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AB-1437 Gambling: Internet Fantasy Sports Game Protection Act.(2015-2016)

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AB1437:v96#DOCUMENT

Amended  IN  Senate  June 21, 2016
Amended  IN  Assembly  January 12, 2016
Amended  IN  Assembly  September 10, 2015

CALIFORNIA LEGISLATURE— 2015–2016 REGULAR SESSION

Assembly Bill
No. 1437

Introduced by Assembly Member Gray
(Coauthors: Assembly Members Brown and Jones-Sawyer)

February 27, 2015

An act to add Chapter 4.7 (commencing with Section 19750) to Division 8 of the Business and Professions Code, and to amend Section 337a of the Penal Code, relating to gambling, and making an appropriation therefor. therefor, and declaring the urgency thereof, to take effect immediately.


LEGISLATIVE COUNSEL'S DIGEST


AB 1437, as amended, Gray. Gambling: Internet Fantasy Sports Game Protection Act.
Existing law, the Gambling Control Act, provides for the licensure and regulation of various legalized gambling activities and establishments by the California Gambling Control Commission and the investigation and enforcement of those activities and establishments by the Department of Justice. Existing law prohibits a person, whether or not for gain, hire, or reward, from making a betting pool or placing a bet or wager on the result of any contest or event, including a sporting event, as specified.
This bill would enact the Internet Fantasy Sports Games Consumer Protection Act, which would require a person or entity to apply for, and receive, a license from the department prior to offering an Internet fantasy sports game for play in California. The bill would require the department to issue a license to a person or entity that applies for a license if the person or entity satisfies specified requirements, including, among others, that the applicant is of good character, honesty, and integrity. The bill would also require a person to register with a “licensed operator” prior to participating in an “Internet fantasy sports game” on an “authorized Internet Web site,” as those terms are defined. The bill would prohibit a licensed operator from offering an Internet fantasy sports game based on a collegiate sports or athletic event, or any other sports or athletic event in which amateur athletes participate.
The bill would require a licensed operator, among other things, to ensure that a registered player is eligible to play on an authorized Internet Web site, and to implement appropriate data security standards to prevent access by a person whose age and location have not been verified. The bill would authorize the department to assess a civil penalty against a licensed operator that violates these provisions according to a specified schedule depending on the number of violations. The bill would require the department to develop an online self-exclusion form on or before July 1, 2017, and to deliver that form to each licensed operator, and would require each licensed operator to make that form available to its registered players. The bill would also require a licensed operator to, among other things, hold the funds in a registered player’s account in trust for that registered player . player. The bill would prohibit a licensed operator from engaging in certain activities, including, among other things, from allowing a registered player to establish more than one account or user name on its authorized Internet Web site, from issuing credit to a registered player, from advertising in publications or other media that are aimed exclusively or primarily at persons under 21 years of age, and from depicting persons under 21 years of age, students, or school or college settings in its advertisements. The bill would also prohibit an officer, director, principal, employee, or contractor of a licensed operator from engaging in certain activities, including, among other things, from playing an Internet fantasy sports game offered by a licensed operator.
The bill would require a licensed operator to pay an annual regulatory fee, for deposit into the Fantasy Sports Fund, which the bill would establish in the State Treasury. The bill would continuously appropriate the Fantasy Sports Fund to the department for the reasonable costs of license oversight, consumer protection, state regulation, and other purposes related to the bill. The bill would require each licensed operator to pay a one-time license fee into the General Fund in an unspecified amount. The license fee would be credited against quarterly fees equivalent to an unspecified percentage of the licensed operator’s gross income that is attributable to the operation of an authorized Internet Web site in California.
The bill would make proprietary information provided by a licensed operator confidential in order to protect the licensed operator and to protect the security of an authorized Internet Web site. The bill would also prohibit a city, county, or city and county from regulating, taxing, or entering into a contract with respect to, any matter governed to the bill’s provisions, and would make conforming changes.
Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.
This bill would make legislative findings to that effect.
This bill would include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIII A of the California Constitution, and thus would require for passage the approval of 2/3 of the membership of each house of the Legislature.
This bill would declare that it is to take effect immediately as an urgency statute.
Vote: 2/3   Appropriation: YES   Fiscal Committee: YES   Local Program: NO  

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


SECTION 1.

 Chapter 4.7 (commencing with Section 19750) is added to Division 8 of the Business and Professions Code, to read:
CHAPTER  4.7. The Internet Fantasy Sports Games Consumer Protection Act
Article  1. Preliminary Provisions

19750.
 This chapter shall be known and may be cited as the Internet Fantasy Sports Games Consumer Protection Act.

19752.
 The Legislature finds and declares all of the following:
(a) The Internet is an integral tool in the everyday lives of Californians. Commerce, communication, and entertainment are just some of the areas in which this technological aid thrives.
(b) Participating in Internet fantasy sports games, including those of the daily variety, is a very popular activity in California, and with the Internet as a technological aid, participation in these games can be conducted in a virtual environment and played from the privacy of one’s own computer or mobile device. Despite a lack of regulation, participation in Internet fantasy sports games still remains popular with California residents.
(c) Californians participate in Internet fantasy sports games on a daily basis on unregulated Internet Web sites. Neither federal nor California laws provide any consumer protections for California players. California players assume all risks, any negative social or financial impacts are borne by the citizens of California, and the revenues generated from these games are being realized by unlicensed operators and do not provide any benefits to the citizens of California.
(d) To better protect the people of California from potential risks from, and to maintain oversight of the systems used to carry out, Internet fantasy sports games, the Legislature finds it to be in the interest of the people to establish a regulatory framework by which entities, as authorized by the Department of Justice, may facilitate Internet fantasy sports games to players within California.
(e) State authorization to operate Internet fantasy sports games consistent with federal law, and heightened regulation and enforcement regarding this activity, will provide California with the means to protect its citizens and consumers under certain conditions by providing a framework to ensure that, among other things, the state is not subject to an unnecessary and unprecedented expansion of gambling, minors are prevented from gambling, residents participating in these games are protected, and the state is not deprived of revenues to which it would otherwise be entitled from these activities.

19754.
 It is the intent of the Legislature to create a licensing and regulatory framework and enforcement mechanisms for Internet fantasy sports games to do all of the following:
(a) Ensure that Internet fantasy sports games of any duration are offered for play only in a manner that is consistent with federal and state law.
(b) Ensure the state possesses sufficient resources to enforce prohibitions of illegal gambling activity, in part, by establishing a regulatory enforcement fund.
(c) Ensure that the state is able to collect income tax revenues from registered players participating in authorized Internet fantasy sports games in the state.
(d) Create systems to protect each registered player’s private information and prevent fraud and identity theft.
(e) Ensure that a registered player is able to have his or her financial transactions processed in a secure, timely, and transparent fashion.
(f) Require that each licensed operator’s Internet Web site contains information relating to problem gambling, including a telephone number that an individual may call to seek information and assistance for a potential gambling addiction.
(g) Ensure that each licensed operator maintains responsibility for the Internet fantasy sports games business and is not serving as a facade for an entity not eligible to be a licensed operator, and that each Internet fantasy sports games Web site identifies who is the actual licensed operator to ensure protection of players.
(h) Deposit regulatory fees collected by the state from each licensed operator into the Fantasy Sports Fund, as established in Section 19780.

Article  2. Definitions

19760.
 For purposes of this chapter, all of the following definitions apply:
(a) “Authorized Internet Web site” means an Internet Web site operated by a licensed operator.
(b) “Department” means the Department of Justice.
(c) “Fund” means the Fantasy Sports Fund established by Section 19780.
(d) “Internet fantasy sports game” means a game of any duration conducted on the Internet in which a registered player does all of the following:
(1) Competes against other registered players or a target score as the owner or manager of an imaginary or simulated team of professional athletes in an imaginary or simulated game.
(2) Uses the statistics accumulated by the professional athletes in real-world professional sporting events to determine the scores of the imaginary or simulated game.
(3) Plays for a predetermined prize.
(4) Pays a charge to the licensed operator providing the game in order to participate.
(e) “Licensed operator” means a person or entity licensed pursuant to this chapter to offer Internet fantasy sports games for play on an authorized Internet Web site.
(f) “Registered player” means a person registered pursuant to this chapter to participate in an Internet fantasy sports game on an authorized Internet Web site.

Article  3. Licensed Operators and Registered Players

19770.
 (a) A person or entity shall apply for and receive a license from the department prior to offering an Internet fantasy sports game for play in California.
(b) The department shall issue a license to a person or entity to operate an authorized Internet Web site if the applicant satisfies all of the following:
(1) The applicant is of good character, honesty, and integrity.
(2) The applicant’s prior activities, criminal record, if any, reputation, habits, and associations do not pose a threat to the public interest of the state, or to the effective regulation and control of Internet fantasy sports games, or create or enhance the dangers of unsuitable, unfair, or illegal practices, methods, and activities in the conduct of Internet fantasy sports games or in the carrying on of the business and financial arrangements incidental to those games.
(3) The applicant is in all other respects qualified to be licensed as provided in this chapter, including, but not limited to, providing documentation establishing that the applicant is capable of paying the one-time license fee described in Section 19782 through its own net position or through credit directly available to the applicant.
(c) The department may promulgate regulations to implement this section.

19772.
 (a) In order to ensure the protection of registered players, an authorized Internet Web site shall identify the person or entity that is the licensed operator.
(b) A licensed operator shall ensure that an Internet fantasy sports game on its authorized Internet Web site complies with all of the following:
(1) An imaginary or simulated sports team in the game shall not be based on the current membership of an actual team that is a member of an amateur or a professional sports organization.
(2) A prize or award offered to the winning registered player or players shall be established and made known to the participating registered players in advance of the contest.
(3) The value of a prize or award offered to the winning registered player or players shall not be determined by the number of participating registered players or the amount of any charges paid by those participating registered players to the licensed operator.
(4) The winning outcome of the game shall not be either of the following:
(A) Based on the score, point spread, or performance of any single real-world team or any combination of real-world teams.
(B) Based solely on the single performance of an individual athlete in a single real-world sporting event.
(c) A licensed operator shall not offer an Internet fantasy sports game based on a collegiate sports or athletic event, or any other sports or athletic event in which amateur athletes participate.

(c)

(d) (1) A licensed operator shall hold the funds of a registered player in a registered player’s account in trust for that registered player.
(2) A licensed operator shall implement, and prominently display on its authorized Internet Web site, procedures that accomplish all of the following:
(A) Prevent unauthorized withdrawals from registered player accounts, including, but not limited to, withdrawals by the licensed operator and other individuals.
(B) Prevent commingling of funds in a registered player’s account with other funds, including, but not limited to, the licensed operator’s funds.
(C) Establish procedures for a registered player to report complaints to the licensed operator regarding whether his or her account has been misallocated, compromised, or otherwise mishandled, and a procedure for the licensed operator to respond to those complaints.

(d)

(e) A licensed operator shall not issue credit to a registered player.

(e)

(f) A licensed operator shall not allow a registered player to establish more than one account or user name on its authorized Internet Web site.

(f)

(g) (1) A licensed operator shall not advertise in publications or other media that are aimed exclusively or primarily at persons under 21 years of age. A licensed operator’s advertisement shall not depict persons under 21 years of age, students, or school or college settings.
(2) A licensed operator shall not advertise an Internet fantasy sports game to an individual by phone, email, or any other form of individually targeted advertisement or marketing material, if the individual has self-excluded himself or herself pursuant to Section 19774 or if the individual is otherwise barred from participating in that Internet fantasy sports game.

19774.
 (a) A person shall register with a licensed operator prior to participating in an Internet fantasy sports game on an authorized Internet Web site.
(b) A licensed operator shall ensure that a registered player is eligible to play on an authorized Internet Web site, and implement appropriate data security standards to prevent access by a person whose age and location have not been verified in accordance with this chapter.
(c) A licensed operator shall ensure that a registered player is physically located within the State of California at the time of participating in an Internet fantasy sports game on an authorized Internet Web site.
(d) A licensed operator shall ensure that a registered player is at least 21 years of age.
(e) (1) Each licensed operator shall, prior to registering and permitting a person to participate in an Internet fantasy sports game on an authorized Internet Web site, verify that the person is 21 years of age or older by doing both of the following:
(A) Attempting to match the name, address, and date of birth provided by the person to information contained in records in a database of individuals who have been verified to be 21 years of age or older by reference to an appropriate database of government records.
(B) Verifying that the name and physical billing address on the check or credit card offered for payment by the person seeking to be a registered player matches the name and address listed in the database described in subparagraph (A).
(2) If the licensed operator is unable to verify that the person is 21 years of age or older pursuant to paragraph (1), the licensed operator shall require the person to submit age-verification documents consisting of an attestation signed by the person that he or she is 21 years of age or older and a copy of a valid form of government identification, either electronically or by mail. For the purposes of this paragraph, a valid form of government identification includes a driver’s license, state identification card, passport, official naturalization or immigration document, including an alien registration receipt card or an immigrant visa, or United States military identification. The licensed operator shall verify that the physical billing address on the check or credit card provided by the person matches the address listed on his or her government identification.
(3) A licensed operator is not in violation of this section if the operator complies with the requirements of paragraphs (1) and (2), and a person under 21 years of age participates in an Internet fantasy sports game on the operator’s authorized Internet Web site.
(f) The department may assess a civil penalty against a licensed operator that violates this section according to the following schedule:
(1) Not less than one thousand dollars ($1,000), and not more than two thousand dollars ($2,000), for the first violation.
(2) Not less than two thousand five hundred dollars ($2,500), and not more than three thousand five hundred dollars ($3,500), for the second violation.
(3) Not less than four thousand dollars ($4,000), and not more than five thousand dollars ($5,000), for the third violation.
(4) Not less than five thousand five hundred dollars ($5,500), and not more than six thousand five hundred dollars ($6,500), for the fourth violation.
(5) Ten thousand dollars ($10,000) for a fifth or subsequent violation.
(g) (1) The department shall, by regulation, provide a process for a licensed operator to exclude from play any person who has filled out an online self-exclusion form.
(2) The department shall develop an online self-exclusion form on or before July 1, 2017.
(3) The department shall deliver the form described in paragraph (2) to each licensed operator.
(4) A licensed operator shall prominently display a link to the department’s Responsible Gambling Internet Web page and the online self-exclusion form described in paragraph (2) when either of the following occurs:
(A) A person registers as a registered player.
(B) Each time a registered player accesses the authorized Internet Web site prior to playing.
(5) A licensed operator shall retain each online self-exclusion form submitted to it by a registered player to identify persons who want to be excluded from play. A licensed operator shall exclude those persons from play.
(6) A licensed operator that has made commercially reasonable efforts to comply with this subdivision is not in violation of this section if a person who has filled out an online self-exclusion form thereafter participates in an Internet fantasy sports game on the operator’s authorized Internet Web site.

19776.
 (a) (1) This subdivision applies to all of the following persons:
(A) An officer of a licensed operator.
(B) A director of a licensed operator.
(C) A principal of a licensed operator.
(D) An employee of a licensed operator.
(E) A contractor of a licensed operator.
(2) A person listed in paragraph (1) shall not play an Internet fantasy sports game offered by a licensed operator.
(3) A person listed in paragraph (1) shall not play an Internet fantasy sports game offered by a licensed operator through another person as a proxy.
(4) A person listed in paragraph (1) shall not disclose proprietary or nonpublic information that may affect the play of an Internet fantasy sports game to any individual authorized to play that Internet fantasy sports game.
(5) A licensed operator shall make the prohibitions in this subdivision known to all affected individuals and corporate entities.
(b) (1) A licensed operator shall identify a highly experienced registered player using a symbol attached to that registered player’s account or username, user name, or by other means easily identifiable by other registered players.
(2) A licensed operator shall develop and offer at least one Internet fantasy sports game in which a highly experienced player cannot participate either directly or through another person as a proxy.

19778.
 (a) A licensed operator shall facilitate the collection by the Franchise Tax Board of personal income taxes from registered players and shall be responsible for providing current and accurate documentation on a timely basis to all state agencies.
(b) The state and its agencies shall treat the proprietary information provided by a licensed operator as confidential in order to protect the licensed operator and to protect the security of an authorized Internet Web site.
(c) Proprietary information supplied by a licensed operator to a state agency is exempt from public disclosure, consistent with subdivision (b) of Section 6253 of the Government Code.

Article  4. Fees and Financial Provisions

19780.
 (a) The Fantasy Sports Fund is hereby created in the State Treasury, to be administered by the department. Notwithstanding Section 13340 of the Government Code, all moneys in the fund are continuously appropriated to the department, without regard to fiscal years, in the amounts necessary for the department to perform its duties under this chapter.
(b) Each licensed operator shall pay an annual regulatory fee, to be deposited in the Fantasy Sports Fund, in an amount to be determined by the department, for the reasonable costs of license oversight, consumer protection, state regulation, problem gambling programs, and other regulatory purposes related to this chapter, including, but not limited to, enforcement efforts related to illegal Internet gambling activities.

19782.
 (a) Prior to operating its authorized Internet Web site, a licensed operator shall remit to the Treasurer a one-time license fee in the amount of ____ ($____), to be deposited into the General Fund and credited against charges imposed pursuant to subdivision (b). Upon depletion of the license fee balance, the department shall notify the licensed operator to commence quarterly payments to the state in accordance with subdivision (b).
(b) In consideration of the substantial value of each license, a licensed operator shall remit to the Treasurer on a quarterly basis for deposit in the General Fund an amount equal to ____ percent of its gross income that is attributable to the operation of an authorized Internet Web site in California.
(1) Each quarterly payment shall be due on the 10th day of the month following the end of each quarter.
(2) A licensed operator shall make all electronic and written financial records available to the Treasurer and the department on an electronic basis.

Article  5. Preemption of Local Regulation

19790.
 A city, county, or city and county shall not regulate, tax, or enter into a contract with respect to any matter governed by this chapter. This section does not prohibit or limit the investigation and prosecution of any violation of this chapter.

SEC. 2.

 Section 337a of the Penal Code is amended to read:

337a.
 (a) Except as provided in Section 336.9 and as authorized pursuant to Chapter 4.7 (commencing with Section 19750) of Division 8 of the Business and Professions Code, every person who engages in one of the following offenses shall be punished for a first offense by imprisonment in a county jail for a period of not more than one year or in the state prison, or by a fine not to exceed five thousand dollars ($5,000), or by both imprisonment and fine:
(1) Pool selling or bookmaking, with or without writing, at any time or place.
(2) Whether for gain, hire, reward, or gratuitously, or otherwise, keeps or occupies, for any period of time whatsoever, any room, shed, tenement, tent, booth, building, float, vessel, place, stand or enclosure, of any kind, or any part thereof, with a book or books, paper or papers, apparatus, device or paraphernalia, for the purpose of recording or registering any bet or bets, any purported bet or bets, wager or wagers, any purported wager or wagers, selling pools, or purported pools, upon the result, or purported result, of any trial, purported trial, contest, or purported contest, of skill, speed or power of endurance of person or animal, or between persons, animals, or mechanical apparatus, or upon the result, or purported result, of any lot, chance, casualty, unknown or contingent event whatsoever.
(3) Whether for gain, hire, reward, or gratuitously, or otherwise, receives, holds, or forwards, or purports or pretends to receive, hold, or forward, in any manner whatsoever, any money, thing or consideration of value, or the equivalent or memorandum thereof, staked, pledged, bet or wagered, or to be staked, pledged, bet or wagered, or offered for the purpose of being staked, pledged, bet or wagered, upon the result, or purported result, of any trial, or purported trial, or contest, or purported contest, of skill, speed, or power of endurance of person or animal, or between persons, animals, or mechanical apparatus, or upon the result, or purported result, of any lot, chance, casualty, unknown or contingent event whatsoever.
(4) Whether for gain, hire, reward, or gratuitously, or otherwise, at any time or place, records, or registers any bet or bets, wager or wagers, upon the result, or purported result, of any trial, or purported trial, or contest, or purported contest, of skill, speed, or power of endurance of person or animal, or between persons, animals, or mechanical apparatus, or upon the result, or purported result, of any lot, chance, casualty, unknown or contingent event whatsoever.
(5) Being the owner, lessee or occupant of any room, shed, tenement, tent, booth, building, float, vessel, place, stand, enclosure or grounds, or any part thereof, whether for gain, hire, reward, or gratuitously, or otherwise, permits that space to be used or occupied for any purpose, or in any manner prohibited by paragraph (1), (2), (3), or (4).
(6) Lays, makes, offers or accepts any bet or bets, or wager or wagers, upon the result, or purported result, of any trial, or purported trial, or contest, or purported contest, of skill, speed or power of endurance of person or animal, or between persons, animals, or mechanical apparatus.
(b) In any accusatory pleading charging a violation of this section, if the defendant has been once previously convicted of a violation of any subdivision of this section, the previous conviction shall be charged in the accusatory pleading, and, if the previous conviction is found to be true by the jury, upon a jury trial, or by the court, upon a court trial, or is admitted by the defendant, the defendant shall, if he or she is not imprisoned in the state prison, be imprisoned in the county jail for a period of not more than one year and pay a fine of not less than one thousand dollars ($1,000) and not to exceed ten thousand dollars ($10,000). Nothing in this paragraph shall prohibit a court from placing a person subject to this subdivision on probation. However, that person shall be required to pay a fine of not less than one thousand dollars ($1,000) nor more than ten thousand dollars ($10,000) or be imprisoned in the county jail for a period of not more than one year, as a condition thereof. In no event does the court have the power to absolve a person convicted pursuant to this subdivision from either being imprisoned or from paying a fine of not less than one thousand dollars ($1,000) and not more than ten thousand dollars ($10,000).
(c) In any accusatory pleading charging a violation of this section, if the defendant has been previously convicted two or more times of a violation of any subdivision of this section, each previous conviction shall be charged in the accusatory pleadings. If two or more of the previous convictions are found to be true by the jury, upon a jury trial, or by the court, upon a court trial, or are admitted by the defendant, the defendant shall, if he or she is not imprisoned in the state prison, be imprisoned in the county jail for a period of not more than one year or pay a fine of not less than one thousand dollars ($1,000) nor more than fifteen thousand dollars ($15,000), or be punished by both imprisonment and fine. Nothing in this paragraph shall prohibit a court from placing a person subject to this subdivision on probation. However, that person shall be required to pay a fine of not less than one thousand dollars ($1,000) nor more than fifteen thousand dollars ($15,000), or be imprisoned in the county jail for a period of not more than one year as a condition thereof. In no event does the court have the power to absolve a person convicted and subject to this subdivision from either being imprisoned or from paying a fine of not more than fifteen thousand dollars ($15,000).
(d) Except where the existence of a previous conviction of any subdivision of this section was not admitted or not found to be true pursuant to this section, or the court finds that a prior conviction was invalid, the court shall not strike or dismiss any prior convictions alleged in the information or indictment.
(e) This section applies not only to persons who commit any of the acts designated in paragraphs (1) to (6), inclusive, of subdivision (a), as a business or occupation, but also applies to every person who in a single instance engages in any one of the acts specified in paragraphs (1) to (6), inclusive, of subdivision (a).

SEC. 3.

 The Legislature finds and declares that Section 1 of this act, which adds Section 19776 to the Business and Professions Code, imposes a limitation on the public’s right of access to the meetings of public bodies or the writings of public officials and agencies within the meaning of Section 3 of Article I of the California Constitution. Pursuant to that constitutional provision, the Legislature makes the following findings to demonstrate the interest protected by this limitation and the need for protecting that interest:
The limitations on the people’s right of access set forth in this act are necessary to protect the privacy and integrity of information submitted by registered players as well as the proprietary information of the license applicants and licensed operators.

SEC. 4.

 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 protect the interests of Californians who play Internet fantasy sports games and to ensure that people play fair games, that the state realizes the revenues, and that suitable persons operate Internet fantasy sports games on authorized Internet Web sites, it is necessary that this act take effect immediately.