BILL ANALYSIS {u AB 1417 u} Page 1 GOVERNOR'S VETO AB 1417 (Wesson) As Amended July 14, 1999 2/3 vote. Urgency {u ASSEMBLY: 63-5 (June 4, 1999) SENATE: 29-3 (July 15,1999) ASSEMBLY: 56-9 (July 15,1999) u} {u u} Original Committee Reference: {u G.O. u} {u SUMMARY u} : Defines what constitutes a "banking game," and exempts from this definition those games in which a player who does not represent the interests of the house may act as a bank, provided the position is offered to all players at the table. Specifically, {u this bill u} : {u u} 1)Defines a "banking game" as 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 in the game, paying all winners and collecting from all losers. 2)Specifies that a game is not a banking game merely because the rules of the game allow a player who does not represent the interests of the house to act as a bank, provided that this position is offered to all the players at the table. 3)Finds and declares that this provision is intended to modify the recent holdings of {u Oliver v. County of Los Angeles u} and {u David Kelley v. First Astri Corporation, et al u} ., as to what constitutes a banking game with respect to controlled games {u AB 1417 u} Page 2 conducted in licensed card clubs. {u EXISTING LAW u} : 1)Establishes the Gambling Control Commission (Commission) and grants it jurisdiction over the operation of card clubs and of all persons having an interest in the operation of card clubs. 2)Creates the Division of Gambling Control within the Department of Justice to investigate and enforce controlled gaming activities in the state. 3)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 Commission may not prohibit, on a statewide basis, the play of any game or restrict the manner in which any game is played, unless the Commission finds that the game, or the manner in which the game is played, violates either federal or state law or a local ordinance. 4)Specifies that any person who conducts any game of faro, monte, roulette, lansquenet, rouge et noire, rondo, tan, fan-tan, seven-and-a-half, twenty-one, hokey-pokey, or any banking or percentage game played with cards, dice, or any device, is guilty of a misdemeanor. {u FISCAL EFFECT u} : None {u COMMENTS u} : Since the mid-to-late 1800's, California has prohibited gambling on specified games, including, for example, the games of twenty-one and roulette. Rather than continue to amend the law to include games that were later deemed worthy of prohibition, the Legislature subsequently prohibited any "banking" or "percentage" games played with cards, dice, or any device. Neither of these terms are defined in statute, however, and the public, law enforcement agencies, and the card club industry has generally had to rely on case law to determine the type of games legally allowed in this state. {u AB 1417 u} Page 3 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. Both these types of games are commonly associated with the games played at out-of-state casinos, and are disallowed in California because in these games the house has a direct interest in the game, a statistical advantage in some instances, and generally possess limitless funds. Banking and percentage games place the house in a position where it has an active interest in the game, either as banker or in taking a percentage of the wagers. By contrast, poker, and other games played in a "round," where players bet against each other rather than against the house, have always been legal in California. In fact, any game not specifically prohibited in statute or that is not a banking or percentage game may be played in this state, subject to the provisions of GCA and contingent upon local approval. At various times, the courts have had to determine whether new card games are either derivatives of those games that are prohibited under existing law, or are banking or percentage games. For instance, the legality of the game of pai gow was called into question during the 1980's due to its rules that provided for a "player-banker." In {uHuntington Park Club Corp. v. County of Los Angeles u} , the Court of Appeal held that the game of pai gow was not an illegal banked game because the role of the player-banker continually and systematically rotates among each of the participants. In {u Oliver v. County of Los Angeles (1998) u} , the courts were asked to consider whether the newly introduced game of "Newjack" was prohibited under existing law, or if the game was inconsistent with previous judicial determinations regarding banking and percentage games. The object of the game of Newjack is to hold a hand of cards having a collective value as close to, but no greater than, 22 points. Each card has a specific point value: 1) an ace has a value of one; 2) a two has a value of two or 12, depending upon the choice of the player; 3) cards three through 10 each have a {u AB 1417 u} Page 4 value equal to the face number of the card; and, 4) the jack, queen and king each have a value of 10. In each hand of the game, there is a player designated as the dealer, or the player-dealer, with the other players representing the opponents of the player-dealer and wagering against this person, who must pay the other players depending upon the outcome of their hands vis-?-vis the hand of the player-dealer. As with other legal card games, the card club is permitted to charge a fixed amount in the form of a table fee. In Los Angeles County, several cities with card clubs began to authorize the play of Newjack. Thereafter, opinion letters were issued by County Counsel's office and the State Attorney General's office that stated that Newjack was illegal. Consequently, the proprietors of Newjack filed a declaratory relief action against the County of Los Angeles requesting a judicial determination if Newjack violated state law. Interestingly, the trial court determined that Newjack was not a banking or percentage game, but instead violated existing law because the rules of the game (with a target number of 22) merely represented a variation of twenty-one, which is a game prohibited under existing law. This trial court decision was subsequently appealed to the Appellate Court. The Appellate Court held that while Newjack is not one of the games specifically prohibited under current law, the question of its legality depended upon whether the game qualified as either a banking or percentage game. The court determined that Newjack was not a percentage game, but did violate existing law because the game has the "potential" of being played as a banking game. The court concluded that a game is a banking game if, under the rules of the game, it is possible that a player can maintain a bank or operate as a bank during the play of the game. The court noted that under the rules of Newjack, the player-dealer position does not have to rotate among the players. If the other players decline to accept the player-dealer position, one player can act as a player-dealer for repeated hands, thus meeting the test, in this court's opinion, of what could be construed to represent a banked game, in that the player-dealer could take all comers, pay all winners, and collect from all losers for an unspecified period of time. {u AB 1417 u} Page 5 The recently decided {u Kelley v. First Astri Corporation u} case, in part, upheld {u Oliver u} by rejecting the contention that a card game is not a banked game and was thus permissible if the deal rotated and the house at no time banked the game. The game in question here involved a form of twenty-one played on an Indian reservation located within California that allowed players to act as the banker, which the court determined to be a prohibited banking game. The purpose of this bill is to address the respective holdings in {u Oliver u} and {u Kelley v. First Astri u} by defining exactly what constitutes a banking game. Supporters note that the these decisions call into question the legality of all player-banked games, (i.e., games where, as in Newjack, the "bank" position rotates among players). 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 and for the card clubs themselves. They 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 addresses this confusion by clarifying that a game is not a banking game merely because the rules of the game allow for a player to act as a bank, provided that the position is offered to all the players at the table and if that player does not represent the interests of the house. Supporters emphasize that this bill does not authorize new games in California but merely clarifies that games played with a player-dealer are allowed in this state, as long as the opportunity to be a player-dealer is offered to all players. Moreover, this legislation is important to those cities with card clubs as they rely on card club license fees to support their ability to provide municipal services to their residents. {u GOVERNOR'S VETO MESSAGE: AB 1417 u} Page 6 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 Analysis Prepared by u} : George Wiley / G. O. / (916) 319-2531 FN: 0002231