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SB-40 Internet poker.(2011-2012)

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SB40:v96#DOCUMENT

Amended  IN  Senate  July 06, 2011
Amended  IN  Senate  May 16, 2011
Amended  IN  Senate  March 31, 2011

CALIFORNIA LEGISLATURE— 2011–2012 REGULAR SESSION

Senate Bill
No. 40

Introduced  by  Senator Correa

December 06, 2010

An act to add Chapter 5.2 (commencing with Section 19990) to Division 8 of the Business and Professions Code, relating to Internet gambling, and declaring the urgency thereof, to take effect immediately.


LEGISLATIVE COUNSEL'S DIGEST


SB 40, as amended, Correa. Internet poker.
The Gambling Control Act provides for the licensure of certain individuals and establishments that conduct controlled games, as defined, and for the regulation of these gambling activities by the California Gambling Control Commission. Existing law provides for the enforcement of those regulations by the Department of Justice. Any violation of these provisions is punishable as a misdemeanor, as specified.
This bill would establish a framework to authorize intrastate Internet poker, as specified. The bill would require the department commission to adopt emergency regulations, in consultation with the California Gambling Control Commission, department, providing for the issuance of licenses to operate intrastate Internet poker Web sites and governing the intrastate play of poker games on the Internet, and would provide for licensed entities to operate up to 5 intrastate Internet poker Web sites, as described below. The bill would make it a misdemeanor for any person or entity to offer or participate in any form of illegal Internet gambling, as defined, or to knowingly process any financial transaction arising out of participation in illegal Internet gambling. The bill would authorize the seizure of any money or property used in or derived from illegal Internet gambling, as specified, and would provide for any money or property that has been seized to be forfeited to the Internet Gambling Fund, as established by this bill. By creating new crimes, this bill would impose a state-mandated local program.
This bill would permit these Internet Web sites to conduct a live online nonbanked, nonpercentage version of the card game poker within the borders of the State of California under the same rules, and with the same manner of compensation, as apply to poker games currently conducted in licensed gambling establishments and tribal class II gaming facilities. The bill would require the department commission to issue up to 3 licenses to own and operate intrastate Internet poker Web sites to eligible entities, as specified. The bill would require the department to report to the Legislature within 3 years if it has the capacity to regulate up to 2 additional Internet poker Web sites, and would authorize the department to issue licenses for up to 2 additional Internet poker Web sites upon subsequent legislative authorization.
The bill would authorize the department commission to assess fees on licensed entities in an amount reasonably necessary to reimburse the department commission for its costs in implementing and administering these provisions, including a registration fee. The bill also would require a licensed entity to pay a license fee equal to 10% of the fees collected by the licensed entity from players participating in poker games conducted on its Internet Web site. The bill would provide for all fees to be remitted to the Internet Gambling Fund, as established by this bill and administered by the Controller, subject to annual appropriation by the Legislature.
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.
This bill would declare that it is to take effect immediately as an urgency statute.
Vote: 2/3   Appropriation: NO   Fiscal Committee: YES   Local Program: YES  

The people of the State of California do enact as follows:


SECTION 1.

 The Legislature finds and declares all of the following:
(a) Leading gaming consultants estimate that in 2005, United States citizens illegally wagered four billion dollars ($4,000,000,000) online at off-shore, non-United States Internet gambling Web sites, and that every week more than 1,000,000 California citizens play poker on the Internet.
(b) Currently, 2,300 Internet gambling Web sites operate outside the United States, unregulated by any United States governmental entity and in violation of United States laws. Questions often arise about the honesty and the fairness of the games played on these Internet Web sites, and about the true purpose for, and use of, proceeds generated by these unregulated Internet Web sites.
(c) In 2006, Congress passed, and the President signed, the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA). While UIGEA prohibits the use of banking instruments such as credit cards, checks, or fund transfers for interstate Internet gambling, the statute has not eliminated illegal, unregulated Internet gambling, nor has it provided any increased protection for participants from game operators and others who would impair the integrity of online gambling activity.
(d) Congress included specific provisions in the UIGEA for individual states to permit intrastate Internet gambling, provided that state laws permitting and regulating that activity could impose reasonable protections against participation by underage persons or by persons located outside the boundaries of the states authorizing that activity.
(e) It is in the best interest of the state and its citizens to permit operation of government-regulated intrastate Internet poker wagering Web sites because only through that authorization and regulation can Californians be ensured that the games they are playing are honest, that winners are paid when and in amounts due, and that the state and its citizens, rather than illegal off-shore companies operating outside the reach of, and contrary to, state and federal laws, will benefit from economic activity in the state. Further, it is in the interest of the state to adopt a statutory basis for the regulation of intrastate Internet poker adequate to shield the state and players from organized crime and other corrupting influences, ensure that intrastate Internet poker is conducted fairly and honestly by both licensed entities and the players, confirm the integrity of all activities conducted pursuant to this act, and protect the public health, welfare, and safety of all Californians.
(f) The California Constitution provides that “slot machines” can only be played if located on Indian lands and offered by an Indian tribe pursuant to a tribal-state gaming compact, and thus, the use of the devices connected to the Internet for gambling would violate the California Constitution unless those devices are solely used for the conveyance of information related to the play of nonbanked, nonpercentage poker games.
(g) The only practical and economically feasible way to ensure that Internet poker conducted entirely within California’s borders receives governmental oversight adequate to ensure that the Internet Web site offering the gaming remains honest, safe, and in compliance with all applicable state and federal laws, and that the State of California receives the economic benefits from that activity to which the state is entitled, would be to limit that activity to up to five intrastate Internet Web sites owned and operated by entities formed under the laws of this state, or otherwise qualified to do business in this state, and owned and operated by business (1) persons or entities licensed under the Gambling Control Act to own and operate gambling establishments in this state as of January 1, 2011, and, (2) the governments or wholly owned subentities of federally recognized California tribal governments. Because California law permits the operation of poker and other nonbanking, nonpercentage card games, those tribal governments are entitled under the federal Indian Gaming Regulatory Act (IGRA), to operate poker and other nonbanking and nonpercentage card games without having to enter into class III gaming compacts with the State of California. California tribal governments that have adopted a tribal gaming ordinance approved by the National Indian Gaming Commission (NIGC) under the federal Indian Gaming Regulatory Act (25 U.S.C. Sec. 2701 et seq.) (IGRA), (3) any combination of persons or entities licensed under the Gambling Control Act to own and operate gambling establishments in this state or the governments or wholly owned subentities of federally recognized California tribal governments that have adopted a tribal gaming ordinance approved by the NIGC under IGRA, or (4) any person or entity determined to be eligible for licensure under the Gambling Control Act to own and operate a gambling establishment in this state.
(h) There is statutory precedent for the state to authorize existing entities to form associations or corporations to offer simulcast wagering and advance deposit wagering over the Internet on live horse racing meetings.
(i) Because the game of poker will be played live over the Internet pursuant to this act, it is the intent of the Legislature that similar authorization be given to California’s existing poker industry to form business entities that may be licensed to conduct the live online play of poker under this act.
(j) There are 109 federally recognized tribal governments in California and 91 California licensed gambling establishments. To provide the broadest distribution of these Internet poker licenses within a geographic area confined within the borders of this state to comply with UIGEA, recognize the large number of licensed gambling establishments and tribal governments currently offering or authorized to offer the game of poker in land-based operations, and maximize and expedite the receipt of revenue to the State of California, the eligible entities that include the greatest numbers of licensed gambling establishments and federally recognized California tribal governments shall be selected for licensure to own and operate intrastate Internet poker Web sites pursuant to this act. California, entities formed under the laws of this state, or otherwise qualified to do business in this state, and owned and operated by (1) persons or entities licensed under the Gambling Control Act to own gambling establishments in this state, (2) the governments or wholly owned subentities of federally recognized California tribal governments that have adopted a tribal gaming ordinance approved by the NIGC under IGRA, or (3) any combination of persons or entities licensed under the Gambling Control Act to own gambling establishments in this state, or the governments or wholly owned subentities of federally recognized California tribal governments that have adopted a tribal gaming ordinance approved by the NIGC under IGRA, shall be presumed suitable for immediate licensure under this chapter. All other applicants for licensure under this chapter shall first complete a full background investigation, in accordance with the Gambling Control Act and the requirements of this chapter, and shall not be eligible to receive a temporary or provisional license pending the completion of the investigation. A person or entity that has accepted wagers from persons in the United States on any form of Internet gaming that has not been affirmatively authorized by the laws of this state or the United States subsequent to the effective date of UIGEA, or is or has been the holder of a direct or indirect financial interest in such a person or entity, shall not be eligible for either a license to operate an intrastate Internet poker Web site or to be found suitable to provide goods or services to an entity licensed under this chapter.
(k) The purpose of this act is to provide persons over 21 years of age who are physically present within the State of California and desire to use the Internet to play poker games that are not prohibited by California law, and in a manner consistent with existing law, with a lawful, highly regulated means of doing so in conformity with all applicable laws and regulations. Therefore, nothing in this act, which authorizes the intrastate use of the Internet to conduct poker games, shall be construed to expand the term “gambling,” as used in Article 13 (commencing with Section 19960) of Chapter 5 of Division 8 of the Business and Professions Code.
(l) It is in the interest of the state and its citizens to increase sources of nontax, nonstate revenue for tribal governments to enhance their ability to provide services to their communities.
(m) By enacting this act, the Legislature is expressly authorizing intrastate Internet poker within the State of California only in the limited and regulated form provided herein. This express authorization does not authorize any other form or type of gambling over the Internet.

SEC. 2.

 Chapter 5.2 (commencing with Section 19990) is added to Division 8 of the Business and Professions Code, to read:
CHAPTER  5.2. Intrastate Internet Poker

19990.
 The following terms shall have the following meanings:
(a) “Commission” means the California Gambling Control Commission.

(a)

(b) “Department” means the Department of Justice and the entity within the department that is responsible for fulfilling the obligations imposed upon the department by this chapter.

(b)

(c) “Eligible entity” means a business entity formed under the laws of this state, or qualified to do business in this state, that is owned by persons or entities licensed by the California Gambling Control Commission to own gambling establishments as of January 1, 2011, or by the government or governments of federally recognized California Indian tribes, or the wholly owned subentities of those tribes, or by any combination of those gambling establishment licensees and California tribal governments or wholly owned subentities of those tribes. owned by any of the following:
(1) Persons or entities licensed under Chapter 5 (commencing with Section 19800) to own gambling establishments.
(2) The governments or wholly owned subentities of federally recognized California tribal governments that have adopted a tribal gaming ordinance approved by the National Indian Gaming Commission (NIGC) under the Indian Gaming Regulatory Act (25 U.S.C. Sec. 2701 et seq.) (IGRA).
(3) Any combination of persons or entities licensed under Chapter 5 (commencing with Section 19800) to own and operate gambling establishments in this state or the governments or wholly owned subentities of federally recognized California tribal governments that have adopted a tribal gaming ordinance approved by the NIGC under IGRA.
(4) Any person or entity determined to be eligible for licensure under Chapter 5 (commencing with Section 19800) to own and operate a gambling establishment in this state.

(c)

(d) “Gambling” has the same meaning as set forth in subdivision (l) of Section 19805.

(d)

(e) “Gambling establishment” has the same meaning as set forth in subdivision (o) of Section 19805.

(e)

(f) “Illegal gambling” means participating in, or engaging in conduct that materially aids, any form of gambling that is not conducted pursuant to a tribal-state gaming compact or not otherwise authorized by the laws of this state or the laws of the United States.

(f)

(g) “Illegal Internet gambling” means illegal gambling conducted over the Internet.

(g)

(h) “Internet” means the international computer network of interoperable packet switched data networks.

(h)

(i) “Intrastate” means within the geographical borders of the State of California.

(i)

(j) “Intrastate Internet poker” means any nonbanked, nonpercentage poker game lawfully approved for play through use of the Internet within the state by the department commission, and that is conducted in accordance with this chapter.

(j)

(k) “Licensed entity” means an eligible entity to which the department commission has issued a license pursuant to this chapter for the purpose of operating an Internet Web site offering persons over 21 years of age who are physically present within the State of California the opportunity to play approved poker games on the Internet intrastate Internet poker within the geographical boundaries of the State of California.

(k)

(l) “Person” means an individual, partnership, corporation, limited liability company, or other business entity, including a federally recognized California Indian tribe or a subentity of such a tribe that is wholly owned by the tribe.
(m) “Subcontractor” means any person providing goods or services to a licensed entity in connection with the operation of intrastate Internet poker.

(l)

(n) “Web site” means the unique Uniform Resource Locator of a licensed entity through which the licensed entity is authorized to operate intrastate Internet poker games.

19991.
 (a) No person or other entity may operate, for consideration, poker games over the Internet in California unless licensed to provide those games by the department commission pursuant to this chapter and any regulations adopted thereunder. Intrastate Internet poker is hereby authorized, but only to the extent, and in the manner, prescribed in this chapter.
(b) Any person or entity that offers or participates in illegal Internet gambling, or knowingly processes any financial transactions arising out of, or in connection with, participation in illegal Internet gambling, is guilty of a misdemeanor, and shall be punished by a fine of up to ten thousand dollars ($10,000) and imprisonment in a county jail for up to one year.
(c) Any money, other representative of value, or real or personal property used in, or derived from, illegal Internet gambling shall be subject to seizure by the commission or by any peace officer. Upon a finding by the court that the money, other representative of value, or real or personal property was used in, or derived from, illegal Internet gambling, that money or property shall be forfeited to the Internet Gambling Fund established in Section 19998.

19992.

(a)Within 90 days of the effective date of the act adding this chapter, the department shall adopt regulations, in consultation with the California Gambling Control Commission, governing the intrastate play of poker games on the Internet to provide persons over 21 years of age who are physically present in California with the same protections enjoyed by persons playing in gambling establishments or in tribally owned gaming facilities. The department may issue licenses and promulgate regulations as it determines may be necessary to implement the provisions of this chapter, protect that gaming from criminal influences, and protect the public health, welfare, and safety of the people of California, but shall give priority in the adoption of regulations to the licensing of the three categories of entities enumerated in paragraph (1) of subdivision (b). However, persons licensed by the California Gambling Control Commission to own or operate a gambling establishment, the governments of California Indian tribes recognized by the United States Department of the Interior, Bureau of Indian Affairs, or the wholly owned subentities of those tribal governments shall not be required to apply for or obtain licenses to own interests in a licensed entity.

(b)The regulations adopted pursuant to subdivision (a) shall provide both of the following:

(1)Procedures by which an entity may apply for a license to operate an Internet Web site through which persons over 21 years of age and physically present within the state may play intrastate Internet poker, with the objective of facilitating the commencement of operation of the licensed entity’s authorized Internet Web site as quickly as possible, thereby accelerating the receipt of revenues by the state.

(2)Procedures by which persons over 21 years of age who are physically present in the state may register to lawfully engage in intrastate Internet poker games through an Internet Web site owned and operated by a licensed entity.

19992.
 (a) Within 90 days of the effective date of the act adding this chapter, the commission shall adopt emergency regulations, in consultation with the department, providing for the issuance of licenses to operate Internet Web sites for the operation of intrastate Internet poker and governing the play of intrastate Internet poker to provide persons over 21 years of age who are physically present in California with the same protections enjoyed by persons playing in gambling establishments or in tribally owned gaming facilities. The commission may issue licenses and promulgate regulations as it determines may be necessary to implement the provisions of this chapter, protect that gaming from criminal influences, and protect the public health, welfare, and safety of the people of California. The regulations shall include the same licensing criteria as apply to applicants for licensure under Chapter 5 (commencing with Section 19800) and regulations thereunder, including the licensure of persons or entities with a direct or indirect financial interest in an eligible entity.
(1) To avoid delays in implementing this chapter in order to provide much needed revenues to meet the state’s budget emergency, the Legislature finds and declares that it is necessary to provide the commission with a limited exception from the procedural requirements normally applicable to the commission’s rulemaking. The commission shall adopt appropriate emergency regulations as soon as possible, the initial regulatory action to be filed with the Office of Administrative Law no later than 90 days after the effective date of this chapter. Notwithstanding the adoption of appropriate emergency regulations, the commission shall complete the normal public notice and comment process, giving careful consideration to the comments of all interested parties. It is the intent of the Legislature to provide the commission with full authority and sufficient flexibility to adopt all needed regulations. These regulations may be adopted in a series of regulatory actions. Subsequent regulatory actions may amend or repeal earlier regulatory actions, as necessary, to reflect program experience and concerns of the regulated public. However, any later amendment or repeal shall not have the effect of amending or repealing the Legislative intent under this chapter that emergency regulations be promulgated and remain effective as provided in this chapter.
(2) The commission shall adopt emergency regulations concerning intrastate Internet poker no later than 90 days after the effective date of this chapter. The adoption, amendment, repeal, or readoption of a regulation authorized by this section is deemed to address an emergency, for purposes of Sections 11346.1 and 11349.6 of the Government Code, and the commission is hereby exempted for this purpose from the requirements of subdivision (b) of Section 11346.1 of the Government Code, but shall otherwise be subject to the review and approval of the Office of Administrative Law.
(3) The emergency regulations adopted pursuant to this section shall be effective initially for a period of 180 days from the date the regulations are filed with the Secretary of State by the Office of Administrative Law or upon any later date specified by the commission in a written instrument filed with, or as part of, the regulation. Notwithstanding subdivision (h) of Section 11346.1 of the Government Code, the regulations may be readopted only once pursuant to this section for a period of not more than 180 days. This exemption from the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340), Chapter 4 (commencing with Section 11370), Chapter 4.5 (commencing with Section 11400), and Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code) applies only to regulations that are submitted to the Office of Administrative Law no later than 24 months after the effective date of this chapter.
(b) Notwithstanding any other provision of this chapter, persons or entities licensed under Chapter 5 (commencing with Section 19800) to own gambling establishments in this state and the governments or wholly owned subentities of federally recognized California tribal governments that have adopted a tribal gaming ordinance approved by the NIGC under IGRA shall not be required to apply for or obtain licenses to own interests in a licensed entity. Any licensed entity consisting of persons or entities licensed under Chapter 5 (commencing with Section 19800) to own gambling establishments in this state and the governments or wholly owned subentities of federally recognized California tribal governments that have adopted a tribal gaming ordinance approved by the NIGC under IGRA shall be presumed suitable for licensing. All other applicants for licensure under this chapter shall first complete a full background investigation, in accordance with Chapter 5 (commencing with Section 19800) and the requirements of this chapter, and shall not be eligible to receive a temporary or provisional license pending the completion of the investigation. A person or entity that has accepted wagers from persons in the United States on any form of Internet gaming that has not been affirmatively authorized by the laws of this state or the United States subsequent to the effective date of the federal Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA), or is or has been the holder of a direct or indirect financial interest in such a person or entity, shall not be eligible for either a license to operate an intrastate Internet poker Web site or to be found suitable to provide goods or services to an entity licensed under this chapter.
(c) The regulations adopted pursuant to subdivision (a) shall provide all of the following:
(1) Procedures by which (A) an eligible entity may apply for and receive a license to operate an Internet Web site through which persons over 21 years of age and physically present within the state may play intrastate Internet poker, and (B) subcontractors may apply for and be found suitable in accordance with the suitability requirements of Chapter 5 (commencing with Section 19800) and ensuring that all financial arrangements between a licensed entity and any subcontractor are on an arms-length, commercially reasonable basis. A subcontractor licensed by a governmental jurisdiction within the United States shall be presumed suitable for the issuance of a temporary license by the commission under this chapter pending completion of a full background investigation and issuance of a permanent license, with the objective of facilitating the commencement of operation of licensed entities authorized intrastate Internet poker Web sites at the earliest possible date, thereby accelerating the receipt of revenues by the state and helping to alleviate the state’s current budget crisis. The commission may engage the services of a nationally recognized gaming test laboratory for the purpose of validating software and equipment pending the development of the commission’s own validating and testing capability. A subcontractor shall not receive more than 12 percent of the gross revenues for services provided to an intrastate Internet poker Web site.
(2) Procedures by which persons over 21 years of age who are physically present in the state may register to lawfully engage in intrastate Internet poker games through Internet Web sites owned and operated by licensed entities.
(d) Each license issued under this chapter shall permit the operation of a single intrastate Internet poker Web site.
(e)  No person shall have an ownership interest in more than one license issued under this chapter.

(c)

(f) The intrastate Internet poker games shall be honestly and fairly run.

(d)

(g) A licensed entity may offer intrastate Internet poker games pursuant to this chapter only on a network approved by the department commission containing an Internet Web site that is registered with the department commission to offer that service. A licensed entity shall not offer, for consideration, any form of Internet poker game independent of that network.

(e)

(h) A person desiring to play intrastate Internet poker shall register with a licensed entity by presenting documentation, upon logging on to the licensed entity’s intrastate Internet poker Web site, that the person is at least 21 years of age and is physically present within the state. After verifying the validity of the proffered documentation and confirming the person’s physical presence within this state, the person may be permitted to play any intrastate Internet poker game provided by the licensed entity, subject to the licensed entity’s right, in its sole and absolute discretion and without liability, to exclude from participation in intrastate Internet poker games any person reasonably determined to be unsuitable to participate in those games, or whose participation would be contrary to requests concerning self-exclusion or limits on losses, amounts wagered, or playing time.

(f)

(i) A licensed entity’s intrastate Internet poker Web site shall use the services of an independent third party licensed by the department commission to perform identification, physical presence in the state, and age verification services for persons registering to play intrastate Internet poker games.

(g)

(j) A licensed entity’s intrastate Internet poker Web site shall use personal identification numbers and other technology so that only the registered person has access to his or her wagering account, and that games can be played only from within the geographical borders of the state.

(h)

(k) A licensed entity shall provide for withdrawals from the wagering account only by check, made payable to the account holder and sent to the address of the account holder in the state, or by an electronic transfer to an account held by the verified account holder at a financial institution located within the state. The account holder also may withdraw funds from the wagering account at a licensed gambling establishment or tribal gaming facility participating in a licensed entity by presenting valid identification and verifiable personal and account information.

(i)

(l) A licensed entity’s intrastate Internet poker Web site shall provide information on problem gambling, including a problem gambling hotline telephone number that a person may call to seek information and assistance for a potential gambling addiction, and shall offer responsible gambling services, such as self-exclusion, limits on losses, amounts wagered, and playing time, and other services as the department commission reasonably may determine are appropriate.

(j)

(m) A licensed entity shall allow the department commission access to its operating premises at any time and without notice to visit, investigate, and place expert accountants and other persons it deems necessary to ensure strict compliance with its regulations concerning game integrity, credit authorization, account access, and other security provisions, if those activities do not interfere with the normal lawful functioning of the licensed entity’s operations. To maximize the commission’s ability to exercise its regulatory authority at minimum cost, a licensed entity’s operating premises shall be located within the geographical limits of this state.

(k)

(n) A licensed entity shall offer, at the time of registration, the option to place a limitation on the amount of funds that may be transferred into a wagering account within any 24-hour period. The licensed entity shall adopt procedures to ensure that the player may not deposit more funds into the account than the amount specified. If, after the wagering account is opened, a person wishes to increase the amount of funds that may be transferred, the licensed entity may increase the amount after obtaining and verifying the validity of identification and personal information. However, that increase shall not be effective until at least 48 hours after the change is requested.

(l)

(o) A licensed entity shall conduct intrastate Internet poker games in the same manner as those games are lawfully conducted in licensed gambling establishments or tribally owned gaming facilities in the state, except that the games shall be played with computers, rather than with tangible cards and chips, and the virtual cards shall be shuffled and dealt by the licensed entity’s computer system, rather than by a natural person. Only nonbanked, nonpercentage poker games lawfully approved for play within the state by the department commission may be offered for play on a licensed entity’s intrastate Internet Web site. A licensed entity’s intrastate Internet Web site may collect fees from players in authorized poker games pursuant to the same player fee collection methods approved by the department commission under state law for use within nontribal licensed gambling establishments in California.

(m)The department

(p) The commission shall assess fees on licensed entities in the amounts reasonably necessary to reimburse the department commission for its costs in implementing and administering this chapter, protecting that gaming from criminal influences, and protecting the public health, welfare, and safety of the people of California.

19992.5.
 (a) There shall be authorized up to five an unlimited number of Internet Web sites to conduct a live online nonbanked, nonpercentage version of the card game poker pursuant to this chapter within the borders of the State of California under the same rules, and with the same manner of compensation, as apply to poker games currently conducted in licensed gambling establishments and tribal class II gaming facilities.
(b) The department shall issue up to three commission shall issue licenses to own and operate intrastate Internet poker Web sites pursuant to this chapter to eligible entities consisting of any of the following:

(1)Licensed gambling establishments and federally recognized California tribal governments.

(2)Federally recognized California tribal governments.

(3)Licensed gambling establishments.

(c)The department shall select the eligible entities that include the greatest numbers of individual entities as specified in subdivision (b).

(d)Notwithstanding Section 10231.5 of the Government Code, within three years of commencing the play of live online Internet poker pursuant to this chapter, the department shall report to the Legislature if it has the capacity to regulate up to two additional Internet poker Web sites. The department may issue licenses for up to two additional Internet poker Web sites upon subsequent legislative authorization.

(1) Persons or entities licensed under Chapter 5 (commencing with Section 19800) to own gambling establishments.
(2) The governments or wholly owned subentities of federally recognized California tribal governments that have adopted a tribal gaming ordinance approved by the NIGC under IGRA.
(3) Any combination of persons or entities licensed under Chapter 5 (commencing with Section 19800) to own and operate gambling establishments in this state or the governments or wholly owned subentities of federally recognized California tribal governments that have adopted a tribal gaming ordinance approved by the NIGC under IGRA.
(4) Any person or entity determined to be eligible for licensure under Chapter 5 (commencing with Section 19800) to own and operate a gambling establishment in this state.

19993.
 After the regulations required by subdivision (a) of Section 19992 are adopted pursuant to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), an entity, an eligible entity seeking to be licensed to offer intrastate Internet poker games shall apply to the department commission for licensure to engage in that activity. The department shall charge the entity a registration fee sufficient The commission shall charge the eligible entity a nonrefundable registration fee of five million dollars ($5,000,000) to cover all costs associated with the issuance of the license, including any necessary background investigation. Any remaining amount shall be credited toward the licensed entity’s license fees payable under Section 19994.

19994.
 (a) In addition to any licensing or other administrative fees that the department commission may assess as reimbursement for the costs of implementing this chapter, a licensed entity shall pay to the state a license fee equal to 10 percent of the fees collected by the licensed entity from players participating in poker games conducted on its Internet Web site. site, payable quarterly in arrears.
(b) An eligible entity that applies for licensure within 30 days after the effective date of the emergency regulations promulgated pursuant to Section 19992 of this chapter and receives a license shall pay an initial deposit of fifty million dollars ($50,000,000) on or before the date that the licensed entity’s Internet Web site becomes operational for real money poker games, which shall be a credit against future license fees payable under subdivision (a). If more than five eligible entities apply for licensure within that 30-day period, then additional eligible entities shall be permitted to apply for licensure following the 30-day period; however, an eligible entity that applies for licensure more than 30 days after the effective date of the emergency regulations promulgated pursuant to Section 19992 of this chapter and receives a license shall pay an initial deposit of one hundred million dollars ($100,000,000) on or before the date that the licensed entity’s Internet Web site becomes operational for real money poker games, which shall be a credit against future license fees payable under subdivision (a).
(c) Notwithstanding subdivision (b), each licensed entity shall have until July 1, 2012, to activate its license by making its Internet Web site operational for ongoing real money poker games. If the total amount of initial deposits paid by licensed entities to the state as of July 1, 2012, is less than two hundred fifty million dollars ($250,000,000), then the initial deposits paid by all licensed entities as of July 1, 2012, shall be increased equally so that the total amount of the initial deposits paid to the state equals two hundred fifty million dollars ($250,000,000). A licensed entity shall pay the full amount of any increased initial deposit within 60 days following receipt of notice by the commission of the amount owed. If a licensed entity is required to increase its initial deposit in excess of fifty million dollars ($50,000,000) pursuant to this subdivision, the commission shall not, as of July 1, 2012, issue any additional licenses under this chapter until July 1, 2016, in order to allow the licensed entity an opportunity to reasonably recoup the initial deposit.
(d) If the implementation of this chapter is temporarily, preliminarily, or permanently enjoined by the order of a court of competent jurisdiction, all license fees paid shall be refunded pending entry of a final and nonappealable judgment concerning the validity of the implementation of this chapter. If implementation of this chapter is validated, each licensed entity to which fees were refunded shall remit to the state the full amount of those fees as a condition precedent to offering real money poker games on its Internet Web site. For purposes of ensuring that license fees are refunded by the state as required by this subdivision, the state hereby waives its sovereign immunity from suit for this limited purpose and consents to the jurisdiction of the Superior Court for the County of Sacramento.

19995.
 In the event that any federal statute now in effect or hereafter enacted either affirmatively authorizes, or repeals existing prohibitions against, the interstate or international play on the Internet of house-banked or percentage games of chance, or games such as poker in which there is an element of chance but a player’s skill predominates over the element of chance in determining the outcome of the game, and the federal statute allows a state to be excluded from application of that statute, the Governor and the Legislature shall take any action necessary to opt out of the application of that statute to persons physically present within the geographical borders of the state. Failure to take that action within the time allowed under the federal statute shall entitle any licensee that requests a refund of its license fee to receive a refund of that portion of its license fee on which an unused credit remains.

19996.
 Nothing in this chapter shall be interpreted to authorize the play of intrastate Internet poker in a manner that circumvents the limitation on gambling establishments, or the limitation on gambling tables, pursuant to Chapter 5 (commencing with Section 19800), and related state and local laws, or to authorize the operation of public or private facilities the primary purpose of which is the online play for consideration of poker or other forms of gaming.

19997.
 If a court of competent jurisdiction determines that the enactment or implementation of this chapter entitles any California Indian tribe that is a party to a class III tribal-state gaming compact with the state to terminate or reduce payments to the Indian Gaming Revenue Sharing Trust Fund required by the compact on the ground that the state has breached the compact by enacting or implementing this chapter, all funds then on deposit in the Indian Gaming Revenue Trust Fund shall continue to be distributed quarterly in equal shares to all federally recognized California Indian tribes entitled to receive disbursements from the fund until all funds on deposit in the fund have been disbursed.

19998.
 (a) The state’s percentage of player fees collected by licensed entities, and any other fees paid by licensed entities, shall be remitted to the Controller for deposit in the Internet Gambling Fund, which is hereby created in the State Treasury. The fund shall be administered by the Controller for the purposes of this chapter, subject to annual appropriation by the Legislature.
(b) On or before March 31 of each year, each state agency with responsibilities imposed under this chapter shall submit a revenue needs request to fulfill those duties for the next fiscal year to the Senate Committee on Budget and Fiscal Review, the Assembly Committee on Budget, the Senate and Assembly Committees on Governmental Organization, and the Department of Finance. Each submission of revenue needs shall specify the justification for those costs.
(c) On or before March 31 of each year, the State Department of Alcohol and Drug Programs, Office of Problem Gambling shall submit a revenue needs request for programs to address problem gambling that results from the offering of authorized games for the next fiscal year to the Senate Committee on Budget and Fiscal Review, the Assembly Committee on Budget, the Senate and Assembly Committees on Governmental Organization, the Senate and Assembly Committees on Human Services, and the Department of Finance. Each submission of revenue needs shall specify the justification for those costs.
(d) All remaining proceeds not allocated pursuant to subdivisions (b) and (c) shall remain in the Internet Gambling Fund, subject to appropriation by the Legislature for purposes related to this chapter or for those other purposes as the Legislature may deem appropriate.

19999.
 A city, county, or city and county shall not regulate, tax, or enter into a contract with respect to any matter related to this chapter.

SEC. 3.

 Fees collected by the state in connection with this act are General Fund revenues for purposes of Section 3.94 of the Budget Act of 2011.

SEC. 4.

 The provisions of this act are severable. If any provision of this act or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.

SEC. 3.SEC. 5.

 No reimbursement is required by this act pursuant to Section 6 of Article XIII B 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 XIII B of the California Constitution.

SEC. 4.SEC. 6.

 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:
In order to ensure that California is able to provide consumer gaming protections from illegal operators, it is necessary for this act to take effect immediately.