BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 1409| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 445-6614 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ {u u} THIRD READING Bill No: AB 1409 Author: Wesson (D), et al Amended: 8/23/99 in Senate Vote: 27 - Urgency {u SENATE GOVERNMENTAL ORG. COMMITTEE u} : 10-0, 8/24/99 AYES: Baca, Burton, Chesbro, Dunn, Hughes, Johannessen, Karnette, Knight, Lewis, Perata NOT VOTING: O'Connell, Johnson {u SENATE APPROPRIATIONS COMMITTEE u} : Senate Rule 28.8 {u ASSEMBLY FLOOR u} : Not relevant {u SUBJECT u} : Gambling {u SOURCE u} : Author {u DIGEST u} : This bill authorizes gambling establishments to operate player-banked games and provides for the regulation of commercial player-bank enterprises and proposition players, as specified. This bill also prohibits gambling establishments from banking any card game. {u ANALYSIS u} : Existing law: 1.Specifies that any person who conducts any game of faro, monte, roulette, lansquenet, rouge et noire, rondo, tan, fan-tan, stud horse poker, seven-and-a-half, twenty-one, CONTINUED {u AB 1409 u} Page 2 hokey-pokey, or any banking or percentage game played with cards, dice, or any device, for money, checks, credit, or other representative of value, is guilty of a misdemeanor. 2.Defines a "controlled game" as any game of chance, including any gambling device, played for currency or any other thing of value that is not prohibited and made unlawful by statute or local ordinance. Existing law further specifies that the Gambling Control Commission may not prohibit, on a statewide basis, the play of any game, or restrict the manner in which the game is played, violates either federal or state law or a local ordinance. 3.Does not provide or any registration of the so-called commercial bans presently operating in California cardrooms. This bill specifically details the conditions player-banked games may be conducted in California cardrooms, and also provides for the registration and licensing of "commercial player-bank enterprises" as defined. Among the bill's provisions are the following: 1.Declares the intent of the Legislature that this bill will be dispositive (define and clarify) of the law regarding the operation of player banks in licensed gambling establishments in California. 2.Finds and declares among other things, that State law prohibits house-banked games, and that it is not the purpose of this act to expand opportunities for gambling. 3.Defines a "bank" as the reservoir of money from which the winnings are paid to the players of a hand or round, and into which all losses that are collected from these players are deposited. 4. Provides that a house-banked banking game is any wagering game where the house or gambling establishment is (a) a participant in the game, with an interest in the outcome of any wager, and (b) covers all bets made {u AB 1409 u} Page 3 in the game, paying all winners and collecting from all losers. 5.Provides also that with respect to licensed gambling establishments only, a game is not a house-banked banking game merely because the rules of the game allow a player, who does not represent the interest of the house, to operate or maintain a bank, provided that no player occupies the position of player-dealer for more than five consecutive hands or rounds, and this position rotates among all seated players. This section will not be construed to allow the house to bank the game. 6.Finds and declares that this provision is intended to modify the 1998 holding of {u Oliver v. County of Los Angeles u} and {u State of California David M. Kelley v. First Astri Corporation, et al. u} , as to what constitutes a "banking game," but only with respect to controlled games conducted within licensed card clubs. 7.Defines a "commercial player-bank enterprise" as any enterprise, undertaking, or endeavor that has as one of its purposes the maintenance of a player-bank through the engagement and financing of one or more contract players in player-banked games in this state. A commercial player-bank enterprise does not include a friend or relative who finances a player on a limited and social basis, as defined by regulation of the commission, nor does it include any natural person to whom the following apply: A. The person is playing with his or her own funds. B. The person retains all of his/her winnings and absorbs all of his/her losses. C. The person is not paid any type of consideration by another person to participate in the play of a controlled game. 8.Defines "player-banked game" to be any game in which the opportunity to maintain or operate a bank rotates to all seated players in the game. {u AB 1409 u} Page 4 9.Defines a "proposition player" to be a person associated with a gambling establishment as a contractor or employee who participates in the play of a game, as provided in this chapter, in order to attract business, and who is not an owner or employee of a commercial player-bank enterprise. 10.Provides specified fees for commercial player-bank enterprise license applications and renewals. 11.Contains a local pre-emption for commercial player-bank enterprise licensing. 12.Describes violations of this act, and necessary requirements that must be complied with, in order to be eligible to receive, renew, or hold a commercial player-bank enterprise license. 13.Makes a number of necessary conforming changes to the Penal Code. {u Background u} The author's office reports that since the mid-to-late 1800's, California has prohibited gambling on specified games such as the games of twenty-one and roulette. Rather than continue to amend the law to include games that were later deemed prohibited, the Legislature subsequently prohibited "banking" or "percentage" games played with cards, dice, or any device. Neither of these terms are defined in statute, however, the public, law enforcement agencies, and the card club industry, have generally had to rely on case law to determine the type of games legally allowed in this state. Banking games have come to be defined as games whereby the house or bank is a participant in the game, taking all comers, paying all winners, and collecting from all losers. A percentage game generally describes any game of chance from which the house collects money calculated as a portion of wagers made or sums won in play, exclusive of charges or fees for use of space and facilities. {u Oliver v. County of Los Angeles u} involved the play of the {u AB 1409 u} Page 5 game "Newjack" (or 22), where it was argued that Newjack was not a banking game because under the rules of the game, each player has the option to be the player-dealer for two consecutive hands, after which the option passes to another player. If everyone else declines, a person could in effect bank additional hands. The house dealer does not participate in the play of the game, and the card club's sole source of income is from the collection of a table fee, which is permissible under current law. The court in Oliver held that a game would be determined to be an illegal banked game if the rules of the game permit the house, another entity, or a player to maintain a bank or operate as a bank during the play of the game. Under this definition, and given the fact that a player could bank the game for repeated hands, Newjack was deemed to be an illegal banked game since the potential exists for this game to be banked. In {u Kelley v. Astri u} , the court held that the recovery of gambling losses in California, was prohibited absent a statutory right to recover gambling losses, under California's long standing policy against judicial resolution of civil claims arising out of either lawful or unlawful transactions. The court went on to conclude that the parties were "in pari delicto" (or "in equal fault") given that the transactions in question (i.e., the play of 21) were not enforceable given the court's determination that 21 is prohibited by Penal Code Section 330, prohibiting specified games, including 21, as well as any banking or percentage games, and also under the Indian Gaming Regulatory Act, because it represented a form of Class III gaming that is illegal on Indian lands. The court in {u First Astri u} , also went on to reject the contention that a game is not a banked game if the bank rotates among players and the house at no time banked the game, thus affirming the decision reached in {u Oliver u} holding that a game is an illegally banked game if there exists the potential that the game could be banked by a person other than the house for an unspecified period of time. {u AB 1409 u} Page 6 {u Prior Legislation AB 1417 (Wesson) - 1999-2000 Session u}. Similar provisions to this measure without {u u} registration procedures for commercial player-bank enterprises. AB 1417 passed the Senate Floor with a vote of 29-3 (NOES: Leslie, Monteith, Mountjoy) and was ultimately vetoed by the Governor. In vetoing AB 1417 earlier this legislative session, Governor Davis stated, "I applaud the effort of the author to find an appropriate way to allow card clubs to function in light of recent court holdings. On the advice of Attorney General Bill Lockyer, I am asking the Legislature to insert a licensing and oversight procedure for persons or business entities who would perform the functions of the bank. With these changes, I will sign the bill." {u AB 317 (Floyd) - 1999-2000 Session u} . Would legalize the player-pool banked game of twenty-one. (Pending in Senate Appropriations Committee) {u u} {u FISCAL EFFECT u} : Appropriation: No Fiscal Com.: Yes Local: Yes {u SUPPORTu} : (Verified 8/31/99) City of Inglewood Ladbroke/Pacific Racing Association California Commerce Club Artichoke Joe's Casino Hawaiian Gardens Club California Gaming Cities Coalition California Gaming Association Lucky Lady Cardroom Lucky Derby Cardroom Empire Sportsmen's Association California Commerce Club {u OPPOSITION u} : (Verified 8/31/99) Stand Up for California {u ARGUMENTS IN SUPPORT u} : The author's office states that the purpose of this bill is to address the respective {u AB 1409 u} Page 7 holdings in {u Oliver u} and {u Kelley v. First Astri u} by defining exactly what constitutes a banking game. Supporters note that these decisions call into question the legality of all player-banked games. This could potentially have a debilitating effect on card clubs throughout the state, in that many of their games are played with a player-dealer format. Furthermore, supporters suggest that the court's vague definition creates an unenforceable standard for those entities that regulate card clubs, as well as for the card clubs themselves. The clubs also argue that the court's holdings that a game is an illegal banking game if it has the potential to be played as a banking game is difficult to apply to actual gaming situations. This bill is an effort to clarify once and for all the confusion surrounding this issue. Supporters believe that this bill will clarify the law as it has been understood by the industry for the previous nine years. A card game would not be considered a banked game if the bank were offered to each person at the table. Thus the possibility that one individual may bank three or four hands would not render that game to be a banked game, provided the bank is offered to other participants. {u ARGUMENTS IN OPPOSITION u} : Stand Up for California, in opposition to this bill believes that its passage will create mini-casinos out of California card rooms. Citizens may have voted for a card room in their local community, however, they did not vote for a full service casino. They further believe that AB 1409 flies in the face of a constitutional prohibition against casinos, and erodes the 125 year-old-ban on banking games in this State. Additionally, they state that recent court decisions interpreted the law correctly when they found that banking games are illegal in California. ( {u Oliver u} and {u Kelley v. First Astri) u}. {u u} TSM:cm 8/31/99 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE {u AB 1409 u} Page 8 **** END ****