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AB-1427 Gambling Control Act: licenses.(2021-2022)

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Date Published: 03/26/2021 04:00 AM
AB1427:v98#DOCUMENT

Amended  IN  Assembly  March 25, 2021

CALIFORNIA LEGISLATURE— 2021–2022 REGULAR SESSION

Assembly Bill
No. 1427


Introduced by Assembly Member Chen

February 19, 2021


An act to amend Section 23363.2 Sections 19805, 19852.2, 19853, 19857, 19858, and 19859 of the Business and Professions Code, relating to alcoholic beverages. and to amend Section 336.5 of the Penal Code, relating to gambling.


LEGISLATIVE COUNSEL'S DIGEST


AB 1427, as amended, Chen. Alcoholic beverages: distilled spirits manufacturers: tastings. Gambling Control Act: licenses.
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 requires the commission to deny a license to an applicant for specified reasons, including if the applicant has been convicted of a felony, except as specified. Existing law prohibits the commission from issuing a license unless the commission is satisfied that the applicant meets various requirements, including that the applicant is a person of good character, honesty, and integrity. Existing law defines “applicant” as any person who has applied for, or is about to apply for, a state gambling license, or other licenses, permits, or approvals, as specified.
This bill would add additional exceptions to the requirement that the commission deny a license to an applicant for a felony conviction for certain circumstances, including, among others, that the person has obtained a certificate of rehabilitation, been granted clemency or a pardon, or had the felony conviction dismissed, as specified. The bill would prohibit the commission from denying a license to an applicant on the basis of a conviction of a crime, or on the acts underlying that crime, if the person has obtained a certificate of rehabilitation, been granted clemency or a pardon, or had the conviction dismissed, as specified. The bill would provide a definition of “conviction” for those purposes.

Existing law authorizes a distilled spirits manufacturer to designate a California licensee to conduct tastings of distilled spirits produced or bottled by or for the manufacturer, as specified, if, among other things, distilled spirits are not sold or solicited for sale in that portion of the premises where the distilled spirits tasting is being conducted.

This bill would make a nonsubstantive change to those provisions.

Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NOYES   Local Program: NO  

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


SECTION 1.

 Section 19805 of the Business and Professions Code is amended to read:

19805.
 As used in this chapter, the following definitions shall apply:
(a) “Affiliate” means a person who, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, a specified person.
(b) “Applicant” means a person who has applied for a state gambling license, a key employee license, a registration, a finding of suitability, a work permit, a manufacturer’s or distributor’s license, or an approval of any act or transaction for which the approval or authorization of the commission or department is required or permitted under this chapter.
(c) “Banking game” or “banked game” does not include a controlled game if the published rules of the game feature a player-dealer position and provide that this position must be continuously and systematically rotated amongst each of the participants during the play of the game, ensure that the player-dealer is able to win or lose only a fixed and limited wager during the play of the game, and preclude the house, another entity, a player, or an observer from maintaining or operating as a bank during the course of the game. For purposes of this section, it is not the intent of the Legislature to mandate acceptance of the deal by every player if the department finds that the rules of the game render the maintenance of or operation of a bank impossible by other means. The house shall not occupy the player-dealer position.
(d) “Chief” means the head of the entity within the department that is responsible for fulfilling the obligations imposed upon the department by this chapter.
(e) “Commission” means the California Gambling Control Commission.
(f) “Controlled gambling” means to deal, operate, carry on, conduct, maintain, or expose for play any controlled game.
(g) “Controlled game” means any controlled game, as defined by subdivision (e) of Section 337j of the Penal Code.
(h) “Conviction” means a judgment following a plea or verdict of guilty or a plea of nolo contendere or finding of guilt. Any action which the commission is permitted or required to take following the establishment of a conviction may be taken when the time for appeal has elapsed, or the judgment of conviction has been affirmed on appeal or when an order granting probation is made suspending the imposition of sentence.

(h)

(i) “Department” means the Department of Justice.

(i)

(j) “Director” means a director of a corporation or a person performing similar functions with respect to any organization.

(j)

(k) “Finding of suitability” means a finding that a person meets the qualification criteria described in subdivisions (a) and (b) of Section 19857, and that the person would not be disqualified from holding a state gambling license on any of the grounds specified in Section 19859.

(k)

(l) “Game” and “gambling game” means a controlled game.

(l)

(m) “Gambling” means to deal, operate, carry on, conduct, maintain, or expose for play a controlled game.

(m)

(n) “Gambling enterprise” means a natural person or an entity, whether individual, corporate, or otherwise, that conducts a gambling operation and that by virtue is required to hold a state gambling license under this chapter.

(n)

(o) “Gambling enterprise employee” means a natural person employed in the operation of a gambling enterprise, including, without limitation, dealers, floor personnel, security employees, countroom personnel, cage personnel, collection personnel, surveillance personnel, data-processing personnel, appropriate maintenance personnel, waiters and waitresses, and secretaries, or any other natural person whose employment duties require or authorize access to restricted gambling establishment areas.

(o)

(p) “Gambling establishment,” “establishment,” or “licensed premises,” except as otherwise defined in Section 19812, means one or more rooms where a controlled gambling or activity directly related to controlled gambling occurs.

(p)

(q) “Gambling license” or “state gambling license” means a license issued by the state that authorizes the person named therein to conduct a gambling operation.

(q)

(r) “Gambling operation” means exposing for play one or more controlled games that are dealt, operated, carried on, conducted, or maintained for commercial gain.

(r)

(s) “Gross revenue” means the total of all compensation received for conducting any controlled game, and includes interest received in payment for credit extended by an owner licensee to a patron for purposes of gambling, except as provided by regulation.

(s)

(t) “Hours of operation” means the period during which a gambling establishment is open to conduct the play of controlled games within a 24-hour period. In determining whether there has been expansion of gambling relating to “hours of operation,” the department shall consider the hours in the day when the local ordinance permitted the gambling establishment to be open for business on January 1, 1996, and compare the current ordinance and the hours during which the gambling establishment may be open for business. The fact that the ordinance was amended to permit gambling on a day, when gambling was not permitted on January 1, 1996, shall not be considered in determining whether there has been gambling in excess of that permitted by Section 19961.

(t)

(u) “House” means the gambling enterprise, and any owner, shareholder, partner, key employee, or landlord thereof.

(u)

(v) “Independent agent,” except as provided by regulation, means a person who does either of the following:
(1) Collects debt evidenced by a credit instrument.
(2) Contracts with an owner licensee, or an affiliate thereof, to provide services consisting of arranging transportation or lodging for guests at a gambling establishment.

(v)

(w) “Initial license” means the license first issued to a person authorizing that person to commence the activities authorized by that license.

(w)

(x) “Institutional investor” means a retirement fund administered by a public agency for the exclusive benefit of federal, state, or local public employees, an investment company registered under the Investment Company Act of 1940 (15 U.S.C. Sec. 80a-1 et seq.), a collective investment trust organized by banks under Part 9 of the Rules of the Comptroller of the Currency, a closed-end investment trust, a chartered or licensed life insurance company or property and casualty insurance company, a banking and other chartered or licensed lending institution, an investment adviser registered under the Investment Advisers Act of 1940 (15 U.S.C. Sec. 80b-1 et seq.) acting in that capacity, and other persons as the commission may determine for reasons consistent with the policies of this chapter.

(x)

(y) “Key employee” means any natural person employed in the operation of a gambling enterprise in a supervisory capacity or empowered to make discretionary decisions that regulate gambling operations, including, without limitation, pit bosses, shift bosses, credit executives, cashier operations supervisors, gambling operation managers and assistant managers, managers or supervisors of security employees, or any other natural person designated as a key employee by the department for reasons consistent with the policies of this chapter.

(y)

(z) “Key employee license” means a state license authorizing the holder to be employed as a key employee.

(z)

(aa) “License” means a gambling license, key employee license, or any other license issued by the commission pursuant to this chapter or regulations adopted pursuant to this chapter.

(aa)

(ab) “Licensed gambling establishment” means the gambling premises encompassed by a state gambling license.

(ab)

(ac) “Limited partnership” means a partnership formed by two or more persons having as members one or more general partners and one or more limited partners.

(ac)

(ad) “Limited partnership interest” means the right of a general or limited partner to any of the following:
(1) To receive from a limited partnership any of the following:
(A) A share of the revenue.
(B) Any other compensation by way of income.
(C) A return of any or all of the partner’s contribution to capital of the limited partnership.
(2) To exercise any of the rights provided under state law.

(ad)

(ae) “Owner licensee” means an owner of a gambling enterprise who holds a state gambling license.

(ae)

(af) “Person,” unless otherwise indicated, includes a natural person, corporation, partnership, limited partnership, trust, joint venture, association, or any other business organization.

(af)

(ag) “Player” means a patron of a gambling establishment who participates in a controlled game.

(ag)

(ah) “Player-dealer” and “controlled game featuring a player-dealer position” refer to a position in a controlled game, as defined by the approved rules for that game, in which seated player participants are afforded the temporary opportunity to wager against multiple players at the same table, provided that this position is rotated amongst the other seated players in the game.

(ah)

(ai) “Publicly traded racing association” means a corporation licensed to conduct horse racing and simulcast wagering pursuant to Chapter 4 (commencing with Section 19400) whose stock is publicly traded.

(ai)

(aj) “Qualified racing association” means a corporation licensed to conduct horse racing and simulcast wagering pursuant to Chapter 4 (commencing with Section 19400) that is a wholly owned subsidiary of a corporation whose stock is publicly traded.

(aj)

(ak) “Renewal license” means the license issued to the holder of an initial license that authorizes the license to continue beyond the expiration date of the initial license.

(ak)

(al) “Work permit” means any card, certificate, or permit issued by the commission, or by a county, city, or city and county, whether denominated as a work permit, registration card, or otherwise, authorizing the holder to be employed as a gambling enterprise employee or to serve as an independent agent. A document issued by any governmental authority for any employment other than gambling is not a valid work permit for the purposes of this chapter.

SEC. 2.

 Section 19852.2 of the Business and Professions Code is amended to read:

19852.2.
 (a) Notwithstanding Section 19852 or any other provision of law, and solely for the purpose of the licensure of a card club located on any portion of, or contiguous to, the grounds upon which a racetrack is or had been previously located and horserace meetings were authorized to be conducted by the California Horse Racing Board on or before January 1, 2012, that is owned by a limited partnership that also owns or owned the racetrack, the commission may, at its discretion, exempt all of the following from the licensing requirements of this chapter:
(1) The limited partners in a limited partnership that holds interest in a holding company if all of the following criteria are met:
(A) The limited partners of the limited partnership in the aggregate directly hold at least 95 percent of the interest in the holding company.
(B) The limited partner is one of the following:
(i) An “institutional investor” as defined in subdivision (w) (x) of Section 19805.
(ii) An “employee benefit plan” as defined in Section 1002(3) of Title 29 of the United States Code.
(iii) An investment company that manages a state university endowment.
(2) Other limited partners in a limited partnership described in paragraph (1), if the partners do not number more than five and each partner indirectly owns 1 percent or less of the shares of the interest in the holding company.
(3) A limited partner in a limited partnership that holds in the aggregate less than 5 percent of the interest in a holding company.
(b) Nothing in this section shall be construed to limit the licensure requirements for a general partner of a limited partnership or a limited partner that is not specifically described in this section.

SEC. 3.

 Section 19853 of the Business and Professions Code is amended to read:

19853.
 (a) The commission, by regulation or order, may require that the following persons register with the commission, apply for a finding of suitability as defined in subdivision (j) (k) of Section 19805, or apply for a gambling license:
(1) Any person who furnishes any services or any property to a gambling enterprise under any arrangement whereby that person receives payments based on earnings, profits, or receipts from controlled gambling.
(2) Any person who owns an interest in the premises of a licensed gambling establishment or in real property used by a licensed gambling establishment.
(3) Any person who does business on the premises of a licensed gambling establishment.
(4) Any person who is an independent agent of, or does business with, a gambling enterprise as a ticket purveyor, a tour operator, the operator of a bus program, or the operator of any other type of travel program or promotion operated with respect to a licensed gambling establishment.
(5) Any person who provides any goods or services to a gambling enterprise for compensation that the commission finds to be grossly disproportionate to the value of the goods or services provided.
(6) Every person who, in the judgment of the commission, has the power to exercise a significant influence over the gambling operation.
(b) The department may conduct any investigation it deems necessary to determine whether a publicly traded corporation is, or has, engaged in activities specified in paragraph (2), (3), or (4) of subdivision (a), and shall report its findings to the commission. If a publicly traded corporation is engaged in activities described in paragraph (2), (3), or (4) of subdivision (a), the commission may require the corporation and the following other persons to apply for and obtain a license or finding of suitability:
(1) Any officer or director.
(2) Any owner, other than an institutional investor, of 5 percent or more of the outstanding shares of the corporation.

SEC. 4.

 Section 19857 of the Business and Professions Code is amended to read:

19857.
 (a) No gambling license shall be issued unless, based on all of the information and documents submitted, the commission is satisfied that the applicant is all of the following:

(a)

(1) A person of good character, honesty, and integrity.

(b)

(2) A person whose prior activities, criminal record, if any, reputation, habits, and associations do not pose a threat to the public interest of this state, or to the effective regulation and control of controlled gambling, or create or enhance the dangers of unsuitable, unfair, or illegal practices, methods, and activities in the conduct of controlled gambling or in the carrying on of the business and financial arrangements incidental thereto.

(c)

(3) A person that is in all other respects qualified to be licensed as provided in this chapter.
(b) Notwithstanding any other provision of this code, a person shall not be denied a license on the basis that the person has been convicted of a crime, or on the basis of acts underlying a conviction for a crime, if that person has obtained a certificate of rehabilitation under Chapter 3.5 (commencing with Section 4852.01) of Title 6 of Part 3 of the Penal Code, has been granted clemency or a pardon by a state or federal executive, or has made a showing of rehabilitation pursuant to Section 482.
(c) Notwithstanding any other provision of this code, a person shall not be denied a license on the basis of any conviction, or on the basis of the acts underlying the conviction, that has been dismissed pursuant to Section 1203.4, 1203.4a, 1203.41, 1203.42, or 1203.425 of the Penal Code, or a comparable dismissal or expungement. An applicant who has a conviction that has been dismissed pursuant to Section 1203.4, 1203.4a, 1203.41, or 1203.42 of the Penal Code shall provide proof of the dismissal if it is not reflected on the report furnished by the Department of Justice.

SEC. 5.

 Section 19858 of the Business and Professions Code is amended to read:

19858.
 (a) Except as provided in subdivisions (b) and (c), a person shall be deemed to be unsuitable to hold a state gambling license to own a gambling establishment if the person, or any partner, officer, director, or shareholder of the person, has any financial interest in any business or organization that is engaged in any form of gambling prohibited by Section 330 of the Penal Code, whether within or without this state.
(b) Subdivision (a) shall not apply to a publicly traded racing association, a qualified racing association, or any person who is licensed pursuant to subdivision (b) or (c) of Section 19852.
(c) Subdivision (a) shall not apply to a person who meets all of the following criteria:
(1) The person is licensed or had an application to be licensed on file with the commission on or before February 1, 2013.
(2) The person has a financial interest in a business or organization engaged in gambling prohibited by Section 330 of the Penal Code that was closed and was not engaged in prohibited gambling at the time the person was either licensed or had filed an application to be licensed with the commission.
(3) The person has a financial interest in a gambling establishment that is located on any portion of, or contiguous to, the grounds on which a racetrack is or had been previously located and horserace meetings were authorized to be conducted by the California Horse Racing Board on or before January 1, 2012.
(4) The grounds upon which the gambling establishment described in paragraph (3) is located are directly or indirectly owned by a racetrack limited partnership owner. For purposes of this paragraph, a “racetrack limited partnership owner” is defined as a limited partnership, or a number of related limited partnerships, that is or are at least 80 percent capitalized by limited partners that are an “institutional investor” as defined in subdivision (w) (x) of Section 19805, an “employee benefit plan” as defined in Section 1002(3) of Title 29 of the United States Code, or an investment company that manages a state university endowment.
(d) Within three years of the date the closed business or organization reopens or becomes engaged in any form of gambling prohibited by Section 330 of the Penal Code, a person described in subdivision (c) shall either divest that person’s interest in the business or organization, or divest that person’s interest in the gambling enterprise or gambling establishment for which the person is licensed or has applied to be licensed by the commission.
(e) A person described in subdivision (c) shall inform the commission within 30 days of the date on which a business or organization in which the person has a financial interest begins to engage in any form of gambling prohibited by Section 330 of the Penal Code.
(f) During the three-year divestment period described in subdivision (d), it is unlawful for any cross-promotion or marketing to occur between the business or organization that is engaged in any form of gambling prohibited by Section 330 of the Penal Code and the gambling enterprise or gambling establishment described in paragraph (3) of subdivision (c). For purposes of this subdivision, “cross-promotion or marketing” means the offering to any customers of the gambling enterprise or gambling establishment anything of value related to visiting or gambling at the business or organization engaged in any form of gambling prohibited by Section 330 of the Penal Code.
(g) During the three-year divestment period described in subdivision (d), any funds used in connection with the capital improvement of the gambling enterprise or gambling establishment described in paragraph (3) of subdivision (c) shall not be provided from the gaming revenues of either the business or organization engaged in gaming prohibited under Section 330 of the Penal Code.
(h) If, at the end of the three-year divestment period described in subdivision (d), any person described in subdivision (c) has not divested his or her their interest in either the gambling enterprise or gambling establishment or the business or organization engaged in any form of gaming prohibited under Section 330 of the Penal Code, the prohibitions of Section 19858 as it read on January 1, 2013, apply.

SEC. 6.

 Section 19859 of the Business and Professions Code is amended to read:

19859.
 The commission shall deny a license to any applicant who is disqualified for any of the following reasons:
(a) Failure of the applicant to clearly establish eligibility and qualification in accordance with this chapter.
(b) Failure of the applicant to provide information, documentation, and assurances required by this chapter or requested by the chief, or failure of the applicant to reveal any fact material to qualification, or the supplying of information that is untrue or misleading as to a material fact pertaining to the qualification criteria.
(c) (1) Except as provided in paragraph (2), paragraphs (2), (3), (4), and (5), conviction of a felony, including a conviction by a federal court or a court in another state for a crime that would constitute a felony if committed in California.
(2) A conviction of a felony for the possession of cannabis, the facts of which would not constitute a felony or misdemeanor under California law on the date the application for a license is submitted, shall not constitute a basis to deny a license pursuant to this section.
(3) A felony conviction shall not constitute a basis to deny a license pursuant to this section if the person has obtained a certificate of rehabilitation under Chapter 3.5 (commencing with Section 4852.01) of Title 6 of Part 3 of the Penal Code, or has been granted clemency or a pardon by a state or federal executive for a felony conviction.
(4) A felony conviction that has been dismissed pursuant to Section 1203.4, 1203.4a, 1203.41, 1203.42, or 1203.425 of the Penal Code, or a comparable dismissal or expungement, shall not constitute a basis to deny a license pursuant to this section.
(5) A plea of guilty entered pursuant to Section 1000.1 of the Penal Code shall not constitute a conviction for purposes of this subdivision unless a judgment of guilty is entered pursuant to Section 1000.3 of the Penal Code.
(d) Conviction of the applicant for any misdemeanor involving dishonesty or moral turpitude within the 10-year period immediately preceding the submission of the application, unless the applicant has been granted relief pursuant to Section 1203.4, 1203.4a, or 1203.45 of the Penal Code; provided, however, that the granting of relief pursuant to Section 1203.4, 1203.4a, or 1203.45 of the Penal Code shall not constitute a limitation on the discretion of the commission under Section 19856 or affect the applicant’s burden under Section 19857.
(e) Association of the applicant with criminal profiteering activity or organized crime, as defined by Section 186.2 of the Penal Code.
(f) Contumacious defiance by the applicant of any legislative investigatory body, or other official investigatory body of any state or of the United States, when that body is engaged in the investigation of crimes relating to gambling; official corruption related to gambling activities; or criminal profiteering activity or organized crime, as defined by Section 186.2 of the Penal Code.
(g) The applicant is less than 21 years of age, except as provided by this chapter.

SEC. 7.

 Section 336.5 of the Penal Code is amended to read:

336.5.
 Gaming chips may be used on the gaming floor by a patron of a gambling establishment, as defined in subdivision (o) (p) of Section 19805 of the Business and Professions Code, to pay for food and beverage items that are served at the table.

SECTION 1.Section 23363.2 of the Business and Professions Code is amended to read:
23363.2.

(a)A distilled spirits manufacturer not licensed in California may designate in writing a California licensee, other than the holder of any retail license, to conduct tastings of distilled spirits produced or bottled by, or produced or bottled for, the manufacturer, off the designated licensee’s premises only for an event sponsored by a nonprofit organization and only if persons attending the event are affiliated with the sponsor. Distilled spirits shall not be sold or solicited for sale in that portion of the premises where the distilled spirits tasting is being conducted. Notwithstanding Section 25600, the designated licensee may provide distilled spirits without charge for any tastings conducted pursuant to this section.

(b)For purposes of this section:

(1)“Nonprofit organization” does not include any community college or other institution of higher learning, as defined in the Education Code, nor does it include any officially recognized club, fraternity, or sorority whether or not that entity is located on or off the institution’s campus.

(2)“Affiliated with the sponsor” means directors, officers, members, employees, and volunteers of bona fide charitable, fraternal, political, religious, trade, service, or similar nonprofit organizations and their invited guests. Persons “affiliated with the sponsor” also includes up to three guests invited by persons described in this paragraph.

(c)The sponsoring organization shall first obtain a permit from the department.

(d)The department may adopt rules and regulations as it determines to be necessary for the administration of this section.