AB 2863: Gambling: Internet poker.

(1)Existing law, the Gambling Control Act, provides for the licensure of certain individuals and establishments that conduct controlled games, as defined, and for the regulation of these gambling activities by the California Gambling Control Commission. The Department of Justice has related investigatory and enforcement duties under the act. Any violation of these provisions is punishable as a misdemeanor, as specified. Existing law, the Horse Racing Law, generally regulates horse racing and vests the administration and enforcement of its provisions in the California Horse Racing Board.

This bill, which would be known as the Internet Poker Consumer Protection Act of 2016, would establish a framework to authorize intrastate Internet poker, as specified. The bill would authorize eligible entities to apply for a 7-year license to operate an authorized poker Web site offering the play of authorized Internet poker games to registered players within California, as specified. The bill would require that the license be automatically renewed every 7 years upon application, as specified. The bill would prohibit the offer or play of any gambling game provided over the Internet that is not an authorized Internet poker game permitted by the state pursuant to these provisions. The bill would provide that it is unlawful for a person to aggregate computers or any other Internet access device in a place of public accommodation within the state, including a club or other association, or a public or other setting, that can accommodate multiple players to simultaneously play an authorized Internet poker game, or to promote, facilitate, or market that activity. The bill would provide that any violation of the Internet Poker Consumer Protection Act of 2016 is punishable as a felony. By creating new crimes, the bill would impose a state-mandated local program.

This bill would require the commission, and any other state agency with a duty pursuant to these provisions, in consultation with the department and federally recognized California Indian tribes, to adopt regulations within 270 days after the effective date of this bill to implement the provisions within 270 days after the operative date of this bill, in consultation with the department and federally recognized California Indian tribes, these provisions and to facilitate the operation of authorized poker Web sites and expedite the states receipt of revenues. The bill would require an eligible entity, as defined, to pay an application processing fee sufficient to cover all reasonable costs associated with the review of the entitys suitability for licensure as an operator and the issuance of the license, for deposit into the Internet Poker Fund, as created by the bill, to be continuously appropriated to the department and the commission in the amounts necessary to perform their duties pursuant to this bill. The bill would require an entity seeking to act as a service provider to apply to the commission for a service provider license, and would require a person seeking to act as a marketing affiliate to apply to the commission for a marketing affiliate license or registration before providing the services of a marketing affiliate to a licensed operator in connection with the operation of an authorized poker Web site. The bill would require these applicants to pay an application processing fee, for deposit into the Internet Poker Fund, sufficient to cover the reasonable costs associated with the issuance of a license or registration. The bill would require employees of a licensed operator or operator, a licensed service provider provider, or licensed or registered marketing affiliate to obtain employee work permits, and owners, officers, and directors of a licensed operator to be subject to a suitability review and obtain employee work permits. The bill would prohibit the commission from granting an applicant a service provider license until January 1, 2021, if the applicant accepted a bet or wager of any form on Internet gambling, as specified, between December 31, 2006, and December 31, 2011, from a person located in the United States and without a license or authority pursuant to comparable federal or state law in the jurisdiction where the bet or wager was made or the facilitation of the wager or financial transaction occurred. The bill, notwithstanding that provision, would authorize an applicant for a service provider license who meets the description above to obtain a service provider license before January 1, 2021, if the applicant pays a one-time fee in the amount of $20,000,000, to be deposited into the General Fund, and otherwise meets the qualifications and suitability criteria under these provisions. The bill would prohibit an applicant for a service provider license that is found unsuitable as a covered person, as defined, from being eligible to be found suitable for a service provider license until January 1, 2022, and would prohibit, during this waiting period, the applicant or any other person from using any covered asset, as defined, in this state. The bill would require an agreement between a licensed operator and a service provider that is a California-owned and operated horse racing association to ensure that at least 50% of the gross gaming revenue that the licensed operator derives from the service provided by the service provider is paid to the service provider. The bill would establish a tribal gaming regulatory authority process for the purpose of processing tribal employee work permits, and authorize a tribe that is a licensed operator to elect to participate in the tribal gaming regulatory authority process.

This bill would require the payment of an annual regulatory fee, for deposit into the Internet Poker Fund, to be continuously appropriated for the actual costs of license oversight, consumer protection, state regulation, and other purposes related to this bill. The bill would require each licensee licensed operator to pay a one-time license deposit in the amount of $12,500,000 for deposit into the General Fund. The bill would require each licensed operator to remit to the Treasurer on an annual a quarterly basis for deposit in the General Fund a specified percentage 10% of its gross gaming revenues pursuant to the applicable rate percent, as specified. revenues, as specified. One-half of the one-time license deposit would be credited against the annual quarterly charge on gross gaming revenues. The bill would require the commission to administer and collect this annual quarterly charge pursuant to the procedures set forth in the Fee Collection Procedures Law. By expanding the application of the Fee Collection Procedures Law, the violation of which is a crime, this bill would impose a state-mandated local program. The bill would require an applicant for an operator license to provide documentation establishing that the applicant is qualified to pay the one-time license deposit through its own net position or through credit directly to the applicant, as specified. The bill would require up to $57,000,000 of the moneys collected each fiscal year pursuant to the license deposit and annual fees provisions to be deposited into the California Horse Racing Internet Poker Account, which the bill would establish in the General Fund. The bill would continuously appropriate the funds in the account to the California Horse Racing Board for distribution, as specified. The bill would require up to $3,000,000 of the moneys collected each fiscal year pursuant to the license deposit and annual fees provisions to be transferred to the State Treasury to the credit of the Fair and Exposition Fund, a continuously appropriated fund, to the benefit of state designated fairs, as specified.

This bill would establish the Unlawful Gambling Enforcement Fund within the General Fund for purposes of ensuring adequate resources for law enforcement charged with enforcing the prohibitions and protections of the provisions described above. The bill would authorize the Attorney General, and other public prosecutors, as specified, to bring a civil action to recover a civil penalty in an unspecified amount penalty, in an amount to be determined by the court based on specified factors, and, at the discretion of the court, restitution payable to any person injured as a result of the violation, against a person who engages in those prohibited activities described above, or other specified unlawful gambling activities in connection with the use of an Internet access device. The bill would provide for an unspecified percentage of require the revenues from certain civil penalties collected to be deposited into the fund Unlawful Gambling Enforcement Fund and used would authorize up to $10,000,000 of those moneys, upon appropriation by the Legislature, to be annually expended by the Attorney General, for law enforcement activities pursuant to these provisions, upon appropriation by the Legislature. provisions.

This bill would require the commission, in consultation with the department, the Treasurer, and the Franchise Tax Board, to issue a report to the Legislature describing the states efforts to meet the policy goals articulated in this bill within one year of the operative date of this bill and annually thereafter. The bill would also require the Bureau of State Audits, at least 4 years after the issue date of any license by the state, but no later than 5 years after that date, to issue a report to the Legislature detailing the implementation of this bill, as specified.

The bill would provide that specified provisions are not severable, and would repeal its provisions on January 1, 2024. severable.

(2)Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.

This bill would make legislative findings to that effect.

(3)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.

(4)This bill would declare that it is to take effect immediately as an urgency statute.