a licensee, knowingly manages, administers, or
controls wagers on authorized games provided over the Internet by a
licensee pursuant to this chapter.
(B) On behalf of a licensee, knowingly manages, administers, or
controls the games with which those wagers are associated.
(C) On behalf of a licensee, develops, maintains, provides, or
operates a gaming system.
(D) Sells, licenses, or otherwise receives compensation for
selling or licensing information on individuals in California who
made wagers on games over the Internet that were not licensed under
this chapter via a database or customer lists.
(E) Provides any product, service, or asset to a licensee and is
paid a percentage of gaming revenue by the licensee, not including
fees to financial institutions and payment providers for facilitating
a deposit by a customer.
(F) Provides intellectual property, including the trademarks,
trade names, service marks, or similar intellectual property under
which a licensee identifies its games to its customers.
(2) "Subcontractor" shall not include a provider of goods or
services that provides similar goods or services to the public for
purposes other than the operation of Internet gambling activities,
and is not otherwise directly or indirectly involved in the operation
of an intrastate Internet gambling Web site pursuant to a license
issued under this chapter.
(ag) "Terms of Use Registered Player's Agreement" means the
agreement offered by a licensee and accepted by a registered player
delineating, among other things, permissible and impermissible
activities on an intrastate Internet gambling Web site and the
consequences of engaging in impermissible activities.
(ah) "Tournament" means a department-approved competition in which
registered players play a series of authorized games to decide the
winner.
(ai) "Tournament charge" means the amount charged by the licensee
for registered players to play in a tournament.
(aj) "Tournament winnings" means the amount of any prize awarded
to a registered player in a tournament.
(ak) "Tribe" means a federally recognized California Indian tribe,
including, but not limited to, the governing body of that tribe or
any entity that is an affiliate of that tribe.
Article 3. Legal Authorized Games Offered Over the Internet in
California
19990.10. Under the federal Unlawful Internet Gambling
Enforcement Act of 2006, California is permitted to authorize games
as long as all players and the online wagering activities are located
within the state and the games are not played by minors.
19990.11. Notwithstanding any other law, a person in California
21 years of age or older is hereby permitted to participate as a
registered player in an authorized game provided over the Internet by
a licensee as described in this chapter.
19990.12. (a) A person shall not offer any game on the Internet
in this state unless that person holds a valid license issued by the
state to offer the play of authorized games on an intrastate Internet
gambling Web site pursuant to this chapter.
(b) It is unlawful for any person to offer or play any gambling
game provided on the Internet that is not authorized by the state
pursuant to this chapter.
(c) It is unlawful for any person to aggregate computers or other
access devices in a public setting for the purpose of playing
gambling games on the Internet, whether or not otherwise authorized
pursuant to this chapter, or to promote or market that activity.
(d) Any violation of this chapter is punishable as a misdemeanor.
19990.13. Chapter 5 (commencing with Section 19800) does not
apply to this chapter.
19990.14. (a) Only poker shall be offered for play on an
intrastate Internet gambling Web site pursuant to this chapter.
(b) Only the types of poker games approved by the department for
play on an intrastate Internet gambling Web site shall be offered for
play on an intrastate Internet gambling Web site pursuant to this
chapter.
Article 4. Licensing of Intrastate Internet Gambling Web Site
Operators
19990.20. (a) A license to operate an intrastate Internet
gambling Web site pursuant to this chapter shall be issued for a term
of five 10 years. Subject to the power
of the commission to deny, revoke, suspend, condition, or limit any
license, as provided in this chapter, a license is eligible for
renewal at the end of each term. Failure of a licensee to file an
application for renewal may be deemed a surrender of the license. The
commission shall draft necessary regulations for the licensing
renewal process.
(b) All initial licenses issued pursuant to this chapter shall
take effect on the same date, as determined by the department, but
not later than January 1, 2015.
19990.21. (a) Each entity described in subdivision (b) is
eligible for a single intrastate Internet gambling license. There is
no limit on the total number of licenses the state may issue. Any of
the eligible entities may jointly apply for a license, either as a
consortium or by forming an entity comprised entirely of eligible
entities. Each eligible entity may have an interest in only a single
license.
(b) An entity eligible to apply for, receive, and maintain an
intrastate Internet gambling license pursuant to this chapter
includes all of the following:
(1) A gambling enterprise, as defined in subdivision (m) of
Section 19805, that holds an owner license issued pursuant to
subdivision (a) of Section 19851, and that has been subject to
oversight by, and in good
standing with, the commission for the three years immediately
preceding its application for licensure.
(2) A federally recognized California Indian tribe operating a
casino pursuant to a tribal-state gaming compact under the federal
Indian Gaming Regulatory Act of 1988, Act,
or pursuant to procedures prescribed under Section 2710(d)(7)
(A)(vii) of Title 25 of the United States Code, that has been subject
to oversight by, and in good standing with, the commission and the
department for the three years immediately preceding its application
for licensure.
(3) A thoroughbred, quarter horse, or harness association licensed
by the California Horse Racing Board that has been subject to
oversight by, and in good standing with, the board for the three
years immediately preceding its application for licensure.
(4) An operator of an online advanced deposit wagering site
regulated by the California Horse Racing Board that has been subject
to oversight by, and in good standing with, the board for the three
years immediately preceding its application for licensure.
(5) A wholly owned subsidiary of any of the entities described in
paragraphs (1) to (4), inclusive, created for the purpose of engaging
in the activities permitted by this chapter.
(c) For the purposes of this section, incorporation or other
change in legal form of ownership during the three years immediately
preceding application for licensure shall not disqualify an entity
otherwise eligible for licensure pursuant to subdivision (b).
Additionally, for the purposes of this section, a group of eligible
entities jointly applying for a license, either as a consortium or by
forming an entity comprised entirely of eligible entities, need not
have been in existence for three years to be eligible for a license
pursuant to this section, provided that its members meet all other
eligibility requirements of this section.
19990.22. (a) Factors to be considered in evaluating a license
applicant shall include, but are not limited to, quality, competence,
experience, past performance, efficiency, reliability, financial
viability, durability, adaptability, timely performance, integrity,
security, and the applicant's subcontractors for core functions.
(b) (1) A license applicant, and all subcontractors of the
applicant, shall be a resident of California, or an entity organized
in California, and subject to state taxation, auditing, and
enforcement. All facilities, bank accounts, and accounting records of
the license applicant related to intrastate Internet gambling shall
be located in California.
(2) At all times, a license applicant or licensee shall be
domiciled in California and in good standing with the Secretary of
State and the Franchise Tax Board.
(3) All subcontractors of a license applicant or licensee, or
persons otherwise providing goods or performing services in
connection with the operation of authorized games for the license
applicant or licensee, or any of its subcontractors, and any persons
that have the authority to exercise significant influence over a
subcontractor shall be subject to this subdivision. If a licensee
desires to enter into an agreement with a person to provide goods or
services in connection with the operation of authorized games, that
person shall be subject to this subdivision and investigation and a
finding of suitability as set forth in Section 19990.23. The
commission may establish a registration process and application for
subcontractors not performing core functions.
(c) In addition to any other confidentiality protections afforded
to license applicants, the state and its agencies shall treat the
proprietary information of any license applicant as confidential to
protect the license applicant and to protect the security of any
prospective intrastate Internet gambling Web site. This chapter does
not prohibit the exchange of confidential information among state
agencies considering a license application. The confidentiality
provisions in this chapter exempt proprietary information supplied by
a license applicant to a state agency from public disclosure
consistent with subdivision (b) of Section 6253 of the Government
Code.
(d) A license applicant that has been deemed eligible shall submit
to the commission, together with its application, an application
deposit of no less than one million dollars ($1,000,000),
and no greater than five million dollars ($5,000,000), as determined
by the department, in consultation with the commission, for
the reasonably anticipated costs to complete necessary background
investigation and evaluate the suitability of the applicant. All
moneys collected pursuant to this subdivision shall be deposited into
the Internet Gambling Licensing Fund, as hereby created, to be
administered by the department. Notwithstanding Section 13340 of the
Government Code, all moneys in the fund are continuously appropriated
to the department and the commission, without regard to fiscal
years, in the amounts necessary for the department and the commission
to perform their duties under this section and Section 19990.23. Any
funds associated with the license applicant that remain after
completion of background investigation and the finding of suitability
shall be refunded to the applicant. If additional moneys are needed
to complete the investigation of the license applicant, the applicant
shall pay the funds necessary to complete the investigation.
(e) An applicant for an intrastate Internet gambling license
pursuant to this chapter that is a federally recognized Indian tribe
or an entity that is either wholly owned by a tribe or that consists
of one or more tribes shall include with its license application an
express waiver of the applicant's sovereign immunity solely for the
purposes of investigating the suitability of the applicant, and
enforcing this chapter and any regulations promulgated thereunder,
and with regard to any claim, sanction, or penalty arising therefrom,
against the applicant as a prospective or actual licensee, and for
no other purpose.
19990.23. (a) The department shall review the suitability of a
license applicant to operate an intrastate Internet gambling Web
site.
(b) The department may establish a process to conduct a
preliminary determination of suitability based on a partial
investigation of license applicants seeking licensure along with a
determination of which license applicants may be subject to a partial
investigation. A partial investigation is intended to screen out
applicants that do not meet the suitability requirements of this
chapter. A partial investigation shall include fingerprint-based
state and federal criminal history checks and clearances, and
inquiries into various public databases regarding credit history and
any civil litigation. A partial investigation shall also include a
review of the applicant's financial status, which shall include the
required submission of a report prepared on behalf of the applicant
by a department-approved forensic accounting, audit, or investigative
firm, in a format developed by the department, and at the applicant'
s expense. The report shall include the financial information
necessary for the department to make a preliminary determination of
suitability. The department may specify additional requirements
regarding the contents of the report and any other financial
information or documentation required to be submitted with the
application. A full investigation shall be conducted of only those
persons that pass the partial investigation and that will undergo a
full investigation pursuant to subdivision (c). Those applicants that
do not pass the partial investigation may appeal the decision to the
commission.
(c) The department shall conduct a full investigation into the
suitability of any license applicant to operate an intrastate
Internet gambling Web site. The investigation shall include all of
the following persons:
(1) The license applicant and all of its subcontractors that
provide services related to core functions.
(2) All officers of the license applicant.
(3) The owner or owners of the following:
(A) The license applicant.
(B) Any affiliate of the license applicant.
(C) Any subcontractors of a license applicant, or other persons
otherwise providing goods to, or performing services for, the license
applicant related to core functions.
(D) Any person deemed by the department to have significant
influence over the license applicant or its subcontractors or their
respective operations.
(d) A full investigation shall include a review and evaluation of
the license applicant's qualifications and experience to provide the
services anticipated of a licensee, which shall include the required
submission of a report prepared on each applicant by an outside firm
contracted and supervised by the department, in a format developed by
the department, and at the applicant's expense. The report shall
include information necessary for the department to make a
determination of suitability, as specified in regulation, consisting
of, but not limited to, personal history, prior activities and
associations, credit history, civil litigation, past and present
financial affairs and standing, and business activities. The
department may specify additional requirements regarding the contents
of the report and other information or documentation required to be
submitted with the application. The license applicant shall also
provide compliance certification of its gaming software by a
department-approved gaming laboratory.
(e) (1) Both of the following persons are subject to the
investigation required under subdivision (c):
(A) A person that directly or indirectly holds a beneficial
interest or ownership interest of 10 percent or more of a
subcontractor or player recruiter of the licensee. The commission may
require any person with a smaller interest to be found suitable in
the exercise of its discretion where it deems appropriate. If the
person is not a natural person, the department may determine which
officers, directors, and owners of the person are significantly
involved in the management or control of the person as it relates to
core functions so as to require an investigation into suitability.
(B) If the owner is a publicly traded or qualified racing
association, then each officer, director, and owner, other than an
institutional investor, of 5 percent or more of the outstanding
shares of the publicly traded corporation.
(2) An institutional investor holding more than 10 percent and
less than 25 percent of the equity securities of a subcontractor's
holding or intermediary companies shall be granted a waiver of any
investigation of suitability or other requirement if all of the
following apply:
(A) The securities are those of a corporation, whether publicly
traded or privately held.
(B) Holdings of those securities were purchased for investment
purposes only.
(C) The institutional investor annually files a certified
statement with the department to the effect that it has no intention
of influencing or affecting the affairs of the issuer, the licensee,
or subcontractor, as applicable, or its holding or intermediary
companies.
(3) Notwithstanding paragraph (2), the institutional investor may
vote on matters put to the vote of the outstanding security holders.
(4) The certification described in subparagraph (C) of paragraph
(2) shall include a statement that the institutional investor
beneficially owns the equity securities of the corporation for
investment purposes only, and in the ordinary course of business as
an institutional investor, and not for the purpose of (A) causing,
directly or indirectly, the election of members of the board of
directors, or (B) effecting any change in the corporate charter,
bylaws, management, policies, or operations of the corporation or any
of its affiliates. The certification also shall indicate any changes
to the structure or operations of the institutional investor that
could affect its classification as an institutional investor, as
listed in paragraph (7). Additionally, the certification shall state
that the institutional investor and corporation shall maintain gaming
compliance policies and procedures to implement and ensure
compliance with this chapter and regulations promulgated thereunder.
(5) An institutional investor granted a waiver under paragraph (2)
that subsequently decides to influence or affect the affairs of the
issuer shall provide not less than 30 days' notice of that intent and
shall file with the department a request for determination of
suitability before taking any action that may influence or affect the
affairs of the issuer. However, the institutional investor may vote
on matters put to the vote of the outstanding security holders. If an
institutional investor changes its investment intent, or the
department finds reasonable cause to believe that the institutional
investor may be found unsuitable, the institutional investor shall
take no action other than divestiture with respect to its security
holdings until it has complied with any requirements established by
the department, which may include the execution of a trust agreement.
The subcontractor and its relevant holding, intermediary, or
subsidiary company shall immediately notify the department of any
information about, or actions of, an institutional investor holding
its equity securities when that information or action may impact upon
the eligibility of the institutional investor for a waiver pursuant
to paragraph (2).
(6) If at any time the department finds that an institutional
investor holding any security of a holding or intermediary company of
a subcontractor, or, where relevant, of another affiliate or
subsidiary company of a holding or intermediary company of a
subcontractor that is related in any way to the financing of the
subcontractor, fails to comply with the terms of paragraphs (2) to
(5), inclusive, or if at any time the department finds that, by
reason of the extent or nature of its holdings, whether of debt or
equity securities, an institutional investor is in a position to
exercise such a substantial impact upon the controlling interests of
a subcontractor that investigation and determination of suitability
of the institutional investor are necessary to protect the public
interest, the department may take any necessary action otherwise
authorized under this chapter to protect the public interest.
(7) For purposes of this subdivision, an "institutional investor"
includes all of the following:
(A) Any retirement fund administered by a public agency for the
exclusive benefit of federal, state, or local public employees.
(B) An investment company registered under the federal Investment
Company Act of 1940 (15 U.S.C. Sec. 80a-1 et seq.).
(C) A collective investment trust organized by banks under Part
Nine of the Rules of the Comptroller of the Currency.
(D) A closed-end investment trust.
(E) A chartered or licensed life insurance company or property and
casualty insurance company.
(F) A federally regulated or state regulated bank, savings and
loan, or other federally or state regulated lending institution.
(G) An investment adviser registered under the federal Investment
Advisers Act of 1940 (15 U.S.C. Sec. 80b-1 et seq.).
(H) Other persons as the department may determine for reasons
consistent with the public interest.
(f) Except as otherwise provided by statute or regulation, every
person, that, by statute or regulation, is required to hold a license
shall obtain a license prior to engaging in the activity, or
occupying the position, with respect to which the license is
required. An applicant for licensing, or for any approval or consent,
shall make a full and true disclosure of all information to the
department and the commission as necessary to carry out the policies
of the state relating to the licensing and control of gambling. The
burden of proving a person's qualifications to receive a license is
on the applicant.
(g) The commission shall issue a finding of suitability for a
license applicant to operate an intrastate Internet gambling Web site
only if, based on all of the information and documents submitted,
the commission is satisfied that each of the persons subject to
investigation pursuant to this section is both of the following:
(1) A person of good character, honesty, and integrity, or, if an
entity, in good standing in its jurisdiction of organization and in
all other jurisdictions in which it is qualified, or should be
qualified, to do business.
(2) A person whose prior activities, criminal record, if any,
reputation, habits, and associations do not pose a threat to the
public interest of this state, or to the effective regulation and
control of controlled gambling, or create or enhance the dangers of
unsuitable, unfair, or illegal practices, methods, and activities in
the conduct of controlled gambling or in the carrying on of the
business and financial arrangements incidental thereto.
(h) The commission shall issue a finding that a license applicant
is not suitable to operate an intrastate Internet gambling Web site
if it finds that any person subject to investigation pursuant to this
section is described by any of the following:
(1) Failed to clearly establish eligibility and qualifications in
accordance with this chapter.
(2) Failed to timely provide information, documentation, and
assurances required by this chapter or requested by the department,
or, with respect to a license applicant, failed to reveal any fact
material to qualification, or supplied information that is untrue or
misleading as to a material fact pertaining to the suitability
criteria.
(3) Been convicted of a felony, including a conviction by a
federal court or a court in another state or foreign jurisdiction for
a crime that would constitute a felony if committed in California.
(4) Been convicted of any misdemeanor, in any jurisdiction,
involving dishonesty or moral turpitude within the 10-year period
immediately preceding the submission of the application, unless the
applicant has been granted relief pursuant to Section 1203.4,
1203.4a, or 1203.45 of the Penal Code. However, the granting of
relief pursuant to Section 1203.4, 1203.4a, or 1203.45 of the Penal
Code shall not constitute a limitation on the discretion of the
department or affect the applicant's burden.
(5) Has associated with criminal profiteering activity or
organized crime, as defined in Section 186.2 of the Penal Code.
(6) Has contemptuously defied any legislative investigative body,
or other official investigative body of any state or of the United
States or any foreign jurisdiction, when that body is engaged in the
investigation of crimes relating to gambling, official corruption
related to gambling activities, or criminal profiteering activity or
organized crime, as defined in Section 186.2 of the Penal Code.
(7) Is less than 21 years of age.
(8) Has knowingly and willfully accepted any wager from a person
in the United States on any form of Internet gaming that has not been
affirmatively authorized by law in this state or the United States
after December 31, 2006, or has been the holder of a direct or
indirect financial interest in a person or entity that has accepted
such a wager.
(i) (1) The commission shall reject the license application of any
applicant found to be ineligible for licensure.
(2) If denial of the application, or approval of the license with
restrictions or conditions on the license, is recommended, the
department shall prepare and file with the commission written reasons
upon which the recommendation is based. Prior to filing its
recommendation with the commission, the department shall meet with
the applicant, or the applicant's duly authorized representative, and
inform the applicant generally of the basis for any proposed
recommendation that the application be denied, restricted, or
conditioned.
(3) This section neither requires the department to divulge to the
applicant any confidential information received from any law
enforcement agency or any information received from any person with
assurances that the information would be maintained confidential, nor
to divulge any information that might reveal the identity of any
informant or jeopardize the safety of any person.
(4) Denial of an application shall be without prejudice to a new
and different application filed in accordance with any regulations
adopted by the department with respect to the submission of
applications.
(5) A request to withdraw an application for a license may be made
by the license applicant at any time prior to final action on the
application by the department by filing a written request with the
commission to withdraw the application.
19990.23.5. (a) A finding of suitability by a state gaming agency
within the United States with expertise recognized within the gaming
industry, and that is also recognized as meeting this standard by
the department, shall be grounds for a state provisional finding of
suitability with respect to a particular person or entity until a
permanent suitability finding is issued by the department as to that
person or entity.
(b) This section shall remain in effect only until January 1,
2017, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2017, deletes or extends
that date.
19990.24. In addition to any other data that the department shall
request from license applicants as a matter of law and to ensure
that any license applicant is legally, technically, and financially
qualified to become a licensee, the department shall request that any
license applicant name, describe, or provide all of the following:
(a) The license applicant's qualifications and the qualifications
of its executives and employees to receive an employee work permit as
set forth in Section 19990.31.
(b) The license applicant's experience and qualifications to
provide the services anticipated of a licensee as set forth in
Article 5 (commencing with Section 19990.30).
(c) The names of all of the license applicant's owners,
executives, and employees, as well as sufficient personally
identifiable information on each of those persons to conduct
background investigations as required by the department.
(d) The fingerprints of the owners, directors, managers,
executives, and employees of the licensee, its affiliates, and
subcontractors taken using live-scan technology.
(e) Documentation and information relating to the license
applicant and its direct and indirect owners, including, but not
limited to, all of the following:
(1) With respect to the license applicant and any of its
subcontractors, proof of formation in California, including, as
applicable, articles of incorporation, articles of organization,
bylaws, operating agreement, partnership agreement, or other
formation or charter documents.
(2) Current and historical audited financial and accounting
records performed in accordance with Generally Accepted
Accounting Principles (GAAP) generally accepted
accounting principles or International Financial Reporting
Standards (IFRS).
(3) Any documents relating to legal and regulatory proceedings.
(4) Any documents relating to the license applicant's business
history and structure.
(5) Any documents relating to the nature and sources of the
license applicant's financing, including, but not limited to,
operating agreements, partnership agreements, stock purchase
agreements, loan capital agreements, pro forma cap tables, pro forma
statements of profits and loss, investor rights agreements, voting
agreements, and shareholder agreements. These materials may be
submitted subject to a request for confidentiality.
(6) Any documentation that demonstrates that the license applicant
is financially qualified to perform the obligations of a licensee as
described in this article.
(7) An independent financial audit report by a certified public
accountant.
(f) Documentation and information relating to all proposed
subcontractors of the license applicant, including, but not limited
to, all of the following:
(1) A description of the services to be provided by each
subcontractor.
(2) Information for each subcontractor as set forth in
subdivisions (b), (c), (d), and (e).
(3) For subcontractors that are not formed in California, a
commitment in writing by the subcontractor to create a California
subsidiary prior to the commencement of authorized games provided by
the licensee. The commitment required pursuant to this paragraph
shall be subject to the cure provisions of Section 19990.61.
(g) A description of the games and services the license applicant
proposes to offer to registered players.
(h) A description of the manner in which the licensee's facilities
will accomplish the goals of this chapter, including, but not
limited to:
(1) The licensee's location within the state.
(2) The licensee's security systems.
(i) The license applicant's proposal for the manner in which it
will facilitate compliance with all of the standards set forth in
this chapter and federal law, including, but not limited to, Section
5362(10)(B) of Title 31 of the United States Code, including, but not
limited to, all of the following:
(1) Age and location verification requirements reasonably designed
to block access by minors and persons located out of state.
(2) Appropriate data security standards to prevent unauthorized
access by any persons whose age and current location have not been
verified in accordance with this chapter and applicable regulations.
(3) The requirement that the licensee be located in California and
all bets be initiated and received or otherwise made exclusively
within California.
(j) The system requirements that the license applicant plans to
implement to achieve the state's goals under this chapter, including,
but not limited to:
(1) Connectivity.
(2) Hardware.
(3) Software.
(4) Antifraud systems.
(5) Virus prevention.
(6) Data protection.
(7) Access controls.
(8) Firewalls.
(9) Disaster recovery.
(10) Redundancy.
(11) Gaming systems, including, but not limited to, hardware and
software that ensure all of the following:
(A) The games are legal.
(B) The games are independent and fair and played by live persons.
(C) Game and betting rules are available to all registered
players.
(D) All data used for the conduct of each game is randomly
generated and unpredictable.
(12) Accounting systems, including
including, but not limited to, those for any of the following:
(A) Registered player accounts.
(B) Per hand charges.
(C) Transparency and reporting to all state agencies.
(D) Distribution of funds, pursuant to the license and this
chapter, to the state and registered players.
(E) Ongoing auditing and ongoing internal control and compliance
reviews.
(13) Facility security systems to protect the intrastate Internet
gambling Web site from internal and external threats.
(k) The license applicant's proposal to facilitate the statutory
duties and responsibilities of the state agencies with jurisdiction
over aspects of the licensee's operations, including, but not limited
to, all of the following:
(1) The department.
(2) The commission.
(3) The Treasurer.
(4) The Franchise Tax Board.
(l) An acknowledgment by the license applicant that the fees or
terms of the license issued by the state may be modified by the state
after five years, at which point the licensee may either agree to be
subject to that modification or relinquish the license.
(m) In addition to demonstrating that the license applicant is
legally, technically, and financially qualified to become a licensee,
a licensee shall also provide compliance certification of its gaming
software by a department-approved gaming laboratory to ensure that
it complies with the requirements of this chapter.
19990.25. (a) A holder of an owner license issued pursuant to
subdivision (a) of Section 19851, and that is in good standing, shall
not be deemed unqualified to operate a land-based gambling entity by
reason of an investment in a license applicant or a licensee.
(b) An official representative of the government of a federally
recognized California Indian tribe with a tribal-state gaming compact
with the state shall not be deemed unqualified to operate a
land-based gambling entity by reason of an investment in a license
applicant or a licensee.
(c) (1) A license applicant whose application is denied may bring
an action to appeal that decision to the Superior Court of
the County of Sacramento County . The decision
of the Superior Court of the County of Sacramento
County is not appealable. No remedy other than an
injunction is available pursuant to this subdivision.
(2) The Superior Court of the County of
Sacramento County shall uphold the decision by the
department if there is any substantial evidence to support the
department's decision to deny the license application.
(3) If the Superior Court of the County of
Sacramento County finds for the license applicant, it
shall return the application to the department for action consistent
with the decision of the court.
Article 5. Rights and Obligations of Licensees
19990.30. (a) A licensee shall comply with the terms of this
chapter.
(b) In the event of commercial infeasibility created by a change
in federal law rendering the provision of intrastate Internet
gambling services illegal, or some other event, a licensee may
abandon its operations after providing the department with 90 days'
advance notice of its intent and a statement explaining its
interpretation that continuing to operate the intrastate Internet
gambling Web site is commercially infeasible. In response to that
notice, the state may file an action in the Superior Court of
the County of Sacramento County as it
deems necessary to protect any state interests, including, but not
limited to, the interests of registered players.
(c) If any dispute arises between the state and the licensee,
either the department or a licensee may file an action in the
superior court of any county in which the department has an office
for an interpretation of the rights and responsibilities of the state
and the licensee pursuant to this chapter.
19990.31. (a) Prior to initiating operations and thereafter, a
licensee shall ensure that each employee has been issued an employee
work permit by the department, pursuant to standards adopted by the
department, prior to that person having access to the licensee's
facilities. The permit shall be renewed every two years.
(b) An employee work permit shall not be issued unless, based on
all of the information and documents submitted, the department is
satisfied that the applicant is, at a minimum, all of the following:
(1) A person of good character, honesty, and integrity.
(2) A person whose prior activities, criminal record, if any,
reputation, habits, and associations do not pose a threat to the
public interest of this state, or to the effective regulation and
control of controlled gambling, or create or enhance the dangers of
unsuitable, unfair, or illegal practices, methods, and activities in
the conduct of controlled gambling or in the carrying on of
incidental business and financial arrangements.
(3) A person who is in all other respects qualified to hold an
employee work permit as provided in this chapter.
(c) An applicant for an employee work permit is disqualified for
any of the following reasons:
(1) Failure of the applicant to clearly establish eligibility and
qualification in accordance with this chapter.
(2) Failure of the applicant to provide timely information,
documentation, and assurances required by this chapter or requested
by any state official, or failure of the applicant to reveal any fact
material to the qualification, or the supplying of information that
is untrue or misleading as to a material fact pertaining to the
qualification criteria.
(3) Conviction of a felony, including a conviction by a federal
court, a court in another state, or a court in another country, for a
crime that would constitute a felony if committed in California.
(4) Conviction of the applicant for any misdemeanor involving
dishonesty or moral turpitude within the 10-year period immediately
preceding the submission of the application, unless the applicant has
been granted relief pursuant to Section 1203.4, 1203.4a, or 1203.45
of the Penal Code. However, the granting of relief pursuant to
Section 1203.4, 1203.4a, or 1203.45 of the Penal Code shall not
constitute a limitation on the discretion of the department or affect
the applicant's burden under subdivision (b).
(5) Association of the applicant with criminal profiteering
activity or organized crime, as defined by Section 186.2 of the Penal
Code.
(6) Contemptuous defiance by the applicant of any legislative
investigative body, or other official investigative body of any state
or of the United States, when that body is engaged in the
investigation of crimes relating to gambling, official corruption
related to gambling activities, or criminal profiteering activity or
organized crime, as defined by Section 186.2 of the Penal Code.
(7) The applicant is less than 21 years of age.
(d) A licensee shall apply for an employee work permit on behalf
of each employee.
(e) An employee work permit shall not be issued unless the
applicant meets the qualification standards adopted by the
commission.
(f) The department shall establish a fee to be paid by a licensee
for the cost of background investigation on employee work permit
applications submitted on behalf of that licensee's employees. The
department and the commission shall establish processes for the
revocation or suspension of an intrastate Internet gambling license
or employee work permit, and to withdraw an application for an
intrastate Internet gambling license or employee work permit.
(g) (1) A licensee or subcontractor of a licensee shall not enter
into, without prior approval of the department, any contract or
agreement with a person who is denied a gambling license or employee
work permit pursuant to Chapter 5 (commencing with Section 19800), or
whose gambling license or employee work permit is suspended or
revoked by the department, or with any business enterprise under the
control of that person, after the date of receipt of notice of the
department's action.
(2) A licensee or subcontractor of a licensee shall not enter into
any contract or agreement with a person or entity that has knowingly
and willfully accepted any wager from persons in the United States
on any form of Internet gaming that has not been affirmatively
authorized by law in this state or the United States after December
31, 2006, or has been the holder of a direct or indirect financial
interest in a person or entity that has accepted such a wager.
The termination of a prosecution of an applicant under the criminal
laws of any state, the United States, or other
jurisdiction in a manner other than with a conviction is not
evidence that the applicant's conduct was unlawful.
(h) A licensee or subcontractor of a licensee shall not employ,
without prior approval of the department, any person in any capacity
for which he or she is required to have an employee work permit, if
the person has been denied a gambling license or an employee work
permit pursuant to Chapter 5 (commencing with Section 19800), or if
his or her gambling license or employee work permit has been
suspended or revoked after the date of receipt of notice of the
action by the department. A licensee or subcontractor of a licensee
shall not enter into a contract or agreement with a person whose
application for a gambling license or an employee work permit has
been withdrawn with prejudice, or with any business enterprise under
the control of that person, for the period of time during which the
person is prohibited from filing a new application for a gambling
license or an employee work permit.
(i) If an employee who is required to hold an employee work permit
pursuant to this chapter is denied an employee work permit, or has
his or her employee work permit revoked by the department, the
employee shall be terminated immediately in all capacities. Upon
notifying the licensee of the department's action, the employee shall
have no further involvement in the gambling operation.
(1) If an employee who is required to hold an employee work permit
pursuant to this chapter has his or her employee work permit
suspended, the employee shall be suspended in all capacities. Upon
notifying the licensee of the department's action, the employee shall
not be permitted to have any involvement in the gambling operation
during the period of suspension.
(2) A licensee or subcontractor of a licensee shall not designate
another employee to replace the employee whose employment was
terminated or suspended, unless the other employee has an existing
work permit.
(j) A licensee or subcontractor of a licensee shall not pay to a
person whose employment has been terminated or suspended pursuant to
subdivision (i) any remuneration for any service performed in any
capacity in which the person is required to hold an employee work
permit, except for amounts due for services rendered before the date
of receipt of notice of the department's action of suspension or
termination.
(k) Except as provided in subdivision (i), a contract or agreement
for the provision of services or property to a licensee or
subcontractor or for the conduct of any activity pertaining to the
operation of an intrastate Internet gambling Web site, which is to be
performed by a person required by this chapter or by regulations
adopted pursuant to this chapter, to hold an employee work permit,
shall be terminated upon a suspension or revocation of the person's
employee work permit.
(l) In any case in which a contract or agreement for the provision
of services or property to a licensee or an affiliate thereof, or
for the conduct of any activity at an intrastate Internet gambling
Web site, is to be performed by a person required by this chapter or
by regulations adopted by the department to hold an employee work
permit, the contract shall be deemed to include a provision for its
termination without liability on the part of the licensee, affiliate,
or subcontractor upon a suspension or revocation of the person's
employee work permit. In any action brought by the department to
terminate a contract pursuant to subdivision (k) or this subdivision,
it shall not be a defense that the agreement does not expressly
include the provision described in this subdivision, and the lack of
express inclusion of the provision in the agreement shall not be a
basis for enforcement of the contract by a party thereto.
(m) If a licensee does not comply with the requirements of this
section, the department may impose a civil fine of not more than ____
dollars ($____) per occurrence. In the event that a licensee
negligently, willfully, or wantonly fails to comply with these
requirements, the department may initiate an enforcement action and
subject a licensee to a civil fine of ____ dollars ($____) and may
begin proceedings to suspend or revoke the licensee's license.
19990.32.5. The department may enter into agreements with one or
more tribal gaming regulatory agencies to issue employee work permits
pursuant to Section 19990.31. The department shall only enter into
agreements with tribal gaming regulatory agencies with demonstrated
expertise in evaluating the suitability of individuals for licensure
in land-based gaming activities. Any agreements entered into pursuant
to this section shall include provisions requiring the tribal gaming
regulatory agency to issue permits in accordance with all applicable
statutory and regulatory requirements and shall provide for appeal
of adverse permit decisions as required by this chapter.
19990.32. The licensee is responsible for providing current and
accurate documentation on a timely basis to all state agencies, as
provided in this chapter.
(a) In addition to any other confidentiality protections provided
to persons licensed by the state, the state and its agencies shall
treat the proprietary information provided by a licensee as
confidential to protect the licensee and to protect the security of
the intrastate Internet gambling Web site.
(b) The confidentiality provisions of this chapter exempt
proprietary information supplied by a licensee to a state agency from
public disclosure consistent with subdivision (b) of Section 6253 of
the Government Code.
19990.33. (a) Changes in ownership of the licensee shall be
approved by the department prior to the closing of any proposed
transaction.
(b) The department shall investigate to ensure that any person
acquiring an interest in a licensee is suitable and otherwise
financially, technically, and legally qualified to be a licensee
consistent with this chapter. If an acquiring person is found to be
unsuitable to be a licensee or otherwise not financially,
technically, or legally qualified to be a licensee, the licensee or
the acquiring person may challenge that determination consistent with
subdivision (c) of Section 19990.25.
19990.34. All facilities, software, including downloadable
programs, and any other property, both tangible and intangible, used
by the licensee in offering authorized games for play on an
intrastate Internet gambling Web site shall be the property of the
licensee or its subcontractors, and shall be approved by the
department.
19990.35. (a) A licensee shall ensure that registered players are
eligible to play authorized games and implement appropriate data
security standards to prevent access by a person whose age and
location has not been verified in accordance with this chapter.
(b) A registered player shall be physically located within the
State of California at the time of gambling.
(c) A registered player shall not be less than 21 years of age.
(1) Online games shall not be provided, directly or indirectly, to
any person under 21 years of age.
(2) Each licensee shall do all of the following:
(A) Prior to registering a person as a registered player or
permitting a person to play an authorized game, the licensee shall
verify that the person is 21 years of age or older. The licensee or
seller shall attempt to match the name, address, and date of birth
provided by the person to information contained in records in a
database of individuals who have been verified to be 21 years of age
or older by reference to an appropriate database of government
records. The licensee also shall verify that the physical billing
address on the check or credit card offered for payment by the person
matches the address listed in the database.
(B) If the licensee is unable to verify that the person is 21
years of age or older pursuant to subparagraph (A), the licensee
shall require the person to submit an age-verification kit consisting
of an attestation signed by the person that he or she is 21 years of
age or older and a copy of a valid form of government
identification. For the purposes of this section, a valid form of
government identification includes a driver's license, state
identification card, passport, official naturalization or immigration
document, such as an alien registration receipt card or an immigrant
visa, or United States military identification. The licensee also
shall verify that the physical billing address on the check or credit
card provided by the person matches the address listed in the
government identification.
(C) The licensee shall not permit registered players to make
payments by money order or cash. The licensee shall submit to each
credit card company with which it has credit card sales, information
in an appropriate form and format so that the words "Internet
gambling" may be printed on the purchaser's credit card statement
when a payment to a licensee is made by credit card payment.
(3) If a licensee complies with the requirements of paragraph (2),
and a person under 21 years of age participates in an authorized
game provided by the licensee, the licensee is not in violation of
this section.
(4) The department may assess civil penalties against a person
that violates this section, according to the following schedule:
(A) Not less than one thousand dollars ($1,000) and not more than
two thousand dollars ($2,000) for the first violation.
(B) Not less than two thousand five hundred dollars ($2,500) and
not more than three thousand five hundred dollars ($3,500) for the
second violation.
(C) Not less than four thousand dollars ($4,000) and not more than
five thousand dollars ($5,000) for the third violation.
(D) Not less than five thousand five hundred dollars ($5,500) and
not more than six thousand five hundred dollars ($6,500) for the
fourth violation.
(E) Ten thousand dollars ($10,000) for a fifth or subsequent
violation.
(d) The department shall, by regulation, provide a process for a
licensee to exclude from play any person who has filled out an online
self-exclusion form.
(1) The department shall develop an online self-exclusion form
within six months of the operative date of this chapter.
(2) The department shall deliver the form to each licensee.
(3) A licensee shall prominently display a link to the department'
s Responsible Gambling Internet Web page and the online
self-exclusion form on the Internet Web page that is displayed when
either of the following occurs:
(A) A person registers as a registered player.
(B) Each time a registered player accesses the intrastate Internet
gambling Web site prior to playing.
(4) A licensee shall retain the online self-exclusion form to
identify persons who want to be excluded from play.
(5) A licensee that has made commercially reasonable efforts to
comply with this subdivision shall not be held liable in any way if a
person who has filled out an online self-exclusion form plays
despite that person's request to be excluded.
19990.36. A licensee shall only offer authorized games and
process bets in accordance with the specified game and betting rules
established by the licensee and approved by the department pursuant
to Sections 19990.14 and 19990.37.
19990.37. (a) In order to propose a game for play, a licensee
shall provide the department with both of the following:
(1) Game rules and betting rules it proposes to offer to
registered players.
(2) Documentation relating to development and testing of the game'
s software.
(b) The department shall approve the game rules and betting rules
before a licensee may offer the game to registered players.
19990.38. (a) A licensee shall ensure that games are fair.
(b) The gaming system shall display for each game the following
information:
(1) The name of the game.
(2) Any restrictions on play.
(3) The rules of the game.
(4) All instructions on how to play.
(5) The unit and total bets permitted.
(6) The registered player's current account balance which shall be
updated in real time.
(7) Any other information that a licensee determines is necessary
for the registered player to have in real time to compete fairly in
the game.
(c) Data used to create game results shall be unpredictable so
that it is infeasible to predict the next occurrence in a game, given
complete knowledge of the algorithm or hardware generating the
sequence and all previously generated numbers.
(d) A licensee shall deploy controls and technology to minimize
fraud or cheating through collusion, including external exchange of
information between different players, robotic play, or any other
means.
(1) If a licensee becomes aware that fraud or cheating is taking
place or has taken place, it shall take steps to stop those
activities immediately and inform the department of all relevant
facts.
(2) The department shall not impose liquidated damages against a
licensee to prevent fraud or cheating if the licensee can demonstrate
that it acted responsibly to prevent those activities as soon as the
licensee became aware of them.
(e) In a per hand game, if the gaming server or software does not
allow a game to be completed, the game shall be void and all funds
relating to the incomplete game shall be returned to the registered
player's account.
(f) In a tournament, if the gaming server or software does not
allow the tournament to be completed, all prize money shall be
distributed among players in accordance with the procedure published
by the licensee prior to the commencement of the tournament.
19990.39. (a) A licensee shall register players and establish
player accounts prior to play.
(b) A person shall not participate in any game provided by a
licensee unless the person is a registered player and holds an
account.
(c) Accounts shall be established in person, or by United States
mail, telephone, or any electronic means.
(d) To register and establish an account, a person shall provide
the following registration information:
(1) Full legal name.
(2) Principal residence address.
(3) Telephone number.
(4) Social security number.
(5) Identification or certification to prove that person is at
least 21 years of age.
(6) Valid email address.
(e) A licensee shall provide registered players with the means to
update the registration information provided to the licensee.
(f) Nothing in this section shall prevent a licensee from entering
into a marketing agreement with any third party to recruit people to
become registered players if the registration process described in
this section is under the sole control of the licensee.
19990.40. (a) A licensee shall provide a means for registered
players to put funds into a registered player account and transfer
funds out of that account.
(b) A registered player shall identify the source of funds to be
used to put money into the account established once the registration
process is complete, and a licensee shall provide a means for a
registered player to transfer money into and out of the player's
intrastate Internet gambling Web site account.
(c) At the time of establishing an intrastate Internet gambling
Web site account, a registered player shall designate the bank
account into which funds from the registered player's intrastate
Internet gambling Web site account are to be transferred.
(d) A registered player shall establish only one account on any
intrastate Internet gambling Web site.
(e) While playing an authorized game, a licensee shall not permit
a registered player to increase the amount of money in that
registered player's account after that hand has started and before
its completion.
(f) A licensee shall maintain records on the balance of each
registered player's account.
(g) A licensee shall not permit a registered player to place a
wager unless the registered player's account has sufficient funds to
cover the amount of the wager.
(h) A licensee shall not provide credit to a registered player's
account or act as agent for a credit provider to facilitate the
provision of funds.
(i) No interest shall be paid by a licensee with respect to
registered player accounts.
19990.41. (a) A licensee shall segregate funds it holds in all
registered player accounts from all of its other assets.
(b) A licensee shall not commingle funds in the segregated account
containing funds paid by registered players with any other funds
held by the licensee, including, but not limited to, operating funds
of the licensee. Both the accounts of the licensee and its segregated
registered player accounts shall be held in financial institutions
located in the state.
(c) Funds held in a registered player's account shall only be used
for the following purposes:
(1) To pay per hand or tournament charges owed by a registered
player to the licensee for play of authorized games.
(2) To transfer funds from one registered player's account to the
account of another registered player to reconcile the result of a
loss in the play of an authorized game.
(3) To transfer funds from a registered player's account to a
temporary account to be held by a licensee pending the outcome of an
authorized game.
(4) To remit tax proceeds due and owing from a registered player
to the Franchise Tax Board.
(5) To transfer funds from a registered player's account with the
licensee to an account specified by a registered player upon that
registered player's request.
19990.42. Prior to completing the registration process, a
licensee shall explain to the person who is registering in a
conspicuous fashion the privacy policies of the intrastate Internet
gambling Web site, and the person shall assent to the following
policies:
(a) No personally identifiable information shall be shared with
any nongovernment third parties except as provided in subdivision (k)
of Section 19990.47.
(b) All personally identifiable information about registered
players shall be shared with state agencies, including, but not
limited to, the department,
the commission, the Franchise Tax Board, and the Department of Child
Support Services as necessary to assist them in fulfilling their
obligations.
(c) Personally identifiable information may be shared with
government agencies only as set forth in subdivision (b) or subject
to court order as provided in subdivision (j) of Section 19990.47.
19990.43. A licensee may require that a registered player, or a
person registering as a player, agree to a Terms of Use Registered
Player's Agreement.
19990.44. A licensee may suspend or revoke the account of a
registered player for any of the following reasons:
(a) A person or registered player provided false information to
the licensee, including, but not limited to, in the registration
process.
(b) The registered player has not updated registration information
to keep it current.
(c) The registered player has violated the intrastate Internet
gambling Web site's Terms of Use Registered Player's Agreement.
(d) The person has already been registered.
(e) The licensee suspects that the registered player has
participated in an illegal or unauthorized activity on the intrastate
Internet gambling Web site.
(f) The licensee is directed by a state agency to suspend or
revoke the registered player's account.
19990.45. (a) Upon registration, and each time a registered
player logs into an intrastate Internet gambling Web site, the
licensee shall permit a registered player to adjust his or her play
settings to:
(1) Set a limit on the deposits that can be made per day.
(2) Set a limit on the aggregate losses in a registered player's
account within a specified period of time.
(b) During play, in order to assist a registered player to decide
whether to suspend play, the registered player's screen shall do all
of the following:
(1) Once an hour, indicate how long the player has been playing
and the current value and change in value of the registered player's
total account since the time of last logging in.
(2) At least once every six hours, require the registered player
to confirm that the player has read the messages required in
paragraph (1), and give an option to the player to end the session or
return to the game.
19990.46. A licensee shall establish a toll-free telephone
customer service hotline that shall be available to registered
players 24 hours per day, 365 days a year. All employees shall be
physically present in the state while in contact with registered
players. However, the licensee shall have discretion to use the
expertise of personnel not physically present in the state when
necessary to protect registered players and state interests,
including, but not limited to, for the purposes of diagnosing and
addressing technological problems, investigating fraud and collusion,
and supervising software and configuration changes. The licensee
shall give notice to the department when using personnel who are out
of state.
19990.47. (a) A licensee shall protect the privacy of registered
players and their personally identifiable information.
(b) A licensee shall comply with all state and federal privacy and
data protection laws.
(c) At the time of registration with a licensee as a registered
player, and at least once a year thereafter, a licensee shall provide
notice in the form of a separate, written statement, delivered via
United States Postal Service or electronic mail, to the registered
player that clearly and conspicuously informs the registered player
of all of the following:
(1) The nature of personally identifiable information collected or
to be collected with respect to the registered player and the nature
of the use of that information.
(2) The nature, frequency, and purpose of any disclosure that may
be made of personally identifiable information, including an
identification of the types of persons to whom the disclosure may be
made.
(3) The period during which personally identifiable information
will be maintained by the licensee.
(4) The times and place at which the registered player may have
access to personally identifiable information in accordance with
subdivision (h).
(5) The limitations provided by this section with respect to the
collection and disclosure of personally identifiable information by a
licensee and the right of the registered player under subdivision
(j) or (k) to enforce those limitations.
(d) A licensee shall not collect personally identifiable
information concerning any registered player without the prior
written or electronic consent of the registered player concerned.
(e) A licensee may collect personally identifiable information in
order to do both of the following:
(1) Obtain information necessary to operate the intrastate
Internet gambling Web site and offer authorized games to registered
players pursuant to this chapter.
(2) Detect unauthorized play, activities contrary to a licensee's
Terms of Use Registered Player's Agreement, or activities contrary to
state or federal law.
(f) Except as provided in subdivision (g), a licensee shall not
disclose personally identifiable information concerning any
registered player without the prior written or electronic consent of
the registered player concerned and shall take actions necessary to
prevent unauthorized access to that information by a person other
than the registered player or licensee.
(g) A licensee may disclose personally identifiable information if
the disclosure is any of the following:
(1) Necessary to render, or conduct a legitimate business activity
related to, the provision of authorized games to the registered
player by the licensee.
(2) Subject to subdivision (k), made pursuant to a court order
authorizing the disclosure, if the registered player is notified of
the order by the person to whom the order is directed.
(3) A disclosure of the names and addresses of registered players
to any tournament third party, if both of the following apply:
(A) The licensee has provided the registered player the
opportunity to prohibit or limit the disclosure.
(B) The disclosure does not reveal, directly or indirectly, the
nature of any transaction made by the registered player over the
intrastate Internet gambling Web site.
(4) To the department to fulfill its obligations under this
chapter or a state agency as authorized in this chapter.
(5) To persons found suitable under this chapter if the registered
player is notified and consents to the information being shared.
(h) A registered player shall be provided access to all personally
identifiable information regarding that registered player that is
collected and maintained by a licensee. The information shall be made
available to the registered player at reasonable times and at a
place designated by the licensee. A registered player shall be
provided reasonable opportunity to correct any error in the
information.
(i) A licensee shall destroy personally identifiable information
if the information is no longer necessary for the purpose for which
it was collected, and there are no pending requests or orders for
access to the information under subdivision (k).
(j) Any person aggrieved by any act of a licensee in violation of
this section may bring a civil action in any superior court in
California. The court may award:
(1) Actual damages but not less than the rate of ____ a day for
each day of violation or ____, whichever is higher.
(2) Punitive damages.
(3) Reasonable attorney's fees and other litigation costs
reasonably incurred.
(k) Except as provided in subdivision (g), a governmental or
nongovernmental third party may obtain personally identifiable
information concerning a registered player pursuant to a court order
only if, in the court proceeding relevant to the court order, both of
the following apply:
(1) The third party offers clear and convincing evidence that the
subject of the information is reasonably suspected of engaging in
criminal activity or otherwise relevant to a pending civil action and
that the information sought would be material evidence in the case.
(2) The registered player about whom the information is requested
is afforded the opportunity to appear and contest the third-party's
claim.
19990.48. A licensee shall establish a book of accounts and
regularly audit all of its financial records and reports, which
shall, at a minimum, include all of the following:
(a) Monthly auditable and aggregate financial statements of
gambling transactions.
(b) Monthly calculation of all amounts payable to the state.
(c) The identity of registered players.
(d) The balance on each registered player's account at the start
of a session of play, the amount won or lost by each registered
player during a game, and the balance on the registered player's
account.
(e) The wagers placed on each game, time stamped by the games
server.
(f) The result of each game, time stamped by the games server.
(g) The amount, if any, as determined by the registered player,
withheld from winnings for federal or state income tax purposes.
19990.49. (a) A licensee shall make all financial records
established and maintained pursuant to Section 19990.48, including,
but not limited to, all books, records, documents, financial
information, and financial reports, available on an electronic basis,
as required by the department or other state agencies so that those
state agencies can fulfill their responsibilities under this chapter.
A state agency may request specific printed hard copies of records
for good cause.
(b) The licensee's data shall be retained in a manner by which it
may be accessed by the state agencies online.
(c) Notwithstanding subdivision (b), data covered by subdivisions
(d), (e), and (f) of Section 19990.48 shall be accessible to the
state agencies online for 120 days, and, thereafter, archived and
retained for one year.
19990.50. (a) A licensee shall implement technical systems that
materially aid the department in the protection of registered
players. Software shall meet, at a minimum, international industry
standards as verified by a department-approved gaming laboratory.
(b) A licensee shall define and document its methodology for
developing software and applications and describe the manner in which
software protects registered players from fraud and other risks in
the play of authorized games and in the management of registered
player accounts.
(c) A licensee shall meet minimum game server connectivity
requirements to ensure that registered players are protected from
losses due to connectivity problems.
(d) A licensee shall ensure that all transactions involving
registered players' funds shall be recoverable by the system in the
event of a failure or malfunction.
(e) All information required for reviewing a game interrupted due
to loss of connectivity shall be recoverable by the licensee.
(f) Preventative and detective controls addressing money
laundering and fraud risks shall be documented and implemented by the
licensee.
19990.51. (a) A licensee may charge registered players to play in
authorized games.
(b) Per hand charges are permitted.
(1) A per hand charge shall be designated and conspicuously posted
on the intrastate Internet gambling Web site.
(2) A licensee may vary the per hand charges to registered players
based on betting limits or other factors.
(c) Tournament charges shall be permitted.
(1) A tournament charge shall be designated and conspicuously
posted on the intrastate Internet gambling Web site.
(2) A licensee may vary tournament charges based on tournament
prizes or other factors.
(d) A licensee shall provide notice to the department of the
charges to registered players prior to initiating play.
19990.52. A licensee may enter into an agreement with any third
party to sponsor or underwrite prizes for a tournament.
19990.53. A licensee may enter into an agreement to sell
advertisement space on any Internet Web site it controls.
19990.535. (a) A licensee may enter into an agreement with a
third party for marketing, or any other purpose consistent with this
chapter, including, but not limited to, displaying the name of a
marketing partner on a screen viewed by a registered player.
(b) A licensee shall not utilize any brand or business name, trade
or service mark, software, technology, operational systems, customer
information, or other data acquired, derived, or developed directly
or indirectly from any operation that has knowingly and willfully
accepted any wager from persons in the United States on any form of
Internet gaming that has not been affirmatively authorized by law in
this state or the United States after December 31, 2006. To the
extent any business relationships or financial arrangements were
utilized or existed to further any such illegal Internet gambling,
those relationships and arrangements shall be discontinued.
19990.54. A licensee may enable a chat function between
registered players if it has in place effective controls against
collusion.
19990.55. A licensee may post Internet Web links on the Internet
Web sites it controls to permit registered players to access remote
Internet Web sites.
19990.56. A licensee may enter into contractual agreements with
one or more licensees for the purpose of ensuring adequate player
liquidity.
19990.57. A licensee may allow a registered player to participate
simultaneously in multiple games or tournaments, if the licensee has
demonstrated to the department that it has technical controls that
prohibit a registered player from playing multiple hands
simultaneously in the same game.
19990.58. (a) Before the collection of a registered player fee,
wager, or deposit on any authorized game on the licensee's intrastate
Internet gambling Web site, the licensee shall remit to the
Treasurer for deposit in the General Fund a one-time license fee in
the amount of thirty million dollars ($30,000,000).
fifteen million dollars ($15,000,000) .
This amount shall be credited against fees imposed pursuant to
subdivision (b) on the licensee's gross gaming revenue proceeds for
the first five years of operation. Upon depletion of the license fee,
the department shall notify the licensee to commence monthly
payments to the state in accordance with subdivision (b).
(b) A licensee shall remit to the Treasurer on a monthly basis for
deposit in the General Fund, an amount equal to 10 percent of its
gross revenues.
(1) Each monthly payment shall be due on the 10th day of the
following month.
(2) A licensee shall make all electronic and written financial
records available to the Treasurer, the commission, and the
department on an electronic basis.
(3) For the purposes of determining gross revenues, the licensee
and the Treasurer shall use generally accepted accounting principles.
(c) Each licensee shall pay a regulatory fee, to be deposited in
the Internet Gambling Fund as established by Section 19990.86, in an
amount to be determined by the department for the actual costs of
license oversight, consumer protection, state regulation, problem
gambling programs, and other purposes related to this chapter.
19990.59. (a) The licensee shall facilitate the collection of
personal income taxes from registered players by the Franchise Tax
Board.
(b) The licensee shall withhold 5 percent of tournament winnings
for state income tax if the winnings less the tournament charge are
more than six hundred dollars ($600) and are at least 300 times the
tournament charge.
(1) The licensee shall transfer that withheld income to the
Franchise Tax Board.
(2) Winnings and losses of the registered player from other
tournaments sponsored by the licensee during the year are not taken
into account in arriving at the six-hundred-dollar ($600) amount.
Required withholding is determined on a tournament-by-tournament
basis.
(c) Within six months of the operative date of this chapter, the
Franchise Tax Board shall publish a form to be used annually by a
licensee to report information concerning income tax revenues from
registered players. The Franchise Tax Board shall provide a date by
which the form is required to be filed. The form shall include, but
shall not be limited to, the following information:
(1) The registered player's first name and surname.
(2) Social security number.
(3) The total amount the registered player deposited in his or her
account during the year.
(4) The registered player's total winnings, if any, during the
year.
(5) The registered player's total losses, if any, during the year.
(6) The total amount withheld by the licensee, if any, during the
year for purposes of federal or state income taxes.
(7) Whether the registered player opened or closed his or her
account during the year.
(d) The licensee shall electronically file a copy of the form with
the Franchise Tax Board for each registered player who held an
account with the licensee for all, or any portion of, the taxable
year. The licensee shall electronically provide each registered
player with a copy of the form.
19990.60. A security interest in a licensee, other than a
security interest in financed or leased equipment, shall not be
enforced except in conformity with regulations adopted by the
commission. If a licensee contracts to acquire or transfer any assets
or property in circumstances where the transferor or transferee must
be licensed or found suitable, then the transaction shall not have a
closing date prior to the approval or licensing of the other party,
except as provided in regulations of the commission.
19990.61. (a) A licensee shall act expeditiously to cure any
violation of this chapter, or any regulation adopted pursuant to this
chapter, in the offer or administration of authorized games that
interferes with its obligations to the state or registered players
under this chapter.
(b) If a licensee becomes aware of any violation, it shall notify
the department immediately and work with the department to develop a
plan to rectify the violation.
(c) If the department becomes aware of any violation, or if it
becomes aware of any activities that might lead to a violation, the
department shall provide notice of that violation to the licensee and
a reasonable opportunity to cure the violation.
(d) All state agencies with responsibilities under this chapter
shall report any actual or suspected violation of this chapter, or
any regulation adopted pursuant to this chapter, or activities that
may lead to such a violation, to the department immediately so that
the department can assess whether it needs to commence an
investigation or enforcement action.
(e) A licensee shall be afforded a reasonable time period to cure
any reported violation. The department may assess penalties for any
violation of this chapter, or any regulation adopted pursuant to this
chapter.
(f) The department shall have the subpoena power in an
investigation of any violation of this chapter, or any regulation
adopted pursuant to this chapter.
(g) The department may revoke or suspend any license or work
permit under this chapter upon reaching a finding that the licensee
or employee is in violation of any provision of this chapter, or any
regulation adopted pursuant to this chapter.
(h) A licensee may appeal any decision of the department pursuant
to this section to the superior court. The superior court shall hear
any appeal de novo.
19990.62. The department shall protect the rights and assets of
registered players on an intrastate Internet gambling Web site if the
licensee's license pursuant to this chapter is revoked or the
licensee becomes bankrupt.
19990.63. (a) A licensee shall at all times indemnify, defend,
and hold harmless the state and its agencies from and against any
claims, damages, liabilities, costs, and expenses, including, but not
limited to, reasonable attorney's fees and expenses arising out of
any third-party claim made against the state or any of its agencies
relating to actions of the licensee and this chapter. However, the
state shall not enter into a settlement agreement related to any of
those claims, damages, liabilities, costs, or expenses without the
prior written approval of the licensee.
(b) The state and its agencies shall promptly notify a licensee of
any claim or litigation to which the indemnity set forth in
subdivision (a) applies.
(c) At the option of a licensee, it may assume the defense of any
claim or litigation. If a licensee assumes the defense of any claim
or litigation, the licensee's obligation with respect thereto shall
be limited to the payment of any settlement approved by the licensee,
or any judgment in connection with that claim or litigation.
Article 6. Authority of State Agencies
19990.70. (a) (1) Within 120 days after the operative date of
this chapter, the commission, and any other state agency with a duty
pursuant to this chapter, shall, in order to comply with time
deadlines, in consultation with the department, adopt regulations to
implement this chapter, and to facilitate the operation of intrastate
Internet gambling Web sites and expedite the state's receipt of
revenues in compliance with this chapter. The initial adoption,
amendment, or repeal of a regulation authorized by this section is
deemed to address an emergency, for purposes of Sections 11346.1 and
11349.6 of the Government Code, and the commission and those other
state agencies are hereby exempted for that purpose from the
requirements of subdivision (b) of Section 11346.1 of the Government
Code. After the initial adoption, amendment, or repeal of an
emergency regulation pursuant to this section, the commission and
those other state agencies shall not request approval from the Office
of Administrative Law to readopt the regulation as an emergency
regulation pursuant to Section 11346.1 of the Government Code, but
shall promulgate permanent regulations in accordance with all
applicable law.
(2) The regulations adopted by the commission shall address
underage gambling and problem gambling.
(3) The regulations of the commission also shall provide for
temporary or provisional approvals, licenses, or certificates for
heirs, executors, receivers, trustees, conservators, key employees,
and other persons where an approval, license, or certificate is
required.
(b) (1) Each state agency with a duty pursuant to this chapter
shall identify a contact person at that agency and describe the
responsibility of the contact with respect to the state agency's
duty.
(2) Any notice provided by a licensee to a state agency pursuant
to this chapter shall be addressed to the contact identified by the
state agency pursuant to paragraph (1).
(3) Unless otherwise provided by this chapter, notice by a
licensee to the state shall be deemed effectively given upon personal
delivery, three days after deposit in the United States mail by
certified or registered mail, return receipt requested, one business
day after its deposit with any return receipt express courier,
prepaid, or one business day after electronically confirmed
transmission by facsimile.
19990.71. The Legislature may, by a statute adopted by a majority
vote of both houses, do either of the following:
(a) Opt out of, or opt into, any federal framework for Internet
gambling.
(b) If the United States Department of Justice notifies the
department in writing that it is permissible under federal law, enter
into any agreement with other states or foreign jurisdictions to
provide Internet gambling.
19990.72. The department may outsource its regulatory functions
under this chapter where optimal to provide efficient, effective, and
robust regulation with access to worldwide expertise tested and
proven in the gambling industry. This may include, but is not limited
to, state and international regulatory agencies. To expedite the
implementation of Internet gambling, contracts pursuant to this
section shall not be subject to otherwise applicable provisions of
the Government Code or the Public Contract Code and, for those
purposes, the department shall not be considered a state agency or
public entity.
Article 7. Protection of Registered Players
19990.75. A licensee shall use its best efforts to protect
registered players. Subject to the approval of the department, and
consistent with uniform standards established by the department by
regulation, each licensee shall establish administrative procedures
to resolve registered player complaints.
19990.76. If a registered player has a complaint against a
licensee, the exclusive remedy shall be to register the complaint
with the department, unless an action is brought pursuant to
subdivision (j) of Section 19990.47.
19990.77. (a) The department, in consultation with the
commission, shall establish regulations with respect to registered
player complaints.
(b) Under the regulations, the department shall do all of the
following:
(1) Investigate registered player complaints to determine if a
licensee has failed to meet its obligations to a registered player.
(2) Attempt to resolve complaints by registered players if a
licensee fails to meet an obligation to a registered player.
(3) Initiate enforcement actions to require specific performance
of any obligation that a licensee has to a registered player and
payment by the licensee of restitution to a registered player for
actual losses and interest thereon.
19990.78. A licensee may appeal any action by the department
pursuant to this article to the superior court, which shall review
the appeal de novo.
Article 8. Disposition of State Regulatory Proceeds
19990.86. (a) The Treasurer shall transfer all amounts received
from a licensee pursuant to subdivision (c) of Section 19990.58 to
the Controller for deposit in the Internet Gambling Fund, which is
created in the State Treasury, to be administered by the Controller,
subject to annual appropriation by the Legislature. These amounts
shall not be subject to the formulas established by statute directing
expenditures from the General Fund.
(b) The state agencies shall submit revenue needs to fulfill their
obligations under this chapter for the upcoming fiscal year to the
Senate Committee on Budget and Fiscal Review and the Assembly
Committee on Budget, as well as the Senate and Assembly Committees on
Governmental Organization and the Department of Finance on or before
March 31 of the preceding fiscal year. A justification of those
costs shall be provided with each submission of revenue needs.
(c) The
State Department of Alcohol and Drug Programs, Office of Problem
Gambling, shall submit revenue needs for programs to alleviate
problem gambling that results from the offering of authorized games
for the upcoming fiscal year to the Senate Committee on Budget and
Fiscal Review and the Assembly Committee on Budget, as well as the
Senate and Assembly Committees on Governmental Organization, the
Senate and Assembly Committees on Human Services, and the Department
of Finance on or before March 31 of the preceding fiscal year. A
justification of those costs shall be provided with each submission
of revenue needs.
(d) All remaining proceeds not allocated to subdivisions (b) and
(c) shall remain in the Internet Gambling Fund subject to
appropriation by the Legislature.
Article 9. Preemption of Local Regulation
19990.90. A city, county, or city and county shall not regulate,
tax, or enter into a contract with respect to any matter related to
this chapter. This section shall not prohibit or limit the
investigation and prosecution of any violation of this chapter.
Article 10. Reports to the Legislature
19990.95. Notwithstanding Section 10231.5 of the Government Code,
within one year of the operative date of this chapter and, annually
thereafter, the department, in consultation with the commission, the
Treasurer, and the Franchise Tax Board, shall issue a report to the
Legislature describing the state's efforts to meet the policy goals
articulated in this chapter. The report shall be submitted in
compliance with Section 9795 of the Government Code.
19990.96. (a) At least four years after the issue date of any
license pursuant to this chapter, but no later than five years after
that date, the Bureau of State Audits shall issue a report to the
Legislature detailing the implementation of this chapter. The State
Auditor may advise the Legislature on any recommendations regarding
the terms of licensure, including the consideration paid to the
state, the economic and operational impacts upon the licensee and the
state, and any other issues that may be relevant to the state's
decision whether to impose modifications on existing licensees' fees
or terms of licensure. The report may also advise the Legislature as
to any proposed changes to Article 5 (commencing with Section
19990.30) of this chapter.
(b) A report submitted pursuant to subdivision (a) shall be
submitted in compliance with Section 9795 of the Government Code.
(c) Pursuant to Section 10231.5 of the Government Code, this
section is repealed on January 1, 2020.
SEC. 2. The Legislature finds and declares that Section 1 of this
act, which adds Chapter 5.2 (commencing with Section 19990.01) to
Division 8 of the Business and Professions Code, imposes a limitation
on the public's right of access to the meetings of public bodies or
the writings of public officials and agencies within the meaning of
Section 3 of Article I of the California Constitution. Pursuant to
that constitutional provision, the Legislature makes the following
findings to demonstrate the interest protected by this limitation and
the need for protecting that interest:
The limitations on the people's rights of access set forth in this
chapter are necessary to protect the privacy and integrity of
information submitted by the registered players as well as the
proprietary information of the license applicants and licensees.
SEC. 3. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.
SEC. 4. This act is an urgency statute necessary for the immediate
preservation of the public peace, health, or safety within the
meaning of Article IV of the Constitution and shall go into immediate
effect. The facts constituting the necessity are:
In order to protect the interests of Californians who play online
gambling games and to ensure that people play fair games, that the
state realizes the revenues, and that suitable persons operate
intrastate Internet gambling Web sites, it is necessary that this act
take effect immediately.
