BILL ANALYSIS Bill No: AB 1417 SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION Senator Don Perata, Chair 1999-2000 Regular Session Staff Analysis AB 1417 Author: Wesson As Amended: June 15, 1999 Hearing Date: July 13, 1999 Consultant: Steve Hardy {u SUBJECT u} Gambling Establishments: Banked Games {u DESCRIPTION u} 1. AB 1417 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. Defines a "banking game" as any wagering game where the house, dealer 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. 3. Specifies that a game is {u not u} a banking game merely because the rules of the game allow one person to act as a bank who does not represent the interest of the house, provided that this position is offered to all the players at the table. The bill further 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. 4. Contains an "Urgency Clause" to take effect immediately. AB 1417 (Wesson) continued Page 2 {u EXISTING LAW u} a) 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, 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. (Section 330, Penal Code). b) 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 {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 and "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 defines 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 AB 1417 (Wesson) continued Page 3 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 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 AB 1417 (Wesson) continued Page 4 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. The author states that the purpose of AB 1417 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 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. AB 1417 is an effort to clarify once and for all the confusion surrounding this issue. Supporters believe that AB 1417 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 . 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 1417 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} In conclusion, opponents recognize that the vested gambling interests of this state are trying to level the playing field with Indian gaming, however, a rush to change the AB 1417 (Wesson) continued Page 5 entire state's policy without the approval of the citizens, while continuing the promotion of gambling expansion without regulation, is ethically improper. {u SUPPORT: u} City of Inglewood Ladbroke/Pacific Racing Association California Commerce Club Artichoke Joe's Casino Hawaiian Gardens Club California Gaming Cities Coalition California Gaming Association {u OPPOSE: u} Stand Up for California {u FISCAL COMMITTEE: u} Senate Appropriations ********** SMH:bjw