Bill Text: CA SB1485 | 2009-2010 | Regular Session | Amended
Bill Title: Internet gambling.
Spectrum: Slight Partisan Bill (Democrat 8-3)
Status: (Engrossed - Dead) 2010-06-29 - Set, first hearing. Hearing canceled at the request of author. [SB1485 Detail]
Download: California-2009-SB1485-Amended.html
BILL NUMBER: SB 1485 AMENDED
BILL TEXT
AMENDED IN SENATE JUNE 22, 2010
AMENDED IN SENATE MAY 28, 2010
INTRODUCED BY Senator Wright
MARCH 8, 2010
An act to add and repeal Chapter 5.2
(commencing with Section 19990.01) of to
Division 8 of the Business and Professions Code, relating to
Internet gambling, and declaring the urgency thereof, to take effect
immediately.
LEGISLATIVE COUNSEL'S DIGEST
SB 1485, 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. Existing law provides for the
enforcement of those regulations by the Department of Justice. 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 require the
department to issue a request for proposals to enter into contracts
with up to 3 hub operators, as defined, to provide lawful Internet
gambling games to registered players in California for a period of
5 20 years, as specified.
The bill would provide that it would be unlawful for any
person to make it a misdemeanor for any person to
offer or play any gambling game provided over the Internet that
is not authorized by the state pursuant to this bill. By creating a
new crime, this bill would impose a state-mandated local program.
The bill would require a hub operator to disperse at
least 20% remit an agreed-upon percentage but no less
than 10%, of its gross revenues to the Treasurer on a monthly
basis.
The bill would also create the Internet Gambling Fund which would
be administered by the Controller subject to annual appropriation by
the Legislature, and which would not be subject to the formulas
established by statute directing expenditures from the General Fund,
for appropriation by the Legislature to state agencies for
purposes related to the bill , 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 commission, notwithstanding that
requirement, in consultation with the department, Treasurer, and
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 effective date of this bill and, annually,
thereafter.
The bill would also require the Bureau of State Audits,
at least 2 years before the expiration 3 years after
the commencement date of any hub operations contract with the
state, but no later than 4 years after that date, to issue
a report to the Legislature detailing the bureau's 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.
The bill would make these provisions inoperative on January 1,
2017, and repeal them on that date unless a later enacted statute,
that is enacted before January 1, 2017, deletes or extends that date.
This bill would declare that it is to take effect immediately as
an urgency statute.
Vote: 2/3. Appropriation: no. 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 2010
Article 1. Title, Legislative Declarations, and Statement of
Legislative Intent
19990.01. This act shall be known and may be cited as the
Internet Gambling Consumer Protection and Public-Private Partnership
Act of 2010.
19990.02. The Legislature hereby finds and declares all of the
following:
(a) Over 1.5 million Californians participate in illegal online
gambling on more than 600 unregulated gambling Internet Web sites
every week. These 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
poker gambling are being realized by
offshore operators and not providing any benefits to the citizens of
California.
(b) The presence, operation, and expansion of offshore,
unlicensed, and unregulated gambling Web sites available to
Californians endangers Californians because the current 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 gambling Web sites as well as about the true purpose
for, and use of, proceeds generated by these unregulated gambling
Web sites.
(c) In October 2006, Congress passed the SAFE Port Act, to
increase the security of United States ports. Embedded within the
language of that bill was a section called the Unlawful Internet
Gambling Enforcement Act of 2006 (UIGEA), which prohibits the use of
banking instruments, including credit cards, checks, or fund
transfers, for interstate Internet gambling, essentially prohibiting
the play of online real-money poker online
gambling by United States citizens. UIGEA permits
does include exceptions that permit individual
states to create a regulatory framework to enable intrastate Internet
play of games of real-money poker. gambling,
provided the bets or wagers are made exclusively within a
single state, and 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 to 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 (IGRA).
(d) State regulation 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 play 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) In order to protect the millions of Californians who gamble
online, allow state law enforcement to ensure consumer protection,
and to keep the revenues generated from Internet poker 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.
(g) The state's interests are best met by a
private-public public-private partnership
between the state and up to three hub operators, the terms of which
would facilitate meeting the important consumer protection interests
of the state while ensuring, through the success of the hub
operators, that the state receives the benefits of the contract as
well as tax revenues that it would otherwise not receive.
(h) The state's interests are best met by encouraging competition
among qualified hub operators with the technical expertise and
systems that comply with federal law, protect registered players, and
ensure that the state collects consideration under its contract with
the hub operators, personal income taxes owed by registered players,
and corporate taxes from the earnings of hub
operators , 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 .
(i) The Department of Justice, in conjunction with other state
agencies and private partners, has the expertise to evaluate the
qualifications of applicants and responses to a request for proposal
for intrastate Internet gambling services, including those
services that a hub operator will provide, and
to enter into a contract with the best qualified and most responsive
applicants to meet the needs of the state and its citizens.
(j) The authorization of intrastate Internet gambling pursuant to
these provisions 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 these
provisions 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 on both tribal and
nontribal lands. Moreover, the facilities used in the provision of
Internet gambling are not slot machines or gaming devices as defined
in any of those compacts. While the Indian Gaming Regulatory Act
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 power to
determine how online gambling should take place within the states.
Finally, application of UIGEA in California does not violate federal
Indian law by impinging upon protected tribal sovereignty.
(k) Nothing in this chapter prohibits federally recognized Indian
tribes within California from participating in intrastate Internet
gambling pursuant to these provisions subject to the jurisdiction of
the state.
(l) It is the intent of the Legislature to encourage the Governor,
immediately following enactment of this act, to enter into meet and
confer negotiations with interested tribal governments with
tribal-state gaming compacts with the state, to resolve the questions
related to tribal-gaming exclusivity, to ensure that the signatory
parties of compacts may exercise their rights under the compacts in a
timely manner and that the state may commence the authorization of
Internet gambling as provided by this act.
19990.03. It is the intent of the Legislature to create a
contractual framework to:
(a) Ensure that authorized games are only offered for play in a
manner that is consistent with federal and state law.
(b) Authorize the Department of Justice, pursuant to a request for
proposal (RFP) seeking hub applicants issued consistent with the
terms and conditions in this chapter, to enter into a
five-year 20-year contract with up to three hub
operators that meet the background requirements and demonstrate the
technical expertise to ensure that wagering authorized by this
chapter is only offered 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 Department of Justice, at the
conclusion of the five-year term and subject to any amendments to
this chapter, after any hub operator has been
providing authorized games for five years, and at any time
thereafter, to do the following:
(1) Offer an extension of five years or more to any hub operator
offering authorized games to registered players pursuant to this
chapter.
(1) Renegotiate the terms and conditions of the contracts with the
hub operators, based in large part on the report and recommendations
of the Bureau of State Audits to the Legislature pursuant to Section
19990.96 with respect to all aspects of the hub operator's
operations, obligations, and economics, and offer existing hub
operators the opportunity to agree to these modifications and
continue in partnership with the state, subject to the statutory
approval of those terms and conditions by the Legislature.
(2) If the Legislature statutorily approves the new contract terms
and conditions related to the rights and obligations of the hub
operators, the existing hub operators may continue in partnership
with the state. If the existing hub operators decline to accept the
new terms and conditions, the department may commence a new RFP
process to award contracts to new hub operators.
(3) If the department recommends no changes to the terms and
conditions of the contract, or if the Legislature does not approve
any changes to the terms or conditions of the contract, the hub
operators shall continue to operate under the existing terms and
conditions of the contract, and the contract shall remain in force
for the remainder of the term of the contract, or until those terms
and conditions are subsequently renegotiated and are approved by the
Legislature
(2)
(4) Issue an RFP consistent with this chapter seeking
additional hub applicants should the Legislature determine to
increase the number of hub operators.
(d) Include all of the provisions in this chapter as terms of the
contract between the state and a each
hub operator subject to the enforcement provisions delineated in this
chapter.
(e) Ensure that a each hub operator
complies with federal and state laws and regulations.
(f) Grant power to the state agencies authorized in this chapter
to oversee the operations of any each
hub operator and to enforce the terms of the contract to ensure that
the interests of the state and registered players are protected.
(g) Establish a process that includes a background check and
requires that every employee of any each
hub operator or subcontractor receives an Internet hub employee
work permit from the state prior to gaining access to hub
facilities.
(h) Ensure that the state is able to collect income tax revenues
from registered players.
(i) Set contractual consideration to be paid by a
each hub operator to the state without creating
a tax or fee .
(j) Distribute contractual consideration collected by the state
from all hub operators each hub operator
to the Internet Gambling Fund, 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 contractual oversight, consumer
protection, state regulation, and problem gaming programs.
(2) Other purposes related to this chapter as the Legislature may
decide.
(k) Create systems to protect each registered player's private
information and prevent fraud and identity theft.
(l) Ensure that registered players are able to have their
financial transactions processed in a secure and transparent fashion.
(m) Ensure that all applicable state agencies will have unfettered
access to the premises and records of any
each hub operator to ensure strict compliance with state
regulations law concerning credit
authorization, account access, and other security provisions.
(n) Require that each hub operator provide registered players with
accessible customer service.
(o) Require that each hub operator's Internet Web site 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.
(p) Require that any each hub
operator and all of its subcontractors be organized in
California and locate the hub and its facilities entirely
within the state , without precluding foreign entities from
creating California subsidiaries for the purposes of applying to
become a California hub operator. The hub, its facilities, its
bank accounts related to its intrastate online gaming
operations, and its registered players' bank accounts shall be
located entirely within the state.
(q) Ensure that all Internet hub employees are physically present
in the state when working on or in hub facilities or when in contact
with registered players. However, the hub operator 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
Public Records Act under subdivision (b) of Section 6253 of the
Government Code, that exempts from public disclosure proprietary
information of a hub applicant or a hub operator that will
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 registered players.
(s) Preserve the authority of the Legislature to opt out of, or
opt into, any federal framework for Internet gambling, or to enter
into any compact with other states to provide Internet gambling.
(t) As a matter of statewide concern, preempt any city, county, or
city and county from passing any law or ordinance regulating or
taxing any matter covered in this chapter.
Article 2. Definitions
19990.05. For the purpose of this chapter the following words
have the following meanings:
(a) "Accepted proposal" means a response by the state to an RFP
submitted by a hub applicant selecting that hub applicant to become a
hub operator.
(b) "Affiliate" means any person or entity with more than a 5
percent ownership interest in a hub operator, a hub applicant, or a
subcontractor, or in which a hub operator, a hub applicant, or a
subcontractor owns more than a 5 percent interest.
(c)
(b) "Authorized game" means a game played using a hub
pursuant to the explicit authority of the state or offered by a hub
operator without objection as authorized
by the state.
(d)
(c) "Background check" means a criminal history record
check and the electronic submission of fingerprints to the Department
of Justice and to the Federal Bureau of Investigation for national
processing.
(e)
(d) "Bet" means the placement of a wager in a game.
(f)
(e) "Commission" means the California Gambling Control
Commission.
(g)
(f) "Contract" means the agreement entered into between
a hub operator and the State of California pursuant to which a hub
operator provides authorized games for consideration to the state.
(h)
(g) "Department" means the Department of Justice.
(i) "Division" means the Division of Gambling Control of the
Department of Justice.
(j)
(h) "Finding of suitability" means a finding by the
commission that a person meets the qualification criteria described
in Section 19990.23, and that the person would not be disqualified
from being a hub operator on any of the grounds specified in Section
19990.23.
(k)
(i) "Gambling" means to deal, operate, carry on,
conduct, maintain, or expose for play any game for money .
(l)
(j) "Game" means any gambling game.
(m)
(k) "Gaming system" means the technology, including
hardware and software, used by a hub operator to facilitate the
offering of authorized games to registered plays
players .
(n)
(l) "Gross revenues" means the total amount of money
received by a hub operator from registered players for
participation in authorized games. paid to a hub
operator pursuant to activities authorized under this chapter. Gross
revenues shall not include player deposits and wagers.
(o)
(m) "Hub" means all facilities and software used to
facilitate activities delineated in this chapter.
(p)
(n) "Hub applicant" means any person or entity
which that has submitted a proposal to enter
into a contract with the state to become a hub operator.
(q)
(o) "Hub facility" means any physical area used by a
hub operator.
(r)
(p) "Hub operator" means an entity
a person that has a contract with the state pursuant to
which that entity person offers
authorized games to registered players on the Internet.
(s)
(q) "Internet Gambling Fund" means the fund established
pursuant to this chapter for annual allocation by the Legislature.
(t)
(r) "Internet hub employee" means any natural person
employed in , or serving as a consultant or independent
contractor with respect to, the operation of a hub
by a hub operator or a subcontractor.
(u)
(s) "Internet hub employee work permit" means a permit
issued to an Internet hub employee by the commission after a
background check by the division.
investigation by the department.
(v) "Intrastate authorized games" means the playing of authorized
games over the Internet by registered players who must be physically
present within the borders of California at the time of play.
(t) "Intrastate" means within the borders of California.
(w)
(u) "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 which provides any game for players on its premises
that is offered on a hub.
(x)
(v) "Online self-exclusion form" means a form on which
an individual notifies a hub operator that she or he must be excluded
from participation in authorized games for a stated period of time.
(w) "Owner" means any person who has a financial interest in or
control of a hub operator, subcontractor, or other entity required to
be found suitable under this chapter.
(y)
(x) "Per hand charge" means the amount charged by the
hub operator for registered players to play in a per hand game.
(z)
(y) "Per hand game" means an authorized game for which
the hub operator charges the player for each hand.
(z) "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.
(aa) "Play settings" means the options and default parameters made
available by a hub operator to a registered player in the play of
authorized games.
(ab) "Proposal" means any and all submissions by a hub applicant
to the state prior to entering into a contract with the state.
(ac) "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 who 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, and business and marketing records,
working papers, files, systems, plans and data, and all registrations
and applications related thereto.
(ad) "Registered player" means a player who has registered with a
hub operator to play authorized games.
(ae) "Registration information" means the information provided by
a person to a hub operator in order to become a registered player.
(af) "RFP" means a request for proposal issued by the state.
(ag) "Robotic play" means the use of a machine by a registered
player to take the next action at any point in a game.
(ah) "State" means the State of California.
(ai) "Subcontractor" means any person or entity
providing goods or services to a hub operator in connection with the
operation of authorized games.
(aj) "Table" means a physical table at which games are legally
played at land-based gaming entities licensed in the state.
(ak) "Terms of Use Registered Player's Agreement" means the
agreement offered by a hub operator and accepted by a registered
player delineating, among other things, permissible and impermissible
activities on a hub and the consequences of engaging in
impermissible activities.
(a l ) "Tournament" means a competition in which
registered players play a series of authorized games to decide the
winner.
(am) "Tournament charge" means the amount charged by the hub
operator for registered players to play in a tournament.
(an) "Tournament winnings" means the amount of any prize awarded
to a registered player in a tournament.
(ao) "Tribe" means a federally recognized 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 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
over 21 years of age is hereby permitted to participate as a
registered player in an authorized game provided over the Internet by
a hub operator 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 contract entered into
with the state to offer authorized games as a hub operator pursuant
to this chapter.
(b) It is unlawful for any person to offer or play any
game provided on the Internet that is not authorized by the state
pursuant to this chapter. Any violation of this subdivision is
punishable as a misdemeanor.
(c)
19990.13. Chapter 5 (commencing with Section 19800) of
Division 8 shall not apply to this chapter.
Article 4. Selection of a Hub Operator
19990.20. Consistent with this chapter within ____ days
of the operative date of this chapter , the
department shall do the following:
(a) Issue an RFP to enter into contracts with up to three hub
operators to provide lawful Internet games in California for a period
of five 20 years.
(b) Issue all rules governing the submission of proposals and
awarding of hub contracts consistent with this chapter.
(c) Require that an authorized officer of a hub applicant execute
an undertaking that the proposal and any additional documents
submitted in response to a request by a state agency are truthful and
accurate subject to penalty of perjury.
(d) Adopt emergency regulations to implement this chapter.
19990.21. A person shall not have an ownership interest in more
than one hub.
19990.22. (a) In issuing the RFP, the department shall clearly
and precisely describe how any hub applicant's proposal shall be
scored and the basis it will use to determine which proposal or
proposals it will accept.
(1) The department shall establish a minimum score that any hub
applicant must achieve in order to be qualified to receive an offer
for a state contract to become a hub operator.
(2) Factors to be considered in evaluating hub applicants shall
include, but are not limited to, quality, competence, experience,
past performance, efficiency, reliability, financial viability,
durability, adaptability, timely performance, integrity, security,
and the consideration promised to the state , including a
lump-sum cash offer, and increasing the percentage of revenue sharing
with the state, up to, and including, 20 percent of the
hub operator's gross revenues .
(3) In establishing scoring parameters for evaluation of all the
proposals and what weight should be given to the specific elements
within each hub applicant's proposal, the department's selection
criteria shall give preference to proposals that meet the following
criteria:
(A) Are most
responsive.
(B) Are most qualified.
(C) Provide the most revenue to the state.
(C)
(D) Have as a managing general partner or chief
executive officer for the proposed hub operator either of the
following:
(i) A holder of an owner license issued by the commission pursuant
to subdivision (a) of Section 19851 of the Business and Professions
Code who is in good standing at the time the hub applicant submits
its proposal.
(ii) An official representative of the government of a federally
recognized Indian tribe with a tribal-state gaming compact with the
state.
(iii) A thoroughbred, quarter horse, or harness association
licensed by the California Horse Racing Board to conduct live horse
racing meetings in California.
(D)
(E) Have as a hub applicant or as a subcontractor or
subcontractors a small business or microbusiness eligible to
participate in the Small Business Procurement and Contract Act
(Chapter 6.5 (commencing with Section 14835) of Part 5.5 of Division
3 of Title 2 of the Government Code).
(E)
(F) Have as a hub applicant or a subcontractor or
subcontractors a disabled veteran business enterprise contractor,
subcontractor, or supplier eligible to participate in the California
Disabled Veteran Business Enterprise Program (Article 6 (commencing
with Section 999) of Division 4 of the Military and Veterans Code).
(F)
(G) Propose to locate hub facilities in a distressed
area designated by the Office of Planning and Research under the
Target Area Contract Preference Act (Chapter 10.5 (commencing with
Section 4530) of Division 5 of Title 1 of the Government Code), or
the regulations promulgated under that act.
(G)
(H) Propose to locate hub facilities in a enterprise
zone designated by the State Trade and Commerce Agency
Department of Housing and Community Development
pursuant to the Enterprise Zone Act (Chapter 12.8 (commencing with
Section 7070) of Division 7 of Title 1 of the Government Code), or
the regulations promulgated under that act.
(H)
(I) Propose to locate hub facilities in a military base
area designated by the State Trade and Commerce Agency pursuant to
the Local Agency Military Base Recovery Area Act (Chapter 12.97
(commencing with Section 7105) of Division 7 of Title 1 of the
Government Code), or the regulations promulgated under that act.
(4) The department shall not have to comply with the provisions of
Section 12103.5 of the Public Contracts Code prior to issuing the
RFP.
(b) The department shall accept up to three proposals within one
year of the operative date of this chapter pursuant to its
determination of rules governing the awarding of a hub contract, as
described in Section 19990.20.
(c) A person or entity , and all
subcontractors of that person, submitting a proposal to become
a hub operator shall be a resident of California or an entity
organized in California and have all of its hub facilities and
bank accounts related to intrastate online gambling in
California.
(1) At all times, a hub applicant or hub operator shall be
domiciled in California and in good standing with the Secretary of
State and the Franchise Tax Board.
(2) All subcontractors of a hub applicant or a hub operator, or
otherwise providing goods or performing services in connection with
the operation of authorized games for the hub applicant, hub
operator, or any of its subcontractors, shall be subject to the
provisions of this subdivision. If a hub operator desires to enter
into an agreement with a person or entity to
provide goods or services in connection with the operation of
authorized games, that person or entity shall be
subject to the provisions of this subdivision and investigation and a
finding of suitability as set forth in Section 19990.23.
(d) In addition to any other confidentiality protections afforded
to applicants for state contracts, the state and its agencies shall
treat the proprietary information contained in any proposal of any
hub applicant as confidential to protect the hub applicant and to
protect the security of any prospective hub. Nothing in this chapter
prohibits the exchange of confidential information between or among
state agencies considering a proposal by a hub applicant to become a
hub operator. The confidentiality provisions in this chapter shall
exempt proprietary information supplied by a hub applicant to a state
agency from public disclosure consistent with subdivision (b) of
Section 6253 of the Government Code.
(e) At the time of its submission of a proposal and response to
the RFP, a hub applicant shall pay a nonrefundable filing charge of
____ dollars ($____) to be paid to the state and received by the
department for the reasonably anticipated costs to be incurred by the
state agencies to evaluate the proposal separate from costs
associated with evaluating the suitability of a hub applicant.
(f) At the time of its submission of a proposal response to the
RFP, any hub applicant shall post a bond payable to the state in the
amount of ____ dollars ($____).
(1) The bond shall be returned to the hub applicant if the
commission finds that the hub applicant is not suitable to be a hub
operator or if its proposal is not accepted by the department.
(2) Upon acceptance of a hub applicant's proposal and the granting
of a contract to that applicant to operate a hub in the state, the
bond shall become immediately due and owing to the state.
(3) Notwithstanding paragraph (1), if any documentation submitted
by a hub applicant at the time the proposal is submitted or
thereafter, including, but not limited to, the proposal or any
additional documentation requested by a state agency in conjunction
with evaluating the hub applicant's suitability to be a hub operator
or other qualifications to be offered a contract with the state,
contains materially false assertions, then the bond shall be
forfeited, and the state shall retain all proceeds thereof.
(g) A federally recognized Indian tribe, including, but not
limited to, the governing body of that tribe or any entity that is an
affiliate of that tribe, that submits a proposal in response to the
RFP issued by the department shall waive its sovereignty for the
purpose of evaluation of its proposal. The proposal shall
affirmatively declare that the hub applicant is subject to the state'
s jurisdiction as set forth in this chapter and in the rules adopted
by state agencies. Any contract between the state and a federally
recognized Indian tribe entered into to provide authorized games as a
hub operator shall include that tribe's affirmative agreement ,
in a form acceptable to the department, to be subject to the
jurisdiction of the state for all purposes under this chapter.
(h) A hub applicant may The department
shall establish a process for a hub applicant to request to
withdraw its proposal at any time prior to final action on the
proposal submitted in response to the RFP by the filing of a
written request to the department. .
19990.23. Prior to In considering
any proposal submitted in response to the RFP, the department shall
send the proposal to the commission and the division to
review the hub applicant's suitability to be a hub
operator.
(a) The commission and division shall conduct an investigation
into the suitability of any hub applicant to be a hub operator and
the commission shall issue findings of suitability to be a hub
operator to the department within ____ days of the submission of the
proposal. The investigation shall include the following entities and
individuals:
(a) The department may establish a process to conduct a
preliminary determination of suitability based on a partial
investigation of hub applicants. The partial investigation is
intended to screen out applicants who do not meet the suitability
requirements of this chapter. The partial investigation shall include
fingerprint-based state and federal criminal history checks,
inquiries into various public databases regarding credit history and
any civil litigation, and a review of the applicant's financial
status, which shall include the required submission of income
statements and balance sheets for the prior 12-month period. A full
investigation shall be conducted of only those persons who pass
partial investigation and who 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.
(b) The department shall conduct a full investigation into the
suitability of any hub applicant to be a hub operator. The
investigation shall include the following persons:
(1) The hub applicant and all of its subcontractors.
(2) All officers of a hub applicant and its subcontractors.
(3) Any employee, independent contractor, or other person with
decisionmaking authority with respect to the hub applicant or any of
its subcontractors.
(4)
(3) The owners of the following:
(A) A hub applicant.
(B) Any affiliate of the hub applicant.
(C) Any subcontractors of a hub applicant, or other persons
or entities otherwise providing goods or
performing services.
(D) Any affiliate of a subcontractor of a hub applicant, or other
persons or entities otherwise providing goods or performing services.
(c) (1) A department-approved, independent forensic accounting
firm shall prepare a report on any applicant undergoing a full
investigation, in a form developed by the department, and at the
applicant's expense. The report shall include the financial
information necessary for the department to make a determination of
suitability, as specified in regulation adopted by the department for
this purpose.
(2) The department may, by regulation, specify additional
requirements regarding the contents of the report described in
paragraph (1) and any other financial information or documentation
required to be submitted with the application.
(b)
(d) In addition to the filing charge and the
bond paid at the time of submitting a proposal response to the RFP
pursuant to subdivision (f) subdivisions (f)
and (g), respectively, of Section 19990.22, a hub applicant
shall pay an additional nonrefundable charge of ____ dollars
($____) charge, established by the commission,
to be paid to the state and received by the division
department to compensate the commission and the
division department for the reasonably
anticipated costs to be incurred by the commission and the
division department to determine the suitability
of the applicant to be a hub operator.
(c)
(e) The commission shall issue a finding of suitability
for a hub applicant to be a hub operator only if, based on all of
the information and documents submitted, and based upon the
recommendation of the division department
, the commission is satisfied that each of the
individuals persons subject to investigation
pursuant to subdivision (a) 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.
(f) The commission shall find both of the following suitable to
become a hub operator:
(1) A holder of a current state gambling license to own or operate
a land-based gambling entity.
(2) A federally recognized Indian tribe operating a gambling
establishment pursuant to a tribal-state gaming compact.
(d)
(g) The commission shall issue a finding that a hub
applicant is not suitable to be a hub operator if it finds that any
individual or entity person subject to
investigation pursuant to subdivision (a):
(1) Fails to clearly establish eligibility and qualification in
accordance with this chapter.
(2) Fails to timely provide information, documentation,
and assurances required by this chapter or requested by the
commission department , or, with respect to a
hub applicant, fails to reveal any fact material to qualification, or
supplies information that is untrue or misleading as to a material
fact pertaining to the suitability criteria.
(3) Has 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) Has been convicted of 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 commission 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) Offers games over the Internet in this state
Has offered or allowed games to be played over the
Internet for compensation in this state since the passage of the
Unlawful Internet Gambling Enforcement Act of 2006 without a
valid contract with the state to be a hub operator.
(e) The commission may find either a holder of a current state
gambling license to own or operate a land-based gambling entity, or a
federally recognized Indian tribe operating a gambling establishment
pursuant to a tribal-state gaming compact, suitable to become a hub
operator.
(h) The department shall request that the United States Department
of Justice or any other federal agency or agency of a state other
than California provide any information about any hub applicant or
any of its subcontractors as part of its inquiry as to the
suitability of a hub applicant to be a hub operator.
(f)
(i) The department shall reject the response to
the RFP of any hub applicant which that
the commission finds unsuitable to be a hub operator subject
to the provisions of this section.
(1) If denial of the application is recommended, the
commission department shall prepare and file
written reasons upon which the recommendation is based with the
department commission .
(A) Prior to filing a recommendation with the department,
the commission 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.
(B) This section neither requires the commission
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 informer or
jeopardize the safety of any person.
(2) A recommendation of denial of an application shall be without
prejudice to a new and different application filed in accordance with
any rules adopted by the department with respect to the submission
of proposals.
19990.24. In addition to any other data that the RFP shall
request from hub applicants as a matter of law and to ensure that any
hub applicant is legally, technically, and financially qualified to
become a hub operator, the RFP shall request that any hub applicant
name, describe, or provide all of the following:
(a) The hub applicant's qualification and the qualifications of
its executives and Internet hub employees to receive an Internet hub
employee work permit as set forth in Section 19990.31.
(b) The hub applicant's experience and qualifications to provide
the services anticipated of a hub operator as set forth in
this article Article 5 (commencing with Section
19990.30) .
(c) The names of all of the hub applicant's owners, executives,
and Internet hub employees as well as sufficient personally
identifiable information on each of those persons to conduct
background checks as required by the commission and the
division department .
(d) The fingerprints of the owners, directors, managers,
executives, and Internet hub employees of the hub operator, its
affiliates, and subcontractors taken in either a police
station in the state or at a department office in the state.
using live scan technology.
(e) Documentation and information relating to the hub applicant
and its direct and indirect owners, including, but not limited to,
all of the following:
(1) With respect to the hub 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
founding formation or charter documents.
(2) Current and historical audited financial and accounting
records.
(3) Any and all documents relating to legal and regulatory
proceedings.
(4) Any and all documents relating to the hub applicant's business
history.
(5) Any and all documents relating to the nature and sources of
the hub applicant's financing, including, but not limited to,
operating agreements, partnership agreements, stock purchase
agreements, pro forma cap tables, pro forma statements of profits and
loss, investor rights agreements, voting agreements, and shareholder
agreements, provided however, that these materials may be submitted
subject to a request for confidentiality.
(6) Any and all documentation that demonstrates that the hub
applicant is financially qualified to perform the obligations of a
hub operator 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 hub 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), and (d).
(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 hub operator. 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 hub applicant
proposes to offer to registered players.
(h) A description of how the hub facilities will accomplish the
goals of this chapter, including, but not limited to:
(1) The hub's location within the state.
(2) The hub's security systems.
(i) The hub applicant's proposal for how 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 to 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 hub is located in California and all
bets are initiated and received or otherwise made exclusively within
California.
(j) The system requirements that the hub applicant plans to
implement to achieve the state's goals under the state's contract
with a hub operator, 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 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 contract and this
chapter, to the state and registered players.
(E) Ongoing auditing.
(13) Hub facility security systems to protect the hub from either
internal or external threats.
(k) The hub applicant's proposal to facilitate the functions of
the state agencies with jurisdiction over aspects of the hub's
operations, including, but not limited to, all of the following:
(1) The division department .
(2) The commission.
(3) The Treasurer.
(4) The Franchise Tax Board.
(l) An acknowledgment by the hub applicant that the contract
between the hub operator and the state may be modified by the state
after five years, and at any time thereafter, at which point the hub
operator may either agree to be subject to that modification or
terminate the contract.
(l)
(m) In addition to demonstrating that the hub applicant
is legally, technically, and financially qualified to become a hub
operator, a hub applicant's proposal in response to the RFP shall
describe how it will comply with all contractual obligations as
provided in this chapter.
19990.245. 19990.24.5. (a) A holder
of an owner license issued by the commission pursuant to subdivision
(a) of Section 19851 who is in good standing at the time the hub
applicant submits its proposal shall not be deemed unqualified to
operate a land-based gambling entity by reason of an investment in a
hub applicant or a hub operator.
(b) An official representative of the government of a federally
recognized 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 hub applicant or a
hub operator.
(c) A person or entity who is a hub operator
Notwithstanding Chapter 5 (commencing with Section 19800), a
person who is a hub operator that is operating lawfully in
another state is eligible to become a hub operator in California.
19990.25. The department, after considering the contents of the
proposal, the recommendation of the commission, and any other written
comments, shall apply the scoring standard released in issuing the
RFP pursuant to Section 19990.22 and shall either deny a proposal or
offer to enter into contract with a qualified hub applicant.
(a) The department shall determine that a hub applicant is
qualified to receive an offer to become a hub operator if both of the
following conditions are met:
(1) The hub applicant's proposal exceeds the minimum scoring
standards established by Section 19990.22.
(2) The hub applicant's proposal is among the three highest
scoring proposals submitted by all hub applicants.
(b) When the department offers to enter into a contract with a hub
applicant, the department shall transmit the offer in writing to the
hub applicant. The offer may limit or place restrictions that vary
from the proposal as may be deemed necessary in the public interest,
consistent with the policies described in this chapter.
(c) In order for the hub applicant to accept an offer, it shall
respond in writing to the department within 10 days.
(d) Acceptance of the offer shall create a binding contract
between the state and the hub applicant.
(e) If the department does not offer a hub applicant a contract
with the state, the department shall prepare and issue a detailed
statement of the department's reasons.
(f) A hub applicant whose proposal has not led to an offer from
the department may bring an action to appeal that decision
to the Office of Administrative Hearings. to the
Superior Court of the County of Sacramento. The decision of the
Superior Court of the County of Sacramento is not appealable. No
remedy other than an injunction is available pursuant to this
subdivision.
(g) The Superior Court of the County of Sacramento shall
uphold the decision by the department shall be upheld
by the Office of Administrative Hearings if there is any
substantial evidence to support the department's decision to deny the
hub applicant's proposal.
(h) In the event that the Office of Administrative Hearings finds
(h) If the Superior Court of the County of
Sacramento finds for the hub applicant, it shall return the
proposal to the department for action consistent with the decision of
the Office of Administrative Hearings.
court.
19990.26. (a) At least two years prior to the expiration
three years after the commencement date of any
hub operator's contract with the state, but no later than four
years after that date, the Bureau of State Audits shall issue a
report to the Legislature consistent with Section 19990.96. The
department shall consider the recommendations in the report and any
other information available to the department in
negotiating new or modified contract terms and conditions with hub
operators. The Legislature may consider whether to amend the
statutes that govern the terms and conditions of the hub operator's
contract with the state contained in Article 5 (commencing with
Section 19990.30) before the expiration
commencement of the sixth year of the contracts with hub
operators.
(b) In the event that the Legislature amends the provisions of
Article 5 (commencing with Section 19990.30) that govern a contract
between the state and a hub operator, the department shall offer an
existing hub operator a new contract for five years or more
modification of its existing contract under the
new terms and conditions in accordance with statutory changes
approved by the Legislature pursuant to this section. A hub operator
shall indicate whether it accepts the new contract within 30 days of
receiving the offer from the department. A hub operator's acceptance
of the department's offer shall create a binding
modify the contract between the hub operator and the state
for the remaining term of the contract .
(c) If the Legislature does not amend the terms and conditions
that govern the contract between the state and a hub operator set
forth in Article 5 (commencing with Section 19990.30), all existing
contracts shall remain in force for the remaining term of the
contract, or until those terms and conditions are subsequently
modified by the Legislature.
19990.27. In the event that the Legislature authorizes the
department to issue an RFP for an additional hub operator or hub
operators, the department shall solicit proposals from new hub
applicants to enter into a contract with the state for ____-year
terms. In establishing scoring parameters for evaluation of all the
proposals and what weight should be given to the specific elements
within each hub applicant's proposal, the department's selection
criteria shall be consistent with the amendments adopted
this chapter and any amendments to this chapter.
19990.28. At least one year prior to the expiration of a hub
operator's contract with the state issued pursuant to Section
19990.25 19990.26 , or as a result of
the RFP process established pursuant to Section 19990.22
19990.27 , the department shall issue an RFP to
solicit proposals from hub applicants to enter into a contract with
the state for a ____-year 15-year term.
In establishing scoring parameters for evaluation of all the
proposals and what weight should be given to the specific elements
within each hub applicant's proposal, the department's selection
criteria shall give preference to proposals from an existing hub
operator in compliance with its contractual obligations.
Article 5. Rights and Obligations of a Hub Operator
19990.30. A hub operator shall comply with the terms of its
contract with the state.
(a) An accepted proposal agreed to by the department and any hub
applicant shall govern interpretation of the contract entered into
between the state and a hub operator.
(b) Subject to state and federal law, a A
contract may be amended by mutual agreement of the department
and a hub operator.
(c) In the event of an act by the Legislature that amends this
chapter and is adopted after the terms of a contract between the
state and any hub operator are established, a hub operator may
declare the contract void within 60 days of the effective date of the
amendment. If a hub operator does not make that declaration, it
agrees to be bound by those amendments to this chapter.
(d) In the event of commercial infeasibility created by a change
in federal law rendering the provision of intrastate Internet gaming
services illegal or some other event, a hub operator may abandon its
contract after providing the department with 90 days advance notice
of its intent to end the contract and a statement explaining its
interpretation that continuing to provide services under the contract
is commercially infeasible. In response to notice provided by the
hub operator under this subdivision, the state may file an action in
the Superior Court of the County of Sacramento as it deems necessary
to protect any state interests, including, but not limited to, the
interests of registered players.
(e) In the event that any dispute arises between the parties to
the contract, either the department or a hub operator may file an
action in the superior court of any county in which the
Attorney General department has an office for an
interpretation of the contract and the rights and responsibilities
of the state and the hub operator pursuant to the
contract.
19990.31. Prior to initiating operations and thereafter, a hub
operator shall ensure that every Internet hub employee has been
issued an Internet hub employee work permit by the commission
prior to having access to the hub facilities.
, pursuant to standards adopted by the commission, prior to that
person having access to the hub facilities. The permit shall be
renewed every two years.
(a) A hub operator shall ensure that every person, who, as an
employee of the hub operator, whether for hire or not, either solely
or in conjunction with others, deals, operates, carries on, conducts,
maintains, or exposes for play any authorized game in this state,
shall apply for and obtain from the commission, and shall thereafter
maintain, a valid Internet hub employee work permit, in the case of
Internet hub employees, or work permit, otherwise.
(b)
(a) No Internet hub employee work permit shall be
issued to any person unless, based on all of the information and
documents submitted, the commission 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
the incidental business and financial arrangements.
(3) A person who is in all other respects qualified to hold an
Internet hub employee work permit as provided in this chapter.
(c)
(b) The commission shall disqualify an applicant for
a an Internet hub employee work permit
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 or a court in another state 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 commission 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)
(c) A hub operator shall apply for an Internet hub
employee work permit on behalf of each Internet hub employee.
(e)
(d) A person shall not be issued an Internet hub
employee work permit unless the person would qualify to be
the owner of a hub operator, as specified in Section 19990.23.
meets the qualification standards adopted by the
commission.
(f)
(e) The commission shall establish a fee to be paid by
a hub operator in submitting applications for Internet hub employee
work permits on behalf of those hub operators' employees. The
commission shall establish processes for the revocation or suspension
of a gambling license or Internet hub employee work permit, and to
withdraw an application for a gambling license or Internet hub
employee work permit.
(g)
(f) A hub operator , affiliate, or
subcontractor of a hub operator shall not enter into, without prior
approval of the department, any contract or agreement with a person
who is denied a gambling license pursuant to Chapter 5 (commencing
with Section 19850) or Internet hub employee work permit, or whose
gambling license or Internet hub employee work permit is suspended or
revoked by the commission or department, or with any business
enterprise under the control of that person, after the date of
receipt of notice of the commission's or department's action.
(h)
(g) A hub operator , affiliate, or
subcontractor of a hub operator shall not employ, without prior
approval of the commission, any person in any capacity for which he
or she is required to have an Internet hub employee work permit, if
the person has been denied an Internet hub employee work permit or a
gambling license pursuant to Chapter 5 (commencing with Section
19850) or if his or her Internet hub employee work permit or gambling
license has been suspended or revoked after the date of receipt of
notice of the action by the commission. A hub operator or
subcontractor of a hub operator shall not enter into a contract or
agreement with a person whose application for an Internet hub
employee work permit or gambling license 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 an Internet hub employee work
permit or gambling license.
(i)
(h ) If an employee who is required to hold
an Internet hub employee work permit pursuant to this chapter is
denied an Internet hub employee work permit, or has his or her
Internet hub employee work permit revoked by the commission or
department, the employee shall be terminated in any capacity
in which the employee is required to hold an Internet hub employee
work permit and the capacity. The employee shall
not be permitted to exercise a significant influence over the
gambling operation, or any part thereof, upon being notified
notification to the hub operator of that
action.
(1) If an employee who is required to hold an Internet hub
employee work permit pursuant to this chapter has his or her Internet
hub employee work permit suspended, the employee shall be suspended
in any capacity in which he or she is required to hold an
Internet hub employee work permit and shall not be
capacity. The employee shall not be permitted to exercise a
significant influence over the gambling operation, or any part
thereof, during the period of suspension, upon being
notified notification to the hub operator of that
action.
(2) If a hub operator , affiliate, or
subcontractor of a hub operator designates another employee to
replace the employee whose employment was terminated or suspend
ed , the hub operator or subcontractor shall
promptly notify the department and shall apply for an Internet hub
employee work permit on behalf of the newly designated employee.
(j)
(i) A hub operator , affiliate, or
subcontractor of a hub operator shall not pay to a person whose
employment has been terminated pursuant to subdivision (i) any
remuneration for any service performed in any capacity in which the
person is required to hold an Internet hub employee work permit,
except for amounts due for services rendered before the date of
receipt of notice of the commission's or department's action of
suspension or termination. A hub operator , affiliate,
or subcontractor of a hub operator shall not ,
during the period of suspension, shall not pay to
a person whose employment has been suspended pursuant to subdivision
(i), any remuneration for any service performed in any capacity in
which the person is required to hold an Internet hub employee work
permit, except for amounts due for services rendered before the date
of receipt of notice of the commission's or department's action.
(k)
(j) Except as provided in subdivision (i), a contract
or agreement for the provision of services or property to a hub
operator , affiliate, or subcontractor of an affiliate
or subcontractor or for the conduct of any
activity pertaining to the operation of a hub, which is to be
performed by a person required by this chapter or by regulations
adopted pursuant to this chapter, to hold an Internet hub employee
work permit, shall be terminated upon a suspension or revocation of
the person's Internet hub employee work permit.
(l)
(k) In any case in which a contract or agreement for
the provision of services or property to a hub operator or an
affiliate thereof, or for the conduct of any activity at a hub, is to
be performed by a person required by this chapter or by regulations
adopted by the commission to hold an Internet hub employee work
permit, the contract shall be deemed to include a provision for its
termination without liability on the part of the hub operator,
affiliate, or subcontractor or its duly registered holding
company upon a suspension or revocation of the person's
Internet hub employee work permit. In any action brought by the
division department or commission 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)
(l) If a hub operator does not comply with the
contractual obligations of this section, the department may impose
liquidated damages of not more than ____ dollars ($____) per
occurrence. In the event that a hub operator negligently, willfully,
or wantonly fails to comply with this contractual obligation, the
department may initiate an enforcement action and subject a hub
operator to ____ dollars ($____) in liquidated damages and may begin
proceedings to suspend or revoke a hub operator's contract.
19990.32. The hub operator shall be 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 entities persons that are in
contract with the state, the state and its agencies shall treat the
proprietary information provided by a hub operator as confidential to
protect the hub operator and to protect the security of the hub.
(b) The confidentiality provisions of this chapter exempt
proprietary information supplied by a hub operator to a state agency
from public disclosure consistent with subdivision (b) of Section
6253 of the Government Code.
19990.33. (a) Changes in ownership or interest of an
affiliate of 5 percent or more of the stock or other equity in the
hub operator or any affiliate shall be approved by the department and
the in the hub operator shall be approved by the
commission prior to the closing of any proposed transaction.
(b) The department and the commission shall
investigate to ensure that any entity person
acquiring interest in a hub operator is suitable and otherwise
financially, technically, and legally qualified to be a hub operator
consistent with the provisions of this chapter. This
investigation shall be concluded within 90 days of the receipt of
notice by the department and the commission. In the event that
If an acquiring entity
person is found to be unsuitable to be a hub operator or
otherwise not financially, technically, and legally qualified to be a
hub operator, the hub operator or the acquiring entity
person may challenge that determination
consistent with subdivision (f) of Section 19990.25.
(c) A change in ownership or interest of a hub operator of less
than 5 percent shall be reported to the department and the commission
within 20 days after the change, unless that change results in a
cumulative total of 5 percent or more and requires compliance with
subdivision (a). The department and commission may then conduct an
investigation to ensure that the hub operator's contract with the
state is properly updated to show the change in ownership or
interest, or that the person is suitable pursuant to the requirements
in this chapter.
19990.34. All facilities, software , including downloadable
programs , and any and all other property, both tangible and
intangible, used by the hub operator in offering authorized games
shall be the property of a hub operator or its subcontractors ,
and shall be approved by the department .
19990.35. A hub operator 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.
(a) All registered players must be physically located within the
State of California at the time of gambling.
(b) No registered player may 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 hub operator 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 hub operator
shall verify that the person is 21 years of age or older. The hub
operator 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 hub operator also shall verify that the billing address
on the check or credit card offered for payment by the person matches
the address listed in the database.
(B) If the hub operator is unable to verify that the person is 21
years of age or older pursuant to subparagraph (A), the hub operator
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 military identification. The hub operator also shall verify
that the billing address on the check or credit card provided by the
person matches the address listed in the government identification.
(C) The hub operator shall not permit registered players to make
payments by money order or cash. The hub operator 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 hub operator is made by credit card
payment.
(3) If a hub operator complies with the requirements of paragraph
(2), and a person under 21 years of age participates in an authorized
game provided by the hub operator, the hub operator 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.
(c) A hub operator shall The commission
shall, by regulation, provide a process for a hub operator to
exclude from play any person who has filled out an Online
Self-Exclusion Form.
(1) The commission shall develop an Online Self-Exclusion Form and
deliver it to the Department of Justice
department within six months of the effective date of this
chapter.
(2) The Department of Justice department
shall deliver the form to each hub operator.
(3) A hub operator shall prominently display a link to the
commission's Responsible Gaming site and the Online Self-Exclusion
Form on the Web page that is displayed when either of the following
apply:
(A) A person registers as a registered player.
(B) A registered player first Each time a
registered player accesses the Web site of the hub prior to
playing.
(4) A hub operator shall retain the Online Self-Exclusion Form to
identify persons who want to be excluded from play.
(5) No hub operator that has complied made
commercially reasonable efforts to comply with this
subdivision shall 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 hub operator shall only offer games and process bets
in accordance with the specified game and betting rules established
by the hub operator and approved by the division with input
from the commission department consistent with
Section 19990.37.
19990.37. A hub operator shall only provide authorized games
approved by the division department .
(a) In order to propose a game for play, a hub operator shall
provide the division and the commission with all
department with both of the following:
(1) A description of the game and the Game
rules and betting rules it proposes to offer to
registered players.
(2) A legal opinion explaining how the game complies with federal
and state laws and how the game is not a violation of tribal-state
gaming compacts.
(3)
(2) Documentation relating to development and testing
of the game's software.
(b) The division shall consult with the commission on whether a
proposed game is authorized under this section.
(c) If the division does not object to the proposal within ____
days, a hub operator may offer the game to registered players.
(d) Only the division may object to the offering of a game to
registered players or file an action to prevent that offering.
(b) The department shall approve the game rules and betting rules
before a hub operator may offer the game to registered players.
19990.38. A hub operator shall ensure that games are fair.
(a) 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 hub operator determines is
necessary for the registered player to have in real time to compete
fairly in the game.
(b) Game results shall be unpredictable.
(1)
(b) 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.
(2) The game or any game event outcome shall not be affected by
the effective bandwidth, link utilization, bit error rate, or other
characteristic of the communications channel between the
gaming system and the playing device
used by the player.
(c) A hub operator 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 hub operator 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 State Chief
Information Officer and the division department
of all relevant facts.
(2) The department may not bring an action for
impose liquidated damages against a hub operator to
prevent fraud or cheating if a hub operator can demonstrate that it
acted responsibly to prevent those activities as soon as a hub
operator became aware of them.
(d) In the event that 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.
(e) In a tournament, if the gaming server or software does not
allow the tournament to be completed, all prize money will be
distributed among players in accordance with the procedure published
by the hub operator prior to the commencement of the tournament.
19990.39. A hub operator shall register players and establish
player accounts prior to play.
(a) A person shall not participate in any game provided by a hub
operator unless the person is a registered player and holds an
account.
(b) Accounts shall be established in person, by mail, telephone,
or by any electronic means.
(c) To register and establish an account, a person shall provide
the following registration information:
(1) First name and surname.
(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 e-mail address.
(d) A hub operator shall provide registered players with the means
to update the registration information provided to the hub operator.
(e) Nothing in this section shall prevent a hub operator 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 hub
operator.
19990.40. A hub operator shall provide a means for registered
players to put funds into a registered player account and transfer
funds out of that account.
(a) 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 hub operator shall provide a means for a
registered player to transfer money into and out of the player's hub
account.
(b) At the time of establishing a hub account, a registered player
shall designate the bank account into which funds from the
registered player's hub account are to be transferred.
(c) A registered player shall establish only one account on any
hub.
(d) While playing an authorized game, a hub operator shall
not permit a registered player shall not
to increase the amount of money in that registered player'
s account after that game hand has
started and before its completion.
(e) A hub operator shall maintain records on the balance of each
registered player's account.
(f) A hub operator 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.
(g) A hub operator shall not provide credit to a registered player'
s account or act as agent for a credit provider to facilitate the
provision of funds.
(h) No interest shall be paid by a hub operator with respect to
registered player accounts.
19990.41. A hub operator shall segregate funds it holds in all
registered player accounts from all of its other assets.
(a) A hub operator shall not commingle funds in the segregated
account containing funds paid by registered players with any other
funds held by the hub operator. Both the accounts of the hub
operator and its segregated registered player accounts shall be held
in financial institutions located in the state.
(b) 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 hub operator 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 hub operator pending the outcome of
an authorized game.
(4) To remit tax proceeds due and owing from a registered player
to the Franchise Tax Board , at the option of the player
.
(5) To transfer funds from a registered player's account with the
hub operator to an account specified by a registered player upon that
registered player's request.
19990.42. Prior to completing the registration process, a hub
operator shall explain to the person who is registering in
a conspicuous fashion the privacy policies of the hub, and a 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 (j)
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, and
the Franchise Tax Board as necessary to assist them in fulfilling
their obligations under this chapter.
(c) Personally identifiable information may only be shared with
government agencies in circumstances other than as
set forth in subdivision (b) or subject to court order as provided
in subdivision (j) of Section 19990.47.
19990.43. A hub operator may also require that a person must
agree to a Terms of Use Registered Player's Agreement applying to
registered players.
19990.44. A hub operator 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 hub operator, 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 hub's Terms of Use
Registered Player's Agreement.
(d) The person has already been registered.
(e) The hub operator suspects that the registered player has
participated in an illegal or unauthorized activity on the hub.
(f) The hub operator is directed by a state agency to suspend or
revoke the registered player's account.
19990.45. (a) Upon registration and at each time when a
registered player logs into a hub, the hub operator 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 amount that can be wagered
aggregate losses in a registered player's account
within a specified period of time.
(3) Set a limit on the losses the player may incur within a
specified period of time.
(4) Set a limit on the amount of time that can be played after
logging into the hub.
(5) Prevent the hub from allowing the registered player to play
for a definite or indefinite 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) Indicate how long the player has been playing.
(2) Indicate the player's winnings or losses
net change in value to a regi stered player's account
since the time of last logging in.
(3) At least once every six hours require the registered player to
confirm that the player has read the message or give an option to
the player to end the session or return to the game.
19990.46. A hub operator shall establish a toll-free telephone
customer service hotline that shall be available to registered
players 24 hours a day and 365 days a year. All Internet hub
operator employees shall be physically present in the
state while in contact with registered players. However, the hub
operator 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 hub operator shall give notice to
the department when using personnel who are out of state.
19990.47. A hub operator shall protect the privacy of registered
players and their data.
(a) A hub operator shall comply with all state and federal privacy
and data protection laws.
(b) At the time of registration with a hub operator as a
registered player, and at least once a year thereafter, a hub
operator shall provide notice in the form of a separate, written
statement , delivered via postal service or electronic mail,
to the registered player which 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 which 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 hub operator.
(4) The times and place at which the registered player may have
access to personally identifiable information in accordance with
subdivision (g).
(5) The limitations provided by this section with respect to the
collection and disclosure of personally identifiable information by a
hub operator and the right of the registered player under
subdivision (i) or (j) to enforce those limitations.
(c) A hub operator shall not collect personally identifiable
information concerning any registered player without the prior
written or electronic consent of the registered player concerned.
(d) A hub operator may collect personally identifiable information
in order to do both of the following:
(1) Obtain information necessary to operate the hub and offer
authorized games to registered players pursuant to this chapter.
(2) Detect unauthorized play, activities contrary to a hub
operator's Terms of Use Registered Player's Agreement, or activities
contrary to state or federal law.
(e) Except as provided in subdivision (f), a hub operator 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 hub operator.
(f) A hub operator 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 hub operator.
(2) Subject to subdivision (j), 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 sponsor third party ,
if both of the following apply:
(A) The hub operator 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 hub.
(4) To the department to fulfill its obligations
under this chapter or a state agency as authorized in this
chapter.
(g) A registered player shall be provided access to all personally
identifiable information regarding that registered player which is
collected and maintained by a hub operator. The information shall be
made available to the registered player at reasonable times and at a
place designated by the hub operator. A registered player shall be
provided reasonable opportunity to correct any error in the
information.
(h) A hub operator 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 (j).
(i) Any person aggrieved by any act of a hub operator in violation
of this section may bring a civil action in any superior court. The
court may award:
(1) Actual damages but not less than liquidated damages computed
at 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.
(j) Except as provided in subdivision (f), 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 hub operator shall establish a book of accounts and
regularly audit all of its financial records and reports which
must shall, at a minimum, include all
of the following:
(a) Monthly auditable and aggregate financial statements of gaming
transactions.
(b) Calculation Monthly calculation
of all amounts payable to the state.
(c) The identity of players.
(d) The balance on each player's account at the start of a session
of play , the amount won or lost by each player during a game,
and the balance on the 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 won or lost by each player.
(h)
(g) The amount, if any, as determined by the player,
withheld from winnings for federal or state income tax purposes.
(i) The balance on the player's account at the end of the game.
19990.49. A hub operator shall make all financial records
established and maintained pursuant to Section 19990.48
available , including, but not limited to, all books,
records, documents, financial information, and financial reports, on
both an electronic basis and in hard copy, as required by the
commission, as required by the state agencies to the division,
the commission, the department, the Treasurer, and the Franchise Tax
Board so that those state agencies can fulfill their responsibilities
under this chapter.
(a) The hub operator's data shall be retained in a manner by which
it may be accessed by the state agencies online.
(b) Notwithstanding subdivision (a), 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 hub operator shall implement technical systems that
materially aid the department and commission in
the protection of registered players.
(a) A hub operator shall define and document its methodology for
developing software and applications and address how
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.
(b) A hub operator shall meet minimum game server connectivity
requirements to ensure that players are protected from losses due to
connectivity problems.
(c) A hub operator shall ensure that all transactions involving
player funds shall be recoverable by the system in the event of a
failure or malfunction.
(d) All information required for viewing
reviewing a game interrupted due to loss of connectivity shall
be recoverable by the hub operator.
(e) Preventative and detective controls addressing money
laundering and fraud risks shall be documented and implemented by the
hub operator.
19990.51. A hub operator shall be permitted to charge registered
players to play in authorized games , subject to the
approval of the division. .
(a) Per hand charges are permitted.
(1) A per hand charge shall be designated and conspicuously posted
on the screen prior to the start of each authorized game.
(2) A hub operator shall be permitted to vary the per hand charges
on to registered players based on
betting limits or other factors.
(b) Tournament charges shall be permitted.
(1) A tournament charge shall be designated and conspicuously
posted on the screen prior to the start of the first authorized game
of any tournament.
(2) A hub operator shall be permitted to vary tournament charges
based on tournament prizes or other factors.
(c) A hub operator shall provide notice to the department of the
charges to registered players prior to initiating play.
19990.52. A hub operator shall be permitted to enter into an
agreement with any third party to sponsor or underwrite prizes for a
tournament, subject to the approval of the division
department .
19990.53. A hub operator shall be permitted to enter into an
agreement to sell advertisement space on any Web site it controls,
subject to the approval of the division
department .
19990.53.5. A hub operator shall be permitted to 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.
19990.54. A hub operator shall be permitted to enable a chat
function between registered players as long as it has in place
effective controls against collusion, subject to the approval of the
division department .
19990.55. A hub operator shall be permitted to post Web links on
the Web site it controls to permit registered players to access
remote Web sites, subject to the approval of the division
department .
19990.56. A hub operator may enter into contractual agreements
with one or more hub operators for the purpose of ensuring adequate
player liquidity, subject to the approval of the division
department .
19990.57. A hub operator may allow a registered player to
participate simultaneously in multiple games or tournaments, as long
as the hub operator has demonstrated to the department that it
has technical controls that prohibit a registered player from
playing multiple hands simultaneously in the same game, subject to
the approval of the division department
.
19990.58. In consideration for its contract with the state, and
in recognition of the fact that the initial
investments and efforts required to start up this business venture,
and to ensure the state hub operators are in the best position to
compete with offshore operators and be successful, a hub operator
shall disperse at least 20 percent of its gross revenues to
the Treasurer on a monthly basis as determined by the proposal.
remit to the Treasurer on a monthly basis that
percentage of its gross revenues as is agreed in the contract between
the state and the hub operator, but no less than 10
percent of its gross revenues.
(a) Each monthly payment shall be due on the 10th of the following
month.
(b) A hub operator shall make all electronic and written financial
records available to the Treasurer, the commission, and the
department on an electronic basis .
(c) For the purposes of determining gross revenues, the hub
operator and the Treasurer shall use generally accepted accounting
principles.
(d) With respect to the dispensation of the bond posted by a hub
applicant pursuant to subdivision (f) of Section 19990.22, both of
the following apply:
(1) In the event that the aggregate amount due to the state in
consideration for a hub operator's contract is an amount greater than
one hundred million dollars ($100,000,000)
_____ dollars ($_____) in the first year of operation of the
hub, the bond referred to in subdivision (f) of Section 19990.22
shall be released in the final calendar quarter of the hub operator's
first year of operation, determined on a rolling basis.
(2) In the event that the aggregate amount due to the state in
consideration for a hub operator's contract is an amount less than
one hundred million dollars ($100,000,000)
_____ dollars ($_____) in the first year of operation of the
hub, under the hub operator's contract with the state, the bond
referred to in subdivision (f) of Section 19990.22 shall not be
released and an amount equal to the difference between the
dollar amount of the bond and the amount due to the state shall
be collected by the state in the final calendar quarter of the hub
operator's first year of operation, determined on a rolling basis.
19990.59. The hub operator shall facilitate the collection of
personal income taxes from registered players by the Franchise Tax
Board.
(a) The hub operator shall withhold 5 percent of tournament
winnings for state income tax if the winnings minus the tournament
charge are more than six hundred dollars ($600) and are at least 300
times the tournament charge.
(1) The hub operator shall transfer that withheld income to the
Franchise Tax Board.
(2) Winnings and losses of the registered player from other
tournaments sponsored by the hub operator 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.
(b) Within six months of the effective date of this chapter, the
Franchise Tax Board shall publish a form to be used annually by a hub
operator to ensure that the state is able to collect 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 their
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 hub operator, 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.
(c) The hub operator shall electronically file a copy of the form
with the Franchise Tax Board for each registered player who held an
account with the hub operator for all, or any portion of, the taxable
year. The hub operator shall electronically provide each registered
player with a copy of the form.
19990.60. A hub operator shall not engage in certain
business dealings or business transactions
without prior approval of the division
department . The division department
shall adopt contract provisions establishing the procedures for
these transactions.
(a) A security interest in a hub operator shall not be enforced
without the prior approval of the division
department .
(b) It is unlawful for any person to sell, purchase, lease,
hypothecate, borrow, or loan money, or create a voting trust
agreement or any other agreement of any sort with a hub operator with
a contract with the state pursuant to this chapter or with respect
to any portion of the provision of authorized games, except in
accordance with the division department
.
(c) Every hub operator that is involved in a transaction for the
extension or redemption of credit by the hub operator, or for the
payment, receipt, or transfer of coin, currency, or other monetary
instruments, as specified by the division
department , in an amount, denomination, or amount and
denomination, or under circumstances prescribed by regulations, and
any other participant in the transaction, as specified by the
commission department , shall, if
required by regulation, make and retain a record of, or file with the
division department a report on, the
transaction, at the time and in the manner prescribed in a
the hub operator's contract.
19990.61. A hub operator shall act expeditiously to cure any
failure in performance under its contract in the offering or
administrating of legal games that interferes with its obligations to
the state or registered players under this chapter.
(a) If a hub operator becomes aware of any failure of performance,
it will shall notify the
division department immediately and work with
the division department to develop a
plan to rectify the failure.
(b) If the division department
becomes aware of any failure of, or suspected failure of, performance
under the contract between the state and a hub operator, or if it
becomes aware of any activities that might lead to a failure to
perform, the division department shall
provide notice of that failure to the hub operator and a reasonable
opportunity to cure the failure. The division
department shall also provide
the notice to the commission.
(c) All state agencies with responsibilities under this chapter
shall report any actual or suspected failure of performance of the
hub operator's duty under the contract, or activities which
might lead to the that may lead to that failure,
to the division department and
commission immediately so that the division
department can assess whether it needs to commence an
investigation or enforcement action.
(d) A hub operator shall be afforded a reasonable time period to
cure any reported failure of performance. The department may
assess damages for failure of performance.
(e) Prior to the issuance of the RFP, the division
department shall issue a schedule of liquidated
damages that will be part of the contract with a hub operator
for delineating and shall delineate
damages that will be owed to the state for failure of the hub
operator to perform specific duties under this chapter.
(1) Liquidated damages shall not exceed ____ ($____) for each
failure of a hub operator to perform under its contract or for a
violation of this chapter.
(2) All liquidated damages payments imposed and remitted to the
state shall be deposited in the Internet Gambling Fund, as created by
Section 19990.86.
(3) The imposition of liquidated damages shall not make
performance by the hub operator commercially infeasible.
(f) Prior to the issuance of the RFP, the commission and the
division department shall issue rules
relating to enforcement proceedings under the contract consistent
with this chapter.
(1) The rules shall describe the procedures for the development of
a record and give the hub operator the opportunity to comment in
advance of any final action.
(2) The rules shall describe enforcement provisions, including
intermediate procedures it shall take prior to the imposition of
liquidated damages on the hub operator.
(3) The division department shall
have the subpoena power in any investigation.
(4) The commission, division, and a hub operator shall be parties
to any investigation or enforcement action.
(5)
(4) The rules shall give a hub operator the opportunity
to respond to any allegation of failure of performance prior to the
issuance of a specific order from the commission or division
department to cure any failure of performance
or any order to pay liquidated damages is issued .
(6)
(5) The commission or division
department may revoke or suspend a hub operator's contractual
rights under this chapter upon reaching a finding that the hub
operator is in negligent, willful, willful
or wanton violation of any provision of this chapter.
(g) A hub operator may appeal any decision of the commission to
the superior court. The superior court shall hear any appeal de novo.
19990.62. The commission shall protect the rights and assets of
registered players on a hub should that hub operator's contract with
the state be revoked or should the hub operator become bankrupt.
19990.63. A hub operator shall at all times indemnify, defend,
and hold harmless the state and its agencies from and against any and
all claims, damages, liabilities, costs, and expenses, including
reasonable attorneys' 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 hub operator
and the provisions of 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 hub operator.
(a) The state and its agencies shall promptly notify a hub
operator of any claim or litigation to which the indemnity set forth
in Section 19990.62 applies.
(b) At the option of a hub operator, it may assume the defense of
any claim or litigation. If a hub operator assumes the defense of any
claim or litigation, the hub operator's obligation with respect
thereto shall be limited to the payment of any settlement approved by
the hub operator, or any judgment in connection with that claim or
litigation.
Article 6. Authority of State Agencies
19990.70. State agencies shall may adopt
rules to perform the duties described in this chapter and in
all ways facilitate the operation of the hub in compliance with this
chapter.
(a) Any rule adopted by a state agency shall be consistent with
this chapter.
(1) Any rule of a state agency that this chapter intends to be
part of a hub operator's contract shall be adopted in advance of
issuance of the RFP by the department.
(2) Any rule adopted after the issuance of the RFP by the
department shall facilitate a hub operator's responsibilities to
registered players, and state revenue raising functions and other
responsibilities under its contract with the state.
(b) Each state agency with responsibility under the contract
between a hub operator and the state shall identify an employee or
employees of the agency to act as the point of contact with the hub
operator and describe the responsibility or responsibilities of the
employee or employees with respect to the state agency's function.
(c) Any notice provided by a hub operator to a state agency with
responsibility under the contract between a hub operator and the
state shall be addressed to the point of contact identified by the
state agency pursuant to subdivision (b).
(d) Unless otherwise provided by this chapter, notice by a hub
operator 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.
Article 7. Protection of Registered Players
19990.75. A hub operator 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 hub operator shall establish administrative
procedures to resolve registered player com plaints.
19990.76. In the event a registered player has a complaint
against a hub operator, the exclusive remedy shall be to register the
complaint with the commission, unless an action is brought pursuant
to the remedies described in subdivision (i) of Section 19990.47.
19990.77. The commission department
, in consultation with the division
commission , shall establish rules with respect to registered
player complaints.
(a) Under the rules, the division
department shall do all of the following:
(1) Investigate registered player complaints to determine if a hub
operator has failed to meet its obligation under its contract to a
registered player.
(2) Attempt to resolve complaints by registered players if a hub
operator fails to meet an obligation under its contract to a
registered player.
(3) Initiate enforcement actions to require specific performance
of any obligation that a hub operator has under a contract with the
state and to impose mitigated damages on a hub operator consistent
with the rules adopted pursuant to this chapter.
(4) Recommend to the commission, the imposition of liquidated
damages upon a hub operator based upon clear and convincing evidence
that the hub operator is required to pay liquidated damages under its
contract with the state.
(b) Under the rules, the commission shall
The commission shall adopt rules to do both of the following:
(1) Impose liquidated damages upon a hub operator based upon clear
and convincing evidence that the hub operator is required to pay
liquidated damages under its contract with the state.
(2) Order payment by the hub operator of restitution to a
registered player for actual losses and interest thereon.
19990.78. A hub operator may appeal the imposition of liquidated
damages by the commission to the superior court which shall review
the appeal de novo.
Article 8. Disposition of State Proceeds
19990.85. In consideration for the contract entered into between
the state and a hub operator, a hub operator shall remit at least 20
percent of its gross revenues to the Treasurer on a monthly basis as
determined by the proposal.
19990.86. The Treasurer shall transfer all amounts received from
a hub operator pursuant to Section 19990.58 to the
Controller for deposit in the Internet Gambling Fund which is created
in the State Treasury and 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 statute
directing expenditures from the General Fund.
(a) 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 by March 31
of the preceding fiscal year. A justification of those costs shall be
provided with each submission of revenue needs.
(b) The State Department of Alcohol and Drug Programs, Office of
Problem Gambling shall submit revenue needs for programs to alleviate
problem gaming 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 by March 31 of the preceding fiscal year. A justification
of those costs shall be provided with each submission of revenue
needs.
(c) All remaining proceeds not allocated to subdivisions (a) and
(b) shall remain in the Internet Gaming Fund subject to appropriation
by the Legislature for purposes related to this chapter
.
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.
Article 10. Judicial Review
19990.93. Any action to assert that this chapter interferes with
a right contained within a compact entered into between the state and
a federally recognized Indian tribe on Indian lands in California or
to clarify that this chapter does not interfere with a right
contained within a tribal-state gaming compact entered into between
the state and a federally recognized Indian tribe on Indian lands in
California, shall be brought by extraordinary writ of mandate to the
superior court, and within 60 days of the existence of any matter
giving rise to an action under this section. Petitions brought
pursuant to this section shall be given preference over all other
civil actions before the court in the matter of setting the same for
hearing, and in hearing the same, to the end that these petitions
shall be speedily heard and determined, and in any case in which a
petition has been filed within the time allowed, the superior court
shall issue its decision within 90 days of the filing of any such
petition.
(a) Notwithstanding any other law, the exclusive means to obtain
review of a superior court judgment entered in an action brought
pursuant to this section shall be by petition to the Court of Appeal
for writ of review. Any petition shall be filed within 15 days
following the notice of entry of the superior court judgment, and no
extension of that period shall be allowed. Within 10 days after the
petition is filed, the respondent or any real party in interest,
separately or jointly, may serve and file a preliminary opposition.
Within 10 days after a preliminary opposition is filed, the
petitioner may serve and file a reply.
(1) If no petition is filed within the time allowed for this
purpose, the decision of the superior court shall be final and
enforceable, notwithstanding any other provision of law, including,
without limitation, Sections 473 and 473.5 of the Code of Civil
Procedure, and thereupon become and thereafter be forever binding and
conclusive, as to all matters therein adjudicated or which at that
time could have been adjudicated, against any agency and any other
persons, and the judgment shall permanently enjoin the institution by
any person of any action or proceeding raising any issue as to which
the judgment is binding and conclusive.
(2) In any case in which a petition has been filed within the time
allowed, the Court of Appeal shall issue its opinion within 90 days
of the filing of any the petition.
(b) Notwithstanding any other law, the exclusive means to obtain
review of the decision of the Court of Appeal entered pursuant to
this section shall be by petition to the California Supreme Court for
extraordinary writ of review. The petition shall be filed within 10
days following the notice of decision of the Court of Appeal, and no
extension of that period shall be allowed.
(c) In the event that a court of competent jurisdiction finds this
section to be illegal or unenforceable in a final, nonappealable
order, this section shall be removed from this chapter without impact
on the other provisions of this chapter.
Article 11. Reports to the Legislature
19990.95. Notwithstanding Section 10231.5 of the Government Code,
within one year of the effective date of this chapter and, annually
thereafter, the commission, in consultation with the department,
Treasurer, and 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. At least two years before the expiration
three years after the commencement date of any
hub operator's contract with the state, but no later than four
years after that date, the Bureau of State Audits shall issue a
report to the Legislature detailing its implementation of this
chapter. The State Auditor may advise the Legislature on whether the
state should solicit additional hub applicants beyond the number of
existing hub operators as of that date, as well as, any other
recommendations regarding the terms of the contract, including the
consideration paid to the state , the economic and operational
impacts upon the hub operator and the state, and any other issues
that may be relevant to the state's decision whether to impose
modifications on existing hub operators . The report may also
advise the Legislature as to any proposed changes to Article 5
(commencing with Section 19990.30) of this chapter. The State Auditor
shall advise the Legislature whether continuation of the moratorium
on state gaming contained in Section 19962 is justified, given
statewide competition with legalized Internet gaming.
19990.97. This chapter 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.
SEC. 2. The Legislature finds and declares that Section 1 of this
act, which adds Chapter 5.2 to 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 of 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 hub applicants and hub operators.
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 online
gambling Web sites, it is necessary that this act take effect
immediately.
