AB 1409 Gambling. BILL NUMBER: AB 1409 AMENDED 09/03/99 BILL TEXT AMENDED IN SENATE SEPTEMBER 3, 1999 AMENDED IN SENATE AUGUST 23, 1999 INTRODUCED BY Assembly Member Wesson (Principal coauthor: Assembly Member Granlund) (Principal coauthor: Senator Perata) FEBRUARY 26, 1999 An act to amend Sections {- 19800, 19801, -} {+ 19800 +} and 19805 of, and to {- add Sections 19834.7, 19840.6, 19941.1, 19952, 19980, 19981, 19982, 19983, 19983.1, 19983.2, 19983.3, 19990, and 19992 to, the -} {+ add Sections 19834.7, 19980, 19981, and 19983 to, the +} Business and Professions Code, to amend Section {- 186.9, and 14161 -} {+ 186.9 +} of, and to add Section 337k to, the Penal Code, and to amend Section 2 of Chapter 424 of the Statutes of 1998, relating to gambling, and declaring the urgency thereof, to take effect immediately. LEGISLATIVE COUNSEL'S DIGEST AB 1409, as amended, Wesson. Gambling. (1) Existing law, the Gambling Control Act, provides for the regulation, oversight, and licensure of gambling establishments, and the owners and employees thereof, by the California Gambling Control Commission and the Division of Gambling Control. Existing law prohibits a list of specified gambling games or any banking or percentage game played with cards, dice, or any device, for money, checks, credit, or any representative of value, and provides that any person who offers for play or participates in these games is guilty of a misdemeanor and is punishable as specified. This bill would {+ state findings and declarations of the Legislature, and would +}authorize gambling establishments to operate {- player-banked -} {+ controlled +} games {+ utilizing a player-dealer position +} , provided that {+ the rules of the game require that +} the opportunity to {+ occupy this position and to +} operate or maintain {- the -} {+ a +} bank {+ continuously and systematically +} rotates among {- all -} seated players and that no one player may participate as the {- player-banker for -} {+ player-dealer +} more {+ often +} than {- 5 -} {+ once in every 3 +} consecutive hands {- or rounds -} {+ , or otherwise exceed the minimal player-dealer rotation requirements imposed by regulation or rule of the commission or division for that type of game +} . {- This bill would also create a regulatory framework and licensing requirement for the owners of commercial player-bank enterprises, as defined, and their supervising employees and contract players. This bill would also impose regulatory requirements on proposition players, who are persons engaged by a gambling establishment to stimulate business therein. This -} {+ This +} bill would prohibit {+ a licensed owner of +} a gambling establishment from {- banking -} {+ operating +} any {+ house-banked +} game, and would also {- restrict the ability of a commercial player-bank enterprise to enter into agreements, contracts, or arrangements with the owners or employees of a gambling establishment, as specified. This -} {+ prohibit a licensed owner from operating games in which the owner shares or participates in the winnings or profits of any player. This bill would authorize a licensed gambling establishment to contract with a 3rd party for the provision of proposition player services subject to specified conditions and unspecified regulatory requirements to be imposed by the commission and division. The bill would authorize the commission and division to impose reasonable fees for this regulation and oversight, and would authorize the division to exercise the authority given to the commission under these provisions until the commission becomes operational. This bill would provide that if any of its provisions, or the application thereof, are held invalid, that these provisions are severable from the remainder of the provisions. This +} bill would also make various technical changes to the act to implement these provisions, as well as technical, nonsubstantive changes, as specified. Because this bill would impose new regulatory requirements, violations of which would be punishable as misdemeanors, this bill would impose a state-mandated local program. {- (2) Existing case law provides that a card game is an illegal banking game if, under the rules of that game, it is possible that the house, another entity, a player, or an observer can maintain or operate a bank during the play of the game. -} {+ (2) +} This bill would declare the Legislature's intent to{- modify the holdings of 2 specified court decisions as to what constitutes an illegal banking game, but only with regard to controlled games conducted within licensed gambling establishments -} {+ effectuate the holding of a specified court decision with regard to minimal requirements for games utilizing a player-dealer position +} . (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 incorporate additional changes in Section 19805 of the Business and Professions Code proposed by SB 416, to be operative only if both bills are enacted and become effective on or before January 1, 2000, and this bill is chaptered last. (5) +} 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. SECTION 1. {+ The Legislature finds and declares as follows: (a) California card clubs played games with cards which were banked by players in 1983 and 1984, prior to the amendment of Section 19 of Article IV, of the California Constitution by the California State Lottery Act in 1984. (b) The amendment to Section 19 of Article IV of the Constitution declared: "The Legislature has no power to authorize, and shall prohibit casinos of the type currently operating in Nevada and New Jersey." Casinos operating in Nevada and New Jersey did not include card games featuring a player-dealer position where the bank systematically rotates around the table amongst the players. (c) In Hotel Employees & Restaurant Employees v. Davis (SO74850), the California Supreme Court recently stated at page 24 that: "...(t)he type" of casino "operating in Nevada and New Jersey" presumably refers to a gambling facility that did not legally operate in California; something other, that is, than "the type" of casino "operating" in California." SEC. 2. +} Section 19800 of the Business and Professions Code is amended to read: 19800. This chapter, together with the following provisions of law, shall be known, and may be cited, as the "Gambling Control Act." (a) Section 1822.60 of the Code of Civil Procedure. (b) Sections 15001, 15001.1, and 15001.2 of the Government Code. (c) Sections 186.9, 337j, and 14161 of the Penal Code. (d) Chapter 8 (commencing with Section 4369) of Part 3 of Division 4 of the Welfare and Institutions Code. {- SEC. 2. Section 19801 of the Business and Professions Code is amended to read: 19801. The Legislature hereby finds and declares all of the following: (a) The longstanding public policy of this state disfavors the business of gambling. State law prohibits commercially operated lotteries, house-banked games, percentage games, and gambling machines, and strictly regulates parimutuel wagering on horse racing. To the extent that state law categorically prohibits certain forms of gambling and prohibits gambling devices, nothing herein shall be construed, in any manner, to reflect a legislative intent to relax those prohibitions. (b) Gambling can become addictive and is not an activity to be promoted or legitimized as entertainment for children and families. (c) (1) Unregulated gambling enterprises are inimical to the public health, safety, welfare, and good order. Accordingly, no person in this state has a right to operate a gambling enterprise except as may be expressly permitted by the laws of this state and by the ordinances of local governmental bodies. (2) The State of California has permitted the operation of gambling establishments for more than one hundred years. Gambling establishments were first regulated by the State of California pursuant to legislation which was enacted in 1984. Gambling establishments currently employ more than twenty thousand people in the State of California, and contribute more than one hundred million dollars in taxes and fees to California' s government. Gambling establishments are lawful enterprises in the State of California, and are entitled to full protection of the laws of this state. The industry is currently in significant decline, with more than half the gambling establishments in this state closing within the past four years. (d) It is the policy of this state that gambling activities that are not expressly prohibited or regulated by state law may be prohibited or regulated by local government. Moreover, it is the policy of this state that no new gambling establishment may be opened in a city, county, or city and county in which a gambling establishment was not operating on and before January 1, 1984, except upon the affirmative vote of the electors of that city, county, or city and county. (e) It is not the purpose of this chapter to expand opportunities for gambling, or to create any right to operate a gambling enterprise in this state or to have a financial interest in any gambling enterprise. Rather, it is the purpose of this chapter to regulate businesses that offer otherwise lawful forms of gambling games. (f) Public trust that permissible gambling will not endanger public health, safety, or welfare requires that comprehensive measures be enacted to ensure that such gambling is free from criminal and corruptive elements, that it is conducted honestly and competitively, and that it is conducted in suitable locations. (g) Public trust and confidence can only be maintained by strict and comprehensive regulation of all persons, locations, practices, associations, and activities related to the operation of lawful gambling establishments and the manufacture or distribution of permissible gambling equipment. (h) All gambling operations, all persons having a significant involvement in gambling operations, all establishments where gambling is conducted, and all manufacturers, sellers, and distributors of gambling equipment must be licensed and regulated to protect the public health, safety, and general welfare of the residents of this state as an exercise of the police powers of the state. (i) To ensure that gambling is conducted honestly, competitively, and free of criminal and corruptive elements, all licensed gambling establishments in this state must remain open to the general public and the access of the general public to licensed gambling activities must not be restricted in any manner, except as provided by the Legislature. However, subject to state and federal prohibitions against discrimination, nothing herein shall be construed to preclude exclusion of unsuitable persons from licensed gambling establishments in the exercise of reasonable business judgment. (j) In order to effectuate state policy as declared herein, it is necessary that gambling establishments, activities, and equipment be licensed, that persons participating in those activities be licensed or registered, that certain transactions, events, and processes involving gambling establishments and owners of gambling establishments be subject to prior approval or permission, that unsuitable persons not be permitted to associate with gambling activities or gambling establishments, and that gambling activities take place only in suitable locations. Any license or permit issued, or other approval granted pursuant to this chapter, is declared to be a revocable privilege, and no holder acquires any vested right therein or thereunder. (k) The location of lawful gambling premises, the hours of operation of those premises, the number of tables permitted in those premises, and wagering limits in permissible games conducted in those premises are proper subjects for regulation by local governmental bodies. However, consideration of those same subjects by a state regulatory agency, as specified in this chapter, is warranted when local governmental regulation respecting those subjects is inadequate or the regulation fails to safeguard the legitimate interests of residents in other governmental jurisdictions. (l) The exclusion or ejection of certain persons from gambling establishments is necessary to effectuate the policies of this chapter and to maintain effectively the strict regulation of licensed gambling. (m) Records and reports of cash and credit transactions involving gambling establishments may have a high degree of usefulness in criminal and regulatory investigations and, therefore, licensed gambling operators may be required to keep records and make reports concerning significant cash and credit transactions. -} SEC. 3. Section 19805 of the Business and Professions Code is amended to read: 19805. As used in this chapter, the following definitions shall apply: (a) "Affiliate" means a person who, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, a specified person. (b) "Applicant" means any person who has applied for, or is about to apply for, a state gambling license, a key employee license, a registration, a finding of suitability, a {- commercial player-bank enterprise license, a work -} {+ work +} permit, a manufacturer's or distributor's license, or an approval of any act or transaction for which the approval or authorization of the commission or division is required or permitted under this chapter. {- (c) "Bank" or "banked" means the reservoir of money from which winnings are paid to the players of a hand or round, and into which all losses that are collected from those players are deposited. (d) -} {+ (c) +} "Board" means the California Gambling Control Board. {- (e) "Commercial player-bank enterprise" means 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 purely limited and social basis, as defined by regulation of the commission, nor does it include any natural person to whom the following apply: (1) the person is playing with his or her own funds (2) the person retains all of his or her winnings and absorbs all of his or her losses, and (3) the person is not paid any type of consideration by another person to participate in the play of a controlled game, except in the case of consideration paid to a proposition player in connection with his or her employment by a gambling establishment. (f) "Commercial player-bank enterprise license" means any license issued pursuant to this chapter that authorizes the person named therein to operate a commercial player-bank enterprise. (g) -} {+ (d) +} "Commission" means the California {+ Gambling +} Control Commission. {- (h) "Contract player" means a person who is engaged or financed by a commercial player-bank enterprise for the purpose of playing in a controlled game. A licensed commercial player-bank enterprise shall ensure that every contract player it employs that plays in a controlled game is clearly identified as a contract player to every other player participating in that game. (i) -} {+ (e) +} "Controlled gambling" means to deal, operate, carry on, conduct, maintain, or expose for play any controlled game. {- (j) -} {+ (f) +}"Controlled game" means any controlled game, as defined by subdivision (e) of Section 337j of the Penal Code. {- (k) -} {+ (g) +} "Director," when used in connection with a corporation, means any director of a corporation or any person performing similar functions with respect to any organization. In any other case, "director" means the Director of the Division of Gambling Control. {- (l) -} {+ (h) +} "Division" means the Division of Gambling Control in the Department of Justice. {- (m) -} {+ (i) +} "Finding of suitability" means a finding that a person meets the qualification criteria described in subdivisions (a) and (b) of Section 19848, and that the person would not be disqualified from holding a state gambling license on any of the grounds specified in subdivision (a) of Section 19850. {- (n) -} {+ (j) +} "Game" and "gambling game" means any controlled game. {- (o) -} {+ (k) +} "Gambling" means to deal, operate, carry on, conduct, maintain, or expose for play any controlled game. {- (p) -} {+ (l) +} "Gambling enterprise employee" means any natural person employed in the operation of a gambling enterprise, including, without limitation, dealers, floormen, security employees, countroom personnel, cage personnel, collection personnel, surveillance personnel, data processing personnel, appropriate maintenance personnel, waiters and waitresses, and secretaries, or any other natural person whose employment duties require or authorize access to restricted gambling establishment areas. {- (q) -} {+ (m) +} "Gambling establishment," "establishment," or "licensed premises" means one or more rooms where any controlled gambling or activity directly related thereto occurs. {- (r) -} {+ (n) +} "Gambling license" or "state gambling license" means any license issued by the state that authorizes the person named therein to conduct a gambling operation. {- (s) -} {+ (o) +}"Gambling operation" means exposing for play one or more controlled games that are dealt, operated, carried on, conducted, or maintained for commercial gain. {- (t) -} {+ (p) +} "Gross revenue" means the total of all compensation received for conducting any controlled game, and includes interest received in payment for credit extended by an owner licensee to a patron for purposes of gambling, except as provided by regulation. {- (u) -} {+ (q) +} "House-banked game" means any game in which the gambling establishment: (1) {+ maintains or operates a bank, or (2) +} is a participant in the game, with an interest in the outcome of the game {- ; and (2) -} {+ , +} covers all bets in the game, and collects from all losers and pays all winners. {- (v) -} {+ (r) +} "Independent agent," except as provided by regulation, means any person who does either of the following: (1) Approves or grants the extension of gambling credit on behalf of a gambling licensee or collects debt evidenced by a credit instrument. (2) Contracts with an owner licensee, or an affiliate thereof, to provide services consisting of arranging transportation or lodging for guests at a gambling establishment. {- (w) -} {+ (s) +} "Institutional investor" means any retirement fund administered by a public agency for the exclusive benefit of federal, state, or local public employees, any investment company registered under the Investment Company Act of 1940 (15 U.S.C. Sec. 80a-1 et seq.), any collective investment trust organized by banks under Part Nine of the Rules of the Comptroller of the Currency, any closed-end investment trust, any chartered or licensed life insurance company or property and casualty insurance company, any banking and other chartered or licensed lending institution, any investment advisor registered under the Investment Advisors Act of 1940 (15 U.S.C. Sec. 80b-1 et seq.) acting in that capacity, and such other persons as the board may determine for reasons consistent with the policies of this chapter. {- (x) -} {+ (t) +} "Key employee" means any natural person employed in the operation of a gambling enterprise in supervisory capacity or empowered to make discretionary decisions that regulate gambling operations, including, without limitation, pit bosses, shift bosses, credit executives, cashier operations supervisors, gambling operation managers and assistant managers, managers or supervisors of security employees, or any other natural person designated as a key employee by the division for reasons consistent with the policies of this chapter. {- "Key employee" also includes any person who is employed as an onsite supervisor, observer, or monitor, or any person who is employed as a contract player, for a commercial player-bank enterprise. (y) -} {+ (u) +} "Key employee license" means a state license authorizing the holder to be associated with a gambling enterprise {- or commercial player-bank enterprise -} as a key employee. {- (z) -} {+ (v) +}"Licensed gambling establishment" means the gambling premises encompassed by a state gambling license. {- (aa) -} {+ (w) +} "Limited partnership" means a partnership formed by two or more persons having as members one or more general partners and one or more limited partners. {- (bb) -} {+ (x) +} "Limited partnership interest" means the right of a general or limited partner to any of the following: (1) To receive from a limited partnership any of the following: (A) A share of the revenue. (B) Any other compensation by way of income. (C) A return of any or all of his or her contribution to capital of the limited partnership. (2) To exercise any of the rights provided under state law. {- (cc) -} {+ (y) +} "Owner licensee" means an owner of a gambling enterprise who holds a state gambling license. {- (dd) -} {+ (z) +} "Person," unless otherwise indicated, includes a natural person, corporation, partnership, limited partnership, trust, joint venture, association, or any other business organization. {- (ee) -} {+ (aa) +} "Player" means a patron of a gambling establishment who participates in a controlled game. {- (ff) "Player-banked game" means any game in which the opportunity to maintain or operate a bank rotates to all seated players in the game. (gg) "Player-pool banked game" means any game in which the bank is maintained or operated by the licensed owner of the gambling establishment for the sole and exclusive benefit of the player-pool. (hh) "Proposition player" means 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. The licensed owner of a gambling establishment shall ensure that every proposition player he or she engages to play in a controlled game is clearly identified as a proposition player to every other player participating in that game. (ii) -} {+ (bb) "Player-dealer" and "controlled game featuring a player-dealer position" refer to a position in a controlled game, as defined by the approved rules for that game, in which players are afforded the temporary opportunity to wager against multiple players at the same table, provided that this position is continuously and systematically rotated among the seated players in the game. (cc) +} "Publicly traded racing association" means a corporation licensed to conduct horseracing and simulcast wagering pursuant to Chapter 4 (commencing with Section 19400) whose stock is publicly traded. {- (jj) -} {+ (dd) +} "Qualified racing association" means a corporation licensed to conduct horseracing and simulcast wagering pursuant to Chapter 4 (commencing with Section 19400) that is a wholly owned subsidiary of a corporation whose stock is publicly traded. {- (kk) -} {+ (ee) +} "Work permit" means any card, certificate, or permit issued by the division or by a county, city, or city and county, whether denominated as a work permit, registration card, or otherwise, authorizing the holder to be employed as a gambling enterprise employee or to serve as an independent agent. A document issued by any governmental authority for any employment other than gambling is not a valid work permit for the purposes of this chapter. {+ SEC. 3.5. Section 19805 of the Business and Professions Code is amended to read: +} 19805. As used in this chapter, the following definitions shall apply: (a) "Affiliate" means a person who, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, a specified person. (b) "Applicant" means any person who has applied for, or is about to apply for, a state gambling license, {+ a key employee license, a registration, a finding of suitability, a work permit, a +} manufacturer's or distributor's license, or approval of any act or transaction for which {- division -} {+ the +} approval {+ or authorization of the commission or division +} is required or permitted under this chapter. (c) "Board" means the California Gambling Control Board. (d) {+ "Commission" means the California Gambling Control Commission. (e) +} "Controlled gambling" means to deal, operate, carry on, conduct, maintain, or expose for play any controlled game. {- (e) -} {+ (f) +} "Controlled game" means any controlled game, as defined by subdivision (e) of Section 337j of the Penal Code. {- (f) -} {+ (g) +} "Director," when used in connection with a corporation, means any director of a corporation or any person performing similar functions with respect to any organization. In any other case, "director" means the Director of the Division of Gambling Control. {- (g) -} {+ (h) +} "Division" means the Division of Gambling Control in the Department of Justice. {- (h) -} {+ (i) +} "Finding of suitability" means a finding that a person meets the qualification criteria described in subdivisions (a) and (b) of Section 19848, and that the person would not be disqualified from holding a state gambling license on any of the grounds specified in subdivision (a) of Section 19850. {- (i) -} {+ (j) +} "Game" and "gambling game" means any controlled game. {- (j) -} {+ (k) +} "Gambling" means to deal, operate, carry on, conduct, maintain, or expose for play any controlled game. {- (k) -} {+ (l) +} "Gambling enterprise employee" means any natural person employed in the operation of a gambling enterprise, including, without limitation, dealers, floormen, security employees, countroom personnel, cage personnel, collection personnel, surveillance personnel, data processing personnel, appropriate maintenance personnel, waiters and waitresses, and secretaries, or any other natural person whose employment duties require or authorize access to restricted gambling establishment areas. {- (l) -} {+ (m) +} "Gambling {- establishment" or "establishment" -} {+ establishment," "establishment," or "licensed premises" +} means one or more rooms where any controlled gambling {+ or activity directly related thereto +} occurs. {- (m) -} {+ (n) +} "Gambling license" {+ or "state gambling license" +} means any license issued by the state that authorizes the person named therein to conduct a gambling operation. {- (n) -} {+ (o) +} "Gambling operation" means {+ exposing for play +} one or more controlled games that are dealt, operated, carried on, conducted, {+ or +} maintained {- , or exposed for play -} for commercial gain. {- (o) Except as provided by regulation, "gross -} {+ (p) "Gross +} revenue" means the total of all compensation received for conducting any controlled game, and includes interest received in payment for credit extended by an owner licensee to a patron for purposes of gambling {+ , except as provided by regulation +} . {- (p) Except as determined by regulation, "independent agent" -} {+ (q) "House-banked game" means any game in which the gambling establishment: (1) maintains or operates a bank, or (2) is a participant in the game, with an interest in the outcome of the game, covers all bets in the game, and collects from all losers and pays all winners. (r) "Independent agent," except as provided by regulation, +} means any person who does either of the following: (1) Approves or grants the extension of gambling credit on behalf of a gambling licensee or collects debt evidenced by a credit instrument. (2) Contracts with an owner licensee, or an affiliate thereof, to provide services consisting of arranging transportation or lodging for guests at a gambling establishment. {- (q) -} {+ (s) +} "Institutional investor" means any retirement fund administered by a public agency for the exclusive benefit of federal, state, or local public employees, any investment company registered under the Investment Company Act of 1940 (15 U.S.C. Sec. 80a-1 et seq.), any collective investment trust organized by banks under Part Nine of the Rules of the Comptroller of the Currency, any closed-end investment trust, any chartered or licensed life insurance company or property and casualty insurance company, any banking and other chartered or licensed lending institution, any investment advisor registered under the Investment Advisors Act of 1940 (15 U.S.C. Sec. 80b-1 et seq.) acting in that capacity, and such other persons as the board may determine for reasons consistent with the policies of this chapter. {- (r) -} {+ (t) +} "Key employee" means any natural person employed in the operation of a gambling enterprise in a supervisory capacity or empowered to make discretionary decisions that regulate gambling operations, including, without limitation, pit bosses, shift bosses, credit executives, cashier operations supervisors, gambling operation managers and assistant managers, managers or supervisors of security employees, or any other natural person designated as a key employee by the division for reasons consistent with the policies of this chapter. {- (s) -} {+ (u) +} "Key employee license" means a state license authorizing the holder to be associated with a gambling enterprise as a key employee. {- (t) -} {+ (v) +} "Licensed gambling establishment" means the gambling premises encompassed by a state gambling license. {- (u) -} {+ (w) +} "Limited partnership" means a partnership formed by two or more persons having as members one or more general partners and one or more limited partners. {- (v) -} {+ (x) +} "Limited partnership interest" means the right of a general or limited partner to any of the following: (1) To receive from a limited partnership any of the following: (A) A share of the revenue. (B) Any other compensation by way of income. (C) A return of any or all of his or her contribution to capital of the limited partnership. (2) To exercise any of the rights provided under state law. {- (w) -} {+ (y) +} "Owner licensee" means an owner of a gambling enterprise who holds a state gambling license. {- (x) Unless otherwise indicated, "person" -} {+ (z) "Person," unless otherwise indicated, +} includes a natural person, corporation, partnership, limited partnership, trust, joint venture, association, or any other business organization. {- (y) -} {+ (aa) "Player" means a patron of a gambling establishment who participates in a controlled game. (bb) "Player-dealer" and "controlled game featuring a player-dealer position" refer to a position in a controlled game, as defined by the approved rules for that game, in which players are afforded the temporary opportunity to wager against multiple players at the same table, provided that this position is continuously and systematically rotated among the seated players in the game. (cc) +} "Publicly traded racing association" means a corporation {+ that was +} licensed to conduct {- horseracing -} {+ horse racing +} and simulcast wagering pursuant to Chapter 4 commencing with Section 19400) {+ during the five-year calendar period prior to January 1, 2000, and +} whose stock is publicly traded. {- (z) -} {+ (dd) +} "Qualified racing association" means a corporation {+ that was +} licensed to conduct {- horseracing -} {+ horse racing +} and simulcast wagering pursuant to Chapter 4 (commencing with Section 19400) {- that -} {+ during the five-year calendar period prior to January 1, 2000, and +} is a wholly owned subsidiary of a corporation whose stock is publicly traded. {- (aa) -} {+ (ee) +} "Work permit" means any card, certificate, or permit issued by the division or by a county, city, or city and county, whether denominated as a work permit, registration card, or otherwise, authorizing the holder to be employed as a gambling enterprise employee or to serve as an independent agent. A document issued by any governmental authority for any employment other than gambling is not a valid work permit for the purposes of this chapter. SEC. 4. Section 19834.7 is added to the Business and Professions Code, to read: 19834.7. (a) It is the intent of the Legislature that this section shall be dispositive of the law regarding the operation of {- player banks-} {+ controlled games featuring a player-dealer position +} in licensed gambling establishments in California. {- (b) Notwithstanding Section 330 of the Penal Code or Section 19834.5A, no -} {+ (b) No +} person or entity licensed pursuant to this chapter shall conduct, operate, or offer any house-banked banking game, or allow such a game to be conducted on the premises of any gambling establishment. (c) (1) A house-banked banking game is any wagering game where the house or gambling establishment {- is (A) -} {+ : (A) maintains or operates a bank, or (B) is +} a participant in the game, with an interest in the outcome of any wager, and {- (B) -} covers all bets made in the game, paying all winners and collecting from all losers. (2) 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. -} {+ occupy the position of player-dealer, provided that this position is continuously and systematically rotated among seated players. +} This section shall not be construed to allow the house to bank any game. {- SEC. 5. Section 19840.6 is added to the Business and Professions Code, to read: 19840.6. (a) Except as provided in subdivision (b), every person who holds an ownership interest in, or who manages or controls a commercial player-bank enterprise, or who receives or is entitled to receive any share of the revenues generated or profits earned by the commercial player-bank enterprise's activities, shall apply for and obtain a commercial player-bank enterprise license prior to engaging in the activity for which the license is required and shall apply for and obtain a renewal of this license each year. Except as provided elsewhere in this chapter and by regulations promulgated thereby, commercial player-bank licenses shall be obtained and held subject to all the laws, conditions, approvals, rules, and regulations applicable to a state gambling license or a gambling enterprise, except Sections 19851, 19851.5, 19852, and 19861. (b) Every person who is engaged by a commercial player-bank enterprise as a contract player, or as an onsite supervisor, observer, or monitor of a contract player, shall apply for and maintain a key employee license prior to engaging in the activity for which the license is required. SEC. 6. Section 19941.1 is added to the Business and Professions Code, to read: 19941.1. (a) Notwithstanding Section 19941, every application for a commercial player-bank enterprise license shall be accompanied by deposit of ten thousand dollars ($10,000) to cover the actual costs of the first year of regulation and oversight, with an additional deposit of funds as determined by the division to be sufficient to cover the actual costs of any additional investigations or background checks. If the actual costs of the first year's investigations, regulation, and oversight are substantially less that the total amount deposited, the difference shall be refunded. The failure to pay these deposits at the time of application may be considered as a basis for denying the application. (b) Notwithstanding Section 19941, every application for renewal of a commercial player-bank enterprise license shall be accompanied by a deposit of fifteen thousand dollars ($15,000) or 1 percent of the commercial player-bank enterprise's total gross income for the prior year, whichever is less. The failure to pay this fee at the time of renewal shall result in the immediate and automatic suspension of the license until the fee is paid. If the payment of the renewal fee is more than 15 days overdue, this delinquency may be considered as a basis for denying the application for renewal. SEC. 7. Section 19952 is added to the Business and Professions Code, to read: 19952. Nothing contained in this article requires, or limits the rights of, a city, county, or city and county to license owners of commercial player-bank enterprises that are operating or located in their jurisdiction. SEC. 8. -} {+ SEC. 5. +} Section 19980 is added to the Business and Professions Code, to read: 19980. (a) It shall be a violation of this chapter for the licensed owner of a gambling establishment to deal, carry on, or open or cause to be opened, any house-banked game played for money, checks, credit, or other representative of value. The licensed owner of a gambling establishment may deal, carry on, or open or cause to be opened at the gambling establishment any authorized {- player-banked game -} {+ controlled game featuring a player-dealer position, provided that the game is operated in compliance with subdivision (b) +} . (b) Neither the commission nor the division shall authorize the play of any {- player-banked game -} {+ controlled game featuring a player-dealer position +} if the rules of that game {- would allow one -} {+ would: (1) allow a +} player to participate in that game as the {- player-banker for more than five -} {+ player-dealer more often than once in every three +} consecutive hands or {- rounds, or if -} {+ would otherwise exceed the minimal player-dealer rotation requirements imposed by regulation or rule of the commission or division for that type of game, or (2) if the rules of that game do not require +} the opportunity to operate or maintain a bank {- does not rotate among all -} {+ to continuously and systematically rotate among +} the seated players. {- (c) Neither the commission nor the division shall authorize the play of any player-banked game if the rules of that game would allow an owner, any agent of the owner, or an on-duty employee of the gambling establishment, to participate in the play of the game as a player-banker. SEC. 9. -} {+ SEC. 6. +} Section 19981 is added to the Business and Professions Code, to read: 19981. (a) It shall be a violation of this chapter for the licensed owner of a gambling establishment to deal, carry on, or open or cause to be opened any game in which the owner shares or participates in the winnings or profits of any player participating in the play of that game. (b) This section shall not apply to poker games that are played without a bank. {- SEC. 10. Section 19982 is added to the Business and Professions Code, to read: 19982. It shall be a violation of this chapter for any person licensed under this chapter to direct, allow, or participate in any activity or conduct that would allow a proposition player to participate in any player-banked game, unless all of the following are true about that proposition player: (a) He or she holds a valid work permit. (b) He or she does not participate in the game as a player-banker. (c) He or she is paid a predetermined and fixed sum by the licensed owner, which is not dependent upon or calculated as a function of the proposition player's winnings or losses. (d) He or she retains all winnings in excess of a fixed sum forwarded by the owner. (e) He or she wears a badge identifying his or her true name, and disclosing that he or she is an on-duty employee of the gambling establishment. SEC. 11. Section 19983 is added to the Business and Professions Code, to read: 19983. It shall be a violation of this chapter for a licensed owner of a gambling establishment to enter into any contract or agreement with a commercial player-bank enterprise without the prior approval of the commission. In no event shall a gambling establishment share in any of the winnings or revenues of a commercial player-bank enterprise. SEC. 12. Section 19983.1 is added to the Business and Professions Code, to read: 19983.1. (a) It shall be a violation of this chapter for an owner of a commercial player-bank enterprise to participate in any player banked game, unless that owner holds a valid commercial player-bank enterprise license, is wearing a badge identifying his or her true name and the true name the commercial player-bank enterprise, and does not share any of his or her winnings or profits from the play of the game with any licensed owner or employee of a gambling establishment. (b) It shall be a violation of this chapter for any owner or employee of a gambling establishment to knowingly allow an owner of a commercial player-bank enterprise to participate in any player-banked game conducted or operated by that gambling establishment, unless that person meets the requirements contained in subdivision (a). SEC. 13. Section 19983.2 is added to the Business and Professions Code, to read: 19983.2. (a) It shall be a violation of this chapter for a contract player engaged by a commercial player-bank enterprise to participate in any player banked game, unless that contract player is a licensed key employee of the commercial player-bank enterprise, is wearing a badge identifying his or her true name and the true name of the commercial player-bank enterprise, and does not share any of his or her winnings or profits from the play of the game with any licensed owner or employee of a gambling establishment. (b) It shall be a violation of this chapter for any owner or employee of a gambling establishment to knowingly allow a contract player engaged by a commercial player-bank enterprise to participate in any player-banked game conducted or operated by that gambling establishment, unless that person meets the requirements contained in subdivision (a). SEC. 14. Section 19983.3 is added to the Business and Professions Code, to read: 19983.3. It shall be a violation of this chapter for any employee, agent, or representative of a commercial player-bank enterprise to enter any gambling establishment for the purpose of supervising, observing, or monitoring the conduct of any contract player engaged by that commercial player-bank enterprise, unless that person is licensed as a key employee of the commercial player-bank enterprise. In no event shall a person supervising contract players for a commercial player-bank enterprise participate in any player banked game while performing his or her duties. SEC. 15. Section 19990 is added to the Business and Professions Code, to read: 19990. In addition to the requirements of Section 19840.6, in order to be eligible to receive, renew, or hold a commercial player-bank enterprise license, a person shall comply with all of the following requirements: (a) The person shall not have a financial interest in a gambling establishment, or in the premises or real property of a gambling establishment, or hold a state gambling license. (b) The person shall demonstrate to the satisfaction of the division, as established by regulation of the commission, that the net worth of the commercial player-bank enterprise is sufficient to ensure the stability of its operations. (c) The person shall provide the division with an advance copy of every proposed contract, agreement, or arrangement with an owner of a gambling establishment for its approval pursuant to Section 19983, and shall provide the division with a copy of every contract, agreement, or arrangement that has been entered into with any employee of a licensed gambling establishment within 30 days after execution. (d) The person shall provide the division with a copy of every contract, agreement, or arrangement that has been entered into with each and every contract player it engages, as well as records of all income generated by each contract player and all payments made to each contract player. The division shall specify by regulation the acceptable form for these records. (e) The person shall submit to an annual third-party audit. The division shall specify by regulation the terms and conditions of this audit, and shall approve the auditing company in advance. (f) The person shall submit a monthly win/loss statement to the division. The division shall specify by regulation the information which shall be included in this report. (g) The person shall maintain a permanent office for the commercial player-bank enterprise where all of its papers, books, and records are kept. The person shall keep the division informed of the location of this office, which shall remain open to inspection by the division at all times, without notice or warrant. SEC. 16. Section 19992 is added to the Business and Professions Code, to read: 19992. Nothing in this chapter shall be construed to require the licensed owner of a gambling establishment to permit any contract player to participate in any game offered for play at his or her gambling establishment, and nothing in this chapter shall be construed to require an owner to enter into a contract, agreement, or arrangement with a commercial player-bank enterprise. SEC. 17. -} {+ SEC. 7. Section 19983 is added to the Business and Professions Code, to read: 19983. Notwithstanding Sections 19980 and 19982, a licensed gambling establishment may contract with a third party for the purpose of providing proposition player services, subject to the following conditions: (a) Any agreement, contract, or arrangement between a gambling establishment and a third-party provider of proposition player services shall be approved in advance by the division, and in no event shall a gambling establishment have any interest, whether direct or indirect, in funds wagered, lost, or won by any proposition player. (b) The commission, in its discretion, may require the licensure of any person or entity which provides proposition player services to gambling establishments pursuant to this section, including owners, supervisors, and player. The commission may impose licensing requirements, disclosures, approvals, conditions, or limitations as it deems necessary to protect the integrity of controlled gambling in this state, and may assess and collect reasonable fees and deposits as necessary to defray the costs of providing this regulation and oversight. (c) The division, pursuant to regulations of the commission, is empowered to perform background checks, financial audits, and other investigatory services as needed to assist the commission in regulating third party providers of proposition player services, and may assess and collect reasonable fees and deposits as necessary to defray the costs of providing this regulation and oversight. In addition, the division is authorized to exercise the regulatory authority specified in subdivision (b) until the Governor, by executive order, declares that the commission is prepared to assume its responsibilities under the act. SEC. 8. +} Section 186.9 of the Penal Code is amended to read: 186.9. As used in this chapter: (a) "Conducts" includes, but is not limited to, initiating, concluding, or participating in conducting, initiating, or concluding a transaction. (b) "Financial institution" means, when located or doing business in this state, any national bank or banking association, state bank or banking association, commercial bank or trust company organized under the laws of the United States or any state, any private bank, industrial savings bank, savings bank or thrift institution, savings and loan association, or building and loan association organized under the laws of the United States or any state, any insured institution as defined in Section 401 of the National Housing Act (12 U.S.C. Sec. 1724 (a)), any credit union organized under the laws of the United States or any state, any national banking association or corporation acting under Chapter 6 (commencing with Section 601) of Title 12 of the United States Code, any agency, agent or branch of a foreign bank, any currency dealer or exchange, any person or business engaged primarily in the cashing of checks, any person or business who regularly engages in the issuing, selling, or redeeming of traveler's checks, money orders, or similar instruments, any broker or dealer in securities registered or required to be registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934 or with the Commissioner of Corporations under Part 3 (commencing with Section 25200) of Division 1 of Title 4 of the Corporations Code, any licensed transmitter of funds or other person or business regularly engaged in transmitting funds to a foreign nation for others, any investment banker or investment company, any insurer, any dealer in gold, silver, or platinum bullion or coins, diamonds, emeralds, rubies, or sapphires, any pawnbroker, any telegraph company, any person or business regularly engaged in the delivery, transmittal, or holding of mail or packages, any person or business that conducts a transaction involving the transfer of title to any real property, vehicle, vessel, or aircraft, any personal property broker, any person or business acting as a real property securities dealer within the meaning of Section 10237 of the Business and Professions Code, whether licensed to do so or not, any person or business acting within the meaning and scope of subdivisions (d) and (e) of Section 10131 and Section 10131.1 of the Business and Professions Code, whether licensed to do so or not, any person or business regularly engaged in gaming within the meaning and scope of Section 330, any person or business regularly engaged in pool selling or bookmaking within the meaning and scope of Section 337a, any person or business regularly engaged in horseracing whether licensed to do so or not under the Business and Professions Code, any person or business engaged in the operation of a gambling ship within the meaning and scope of Section 11317, any person or business engaged in controlled gambling within the meaning and scope of {- subdivisions (e) and (i) -} {+ subdivision (e) +} of Section 19805 of the Business and Professions Code, whether registered to do so or not, and any person or business defined as a "bank," "financial agency," or "financial institution" by Section 5312 of Title 31 of the United States Code or Section 103.11 of Title 31 of the Code of Federal Regulations and any successor provisions thereto. (c) "Transaction" includes the deposit, withdrawal, transfer, bailment, loan, pledge, payment, or exchange of currency, or a monetary instrument, as defined by subdivision (d), or the electronic, wire, magnetic, or manual transfer of funds between accounts by, through, or to, a financial institution as defined by subdivision (b). (d) "Monetary instrument" means United States currency and coin; the currency, coin, and foreign bank drafts of any foreign country; payment warrants issued by the United States, this state, or any city, county, or city and county of this state or any other political subdivision thereof; any bank check, cashier' s check, traveler's check, or money order; any personal check, stock, investment security, or negotiable instrument in bearer form or otherwise in a form in which title thereto passes upon delivery; gold, silver, or platinum bullion or coins; and diamonds, emeralds, rubies, or sapphires. Except for foreign bank drafts and federal, state, county, or city warrants, "monetary instrument" does not include personal checks made payable to the order of a named party which have not been endorsed or which bear restrictive endorsements, and also does not include personal checks which have been endorsed by the named party and deposited by the named party into the named party's account with a financial institution. (e) "Criminal activity" means a criminal offense punishable under the laws of this state by death or imprisonment in the state prison or from a criminal offense committed in another jurisdiction punishable under the laws of that jurisdiction by death or imprisonment for a term exceeding one year. (f) "Foreign bank draft" means a bank draft or check issued or made out by a foreign bank, savings and loan, casa de cambio, credit union, currency dealer or exchanger, check cashing business, money transmitter, insurance company, investment or private bank, or any other foreign financial institution that provides similar financial services, on an account in the name of the foreign bank or foreign financial institution held at a bank or other financial institution located in the United States or a territory of the United States. {- SEC. 18. -} {+ SEC. 9. +} Section 337k is added to the Penal Code, to read: 337k. {- Notwithstanding the prohibition on banking games contained in Section 330 -} {+ Pursuant to Section 19980 of the Business and Professions Code, and regulations adopted thereunder +} , the licensed owner and employees of a licensed gambling establishment may offer for play, and players may participate in, a controlled game, as defined in subdivision (e) of Section 337j, in which a player in that game acts as {- the bank -} {+ a player-dealer +} . {- SEC. 19. Section 14161 of the Penal Code is amended to read: 14161. As used in this title: (a) "Financial institution" means, when located or doing business in this state, any national bank or banking association, state bank or banking association, commercial bank or trust company organized under the laws of the United States or any state, any private bank, industrial savings bank, savings bank or thrift institution, savings and loan association, or building and loan association organized under the laws of the United States or any state, any insured institution as defined in Section 401 of the National Housing Act, any credit union organized under the laws of the United States or any state, any national banking association or corporation acting under Chapter 6 (commencing with Section 601) of Title 12 of the United States Code, any foreign bank, any currency dealer or exchange, any person or business engaged primarily in the cashing of checks, any person or business who regularly engages in the issuing, selling, or redeeming of traveler's checks, money orders, or similar instruments, any broker or dealer in securities registered or required to be registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934, any licensed sender of money, any investment banker or investment company, any insurance company, any dealer in coins, precious metals, stones, or jewelry, any pawnbroker, any telegraph company, any person or business engaged in controlled gambling within the meaning of subdivisions (e) and (i) of Section 19805 of the Business and Professions Code, whether registered or licensed to do so or not, and any person or business defined as a "bank," "financial agency," or "financial institution" by Section 5312 of Title 31 of the United States Code or Section 103.11 of Title 31 of the Code of Federal Regulations and any successor provisions thereto. (b) "Transaction" includes the deposit, withdrawal, transfer, bailment, loan, payment, or exchange of currency, or a monetary instrument, as defined by subdivision (c), by, through, or to, a financial institution, as defined by subdivision (a). "Transaction" does not include the purchase of gold, silver, or platinum bullion or coins, or diamonds, emeralds, rubies, or sapphires by a bona fide dealer therein, and does not include the sale of gold, silver, or platinum bullion or coins, or diamonds, emeralds, rubies, or sapphires by a bona fide dealer therein in exchange for other than a monetary instrument, and does not include the exchange of gold, silver, or platinum bullion or coins, or diamonds, emeralds, rubies, or sapphires by a bona fide dealer therein for gold, silver, or platinum bullion or coins, or diamonds, emeralds, rubies, or sapphires. (c) "Monetary instrument" means United States currency and coin; the currency and coin of any foreign country; and any instrument defined as a "monetary instrument" by Section 5312 of Title 31 of the United States Code or Section 103.11 of Title 31 of the Code of Federal Regulations, or the successor of either. Notwithstanding any other provision of this subdivision, "monetary instrument" does not include bank checks, cashier's checks, traveler's checks, personal checks, or money orders made payable to the order of a named party that have not been endorsed or that bear restrictive endorsements. (d) "Department" means the Department of Justice. (e) "Criminal justice agency" means the Department of Justice and any district attorney's office, sheriff's department, police department, or city attorney's office of this state. (f) "Currency" means United States currency or coin, the currency or coin of any foreign country, and any legal tender or coin defined as currency by Section 103.11 of Title 31 of the Code of Federal Regulations or any succeeding provision. SEC. 20. -} {+ SEC. 10. +} Section 2 of Chapter 424 of the Statutes of 1998 is amended to read: Sec. 2. Section 1 of this act, which amends Section 337j of the Penal Code as amended by Assembly Bill 518 of the 1997-98 Regular Session of the Legislature, shall become operative only if Assembly Bill 518 of the 1997-98 Regular Session of the Legislature is enacted and becomes effective on or before January 1, 1999. {- SEC. 21. -} {+ SEC. 11. +} The Legislature finds and declares that notwithstanding any typographical or clerical error, Section 1 of Chapter 424 of the Statutes of 1998 took effect on September 1, 1998. {- SEC. 22. -} {+ SEC. 12. The provisions of this act are severable. If any provision of this act, or the application thereof, is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application. SEC. 13. +} The Legislature finds and declares that this {- act is intended to modify the respective holdings of Oliver v. County of Los Angeles (1998) 66 Cal.App.4th 1397 and Kelley v. First Astri Corp. (1999) 72 Cal.App.4th 462, as to what constitutes an illegal "banking game," but only with respect to controlled games conducted within licensed gambling establishments. SEC. 23. -} {+ act is intended to effectuate the holding in Oliver v. County of Los Angeles (1998) 66 Cal.App.4th 1397, in which the court, at pages 1408 to 1409, inclusive, distinguished the game of Newjack, which it held to be an illegal banking game, from the game of pai gow, which it held could be legally played, based on the fact that in the game of pai gow, the position of player-dealer "continuously and systematically rotates among each of the participants." SEC. 14. +} No reimbursement is required by this act pursuant to Section 6 of Article XIIIB 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 XIIIB of the California Constitution. {- SEC. 24. -} {+ SEC. 15. Section 3.5 of this bill incorporates amendments to Section 19805 of the Business and Professions Code proposed by both this bill and SB 416. It shall only become operative if (1) both bills are enacted and become effective on or before January 1, 2000, (2) each bill amends Section 19805 of the Business and Professions Code, and (3) this bill is enacted last, in which case Section 3 of this bill shall not become operative. SEC. 16. +} 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: {- Recent decisions by the courts of appeal of this state in the cases of Oliver v. County of Los Angeles (1998) 66 Cal.App.4th 1397 and Kelley v. First Astri Corp. (1999) 72 Cal.App.4th 462 have caused confusion with regard to the -} {+ An opinion issued on August 23, 1999, by the California Supreme Court in the consolidated cases of Hotel Employees & Restaurant Employees International Union v. Davis (SO74850) and Cortez v. Davis (SO74851), while incorporating the holding of Oliver v. County of Los Angeles (1998) 66 Cal.App.4th 1397, with respect to banking games, has caused confusion with regard to the +} status of the law concerning the operation of {- player-banked games -} {+ controlled games featuring a player-dealer position +} in licensed gambling establishments in California. It is necessary that the law be clarified as soon as possible in order to provide reasonable regulatory and enforcement powers to the Gambling Control Commission and the Division of Gambling Control over {- player-banked games and commercial player-bank enterprises -} {+ controlled games featuring a player-dealer position +} . Therefore, in order to ensure, at the earliest possible time, that licensed gambling establishments are able to operate within the law and that the commission and division are able to adequately enforce the law, it is necessary that this act take effect immediately. Searching keywords: (statusam) (authorGovernmental Organization (Wesson (Chair),) (HooA)