BILL NUMBER: SB 1294 INTRODUCED
BILL TEXT
INTRODUCED BY Senator Greene
FEBRUARY 24, 1995
An act to amend Sections 8880.28 and 8880.68 of, and to add
Article 9 (commencing with Section 8881) to Chapter 12.5 of Division
1 of Title 2 of, the Government Code, relating to lotteries, and
making an appropriation therefor.
LEGISLATIVE COUNSEL'S DIGEST
SB 1294, as introduced, Greene. State lottery: video gaming.
(1) The California Constitution provides that, with the exception
of the California State Lottery, the Legislature has no power to
authorize lotteries and shall prohibit the sale of lottery tickets in
the state. The California State Lottery Act of 1984, authorized by
the California Constitution, provides a comprehensive scheme for the
conduct of a state lottery by the California State Lottery
Commission.
This bill would require the commission to establish and operate a
statewide video gaming machine network, to issue regulations
concerning the operation of the network, to license manufacturers,
distributors, and operators of video gaming devices, and to license
video gaming devices and the premises on which these devices are
located for use by the public, as specified.
The bill also would establish fees for licenses issued to
manufacturers, distributors, and operators pursuant to these
provisions. In addition, the bill would impose a charge equal to 25%
of the net machine income during the first 2 years from the date
that video gaming machines are first offered for play to the public
in this state, and 35% of the net machine income for each year
thereafter, and would require the deposit of those fees in the State
Lottery Fund, a continuously appropriated fund in the State Treasury.
Thus, the bill would constitute an appropriation. The bill also
would impose a state tax pursuant to Article XIIIA of the California
Constitution.
The bill also would create new crimes, thus imposing a
state-mandated local program, by providing that any person who
physically tampers with a licensed video gaming machine with the
intent to interfere with the proper operation of the machine,
manipulate the outcome or payoff of the machine is guilty of a
felony, and that any individual, firm, corporation, or other legal
entity that places in operation or continues to have in place any
gray area device, as defined, for use by members of the public at any
licensed premise or any other place is guilty of a felony.
An initiative measure, the California State Lottery Act of 1984
provides that none of its provisions may be changed except to further
its purposes by a bill passed by a 2/3 vote of each house of the
Legislature and signed by the Governor.
This bill would declare that it furthers the purposes of the act
and would require a 2/3 vote.
(2) Existing federal law provides that it is unlawful to transport
any gambling device to any place in a state from any place outside
the state unless the state has enacted a law providing for the
exemption of the state from this provision.
This bill would exempt the state from the federal prohibition.
(3) 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.
Vote: 2/3. Appropriation: yes. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 8880.28 of the Government Code is amended to
read:
8880.28. (a) The commission shall promulgate regulations
specifying the types of lottery games to be conducted by the lottery,
provided subject to the following :
(1) No Except as provided in Article 9
(commencing with Section 8881), no lottery game may use the
theme of bingo, roulette, dice, baccarat, blackjack, Lucky 7's, draw
poker, slot machines, or dog racing.
(2) In lottery games utilizing tickets, each ticket in these games
shall bear a unique number distinguishing it from every other ticket
in that game; and no name of an elected official shall appear on
these tickets.
(3) In games utilizing computer terminals or other devices, no
coins or currency shall be dispensed to players from these computer
terminals or devices.
(b) Notwithstanding subdivision (a), no changes in the types of
games or methods of delivery of these games that incorporate
technologies or mediums that did not exist, were not widely
available, or were not commercially feasible at the time of the
enactment of this chapter in 1984 shall be made, unless all of the
following conditions are met:
(1) This chapter is amended by statute to expressly authorize
these changes.
(2) The act making the amendments contains express legislative
findings that the amendments are consistent with the terms of, and
further the purposes of, this chapter.
(3) The amendments comport with applicable state and federal law.
(c) For purposes of this section, a change in the method of
delivery means a material change in the way a consumer directly
interacts with the game.
(d) Subdivision (b) shall not apply to technological changes
implemented prior to the effective date of this subdivision.
(e) This section shall not be construed to limit any internal
technological changes made to the equipment or components utilized by
the lottery.
SEC. 2. Section 8880.68 of the Government Code is amended to read:
8880.68. Taxes No State
state or local taxes shall be imposed upon the sale of lottery
tickets , a game or games played on a video gaming machine
authorized by Article 9 (commencing with Section 8881), or
shares of the California State Lottery or any prize awarded by the
California State Lottery , including any prize winnings from a
game or games played on a video gaming machine .
SEC. 3. Article 9 (commencing with Section 8881) is added to
Chapter 12.5 of Division 1 of Title 2 of the Government Code, to
read:
Article 9. Video Gaming
8881. As used in this article, the following words mean:
(a) "Credit" or "game credit," means an amount registered on a
video gaming machine in exchange for coins or currency. The amount
shall be registered in units where one unit equals a minimum of
twenty-five cents ($0.25) or a greater value, as determined by the
commission.
(b) "Gray area device" means any video device, not authorized by
the commission and not connected to the state video gaming central
computer communication system, which is available to the public for
play and capable of simulating a game played on a licensed video
gaming machine.
(c) "Licensed premises" means any establishment licensed pursuant
to Division 9 (commencing with Section 23000) of the Business and
Professions Code for the sale and on premise consumption of alcoholic
beverages and that holds a license issued by the commission pursuant
to this article.
(d) "Net machine income" means the amount of money placed by
players into a video gaming machine less amounts paid out to winning
players as prizes.
(e) "Progressive game" means any game, the jackpot of which grows
and accumulates as it is being played on machines throughout the
state, and whose outcome is randomly determined by the play of video
gaming machines linked to a computer network.
(f) "Service employee" means an employee of a video gaming machine
distributor, or video gaming machine operator, who is certified by
the commission to service, maintain, and repair video gaming
machines.
(g) "Video display" means the visual presentation of a video game
shown on the screen of a video gaming machine.
(h) "Video game" means any electronically simulated games of
chance, including, but not limited to, video poker, keno, line-up, or
blackjack, displayed and played on a video gaming machine.
(i) "Video gaming machine" or "machine" means an electronic video
game machine that accepts coins or currency in exchange for game
credit, and is available to play, or simulate the play, of a video
game using a video display and microprocessors, and in which the
player may receive game credit for winning plays that may be redeemed
for a ticket voucher redeemable for cash prizes. "Video gaming
machine" or "machine" does not include a machine that directly
dispenses coins, currency, or tokens.
(j) "Video gaming machine associated equipment" means any
proprietary device, machine, or part used in the manufacture,
operation, or maintenance of a video gaming machine.
(k) "Video gaming machine distributor" means any individual, firm,
corporation, or other legal entity licensed by the commission to
distribute or sell video gaming machines or video gaming machine
associated equipment in this state.
(l"Video gaming machine manufacturer" means any individual, firm,
corporation, or other legal entity licensed by the commission to
assemble or produce video gaming machines or video gaming machine
associated equipment for sale or use in this state.
(m) "Video gaming machine operator" means any individual, firm, or
corporation licensed by the commission to own and physically place
video gaming machines or video gaming machine associated equipment in
licensed premises located anywhere in this state.
8881.1. (a) The commission shall establish a statewide video
gaming machine network in accordance with this article.
(b) The commission shall adopt regulations concerning the
operation of a statewide video gaming machine network. The
regulations shall include, but not be limited to, all of the
following:
(1) The type of video gaming machines and the type of video gaming
machine associated equipment that may be used to conduct video
games.
(2) The type of video games offered for play.
(3) The amount of game credits wagered for a single game play.
The amount of game credits shall not exceed the number of credits
that equals three dollars ($3).
(4) The amount of game credits that may be awarded for winning
plays. The amount of game credits awarded shall not exceed _____
dollars ($ ) per single nonprogressive game play, and _____
dollars ($ ) for any single progressive game prize.
(5) The manner of payment of cash prizes to the holders of winning
video game credits.
(6) The number of machines permitted in each licensed premise.
The location premise license shall provide for the installation of up
to a maximum total of four machines. However, a special license for
five or more machines, not to exceed a total of_____ machines at any
one premise location, may be issued by the commission to horse race
tracks that are licensed to conduct horserace meetings by the
California Horse Racing Board.
(7) No person under the age of 21 years shall operate a video
gaming machine. Notwithstanding subdivision (i) of Section 8880.32,
no prize from gaming authorized by this article shall be paid to any
person under the age of 21 years.
(8) No video gaming machine shall be played except during the
hours that the licensed premises at which it is located may lawfully
operate.
(9) The payback value of one credit wagered, determined over time,
shall be a minimum of 85 percent, but shall not exceed a maximum of
94 percent.
8881.2. (a) The commission, in order to assure integrity of its
accounting system, shall operate the video gaming network through a
central computer communications system, which shall be dedicated and
used solely for the operation of the video gaming network.
(b) The central computer communications system shall be capable of
auditing the operation, financial data, and program information of
the video gaming network, and shall include at each licensed premise
a clerk validation terminal that provides centralized game data
control and cash voucher validation. The central computer
communications system shall incorporate electronic fund transfer
procedures to facilitate the collection of revenue, be capable of
disabling any machine from play that does not comply with this
article, and be capable of communicating with all video gaming
machines licensed by the commission.
(c) In accordance with Article 6 (commencing with Section
8880.56), the commission may enter into a contract with any private
entity for central computer communications system services. All
equipment or devices required for operation of the central computer
communications system shall be included in any contract made for the
purpose of providing or operating that system.
(d) Nothing in this section shall be construed to require the
commission to use constant online communications when the central
computer communications system used is a dial-up system.
(e) The commission shall provide licensed video gaming machine
manufacturers with the protocol documentation and the audit
information and controls necessary to enable the manufacturers'
machines to communicate with the commission's central computer
communications system. The central computer communications system
shall be designed in a manner so as to not limit participation to
only one manufacturer of video gaming machines or video gaming
machine associated equipment by reason of either the cost of
implementing necessary program modifications to communicate with the
system, or an inability to communicate with the system.
8881.3. The director shall remove from play and confiscate any
machine that does not comply with the requirements of this article.
Any machine that the director determines has been modified, or the
design of which has been modified, without the consent of the
director, shall be removed from play and confiscated by the director.
8881.4. (a) The commission shall adopt regulations to provide for
the issuance, renewal, suspension, and revocation of licenses
pursuant to this article. The regulations shall specify that no
individual, firm, corporation, or other legal entity shall apply for
or be granted more than one type of license established under this
section, except that the holder of a video gaming machine operator's
license shall obtain a license for each individual video gaming
machine placed in operation, which license shall be in addition to
the video gaming machine operator's license. Nothing in this section
prohibits the commission from authorizing a licensed premises to own
its own video gaming machines if the licensed premises
satisfactorily demonstrates that it is unable to obtain machine
placement and service from any licensed video gaming machine
operator.
(b) Licensing regulations may include requirements relating to the
financial responsibility of the licensee, the accessibility of the
licensee's place of business or activity to the public, the volume of
expected sales, the security and efficient operation of video gaming
machines, and any other matters necessary to protect the public
interest and trust in video gaming.
(c) The director may issue, renew, suspend, and revoke licenses
for video gaming machine manufacturers, distributors, and operators,
video gaming machines, and video game premise locations pursuant to
the regulations adopted by the commission. The director shall not
issue a license to any individual, firm, corporation, or other legal
entity making application for any license authorized by this article
until that person meets the requirements specified in this article
and in regulations adopted by the commission for that license.
(d) Licenses shall be issued pursuant to this article without
regard to race, sex, religion, ethnic origin, or political
affiliation.
(e) Licenses issued pursuant to this article shall be the only
licenses required by the commission or any political subdivision of
this state to manufacture, distribute, place, and operate video
gaming machines and video gaming machine associated equipment.
8881.5. (a) Any individual, firm, corporation, or other legal
entity seeking to obtain a license pursuant to regulations adopted by
the commission shall apply to the director for a license on forms
provided by the director. No license shall be granted to any person
who has been convicted of a felony. The commission may refuse to
issue a license to any applicant who has been convicted of a gambling
related offense or any crime of moral turpitude, or whose character,
antecedents, and background may pose a threat to the public welfare.
(b) The director shall notify an applicant who is found, for any
reason, to be not qualified for licensure, of the specific reasons
that constitute the basis for the finding.
8881.6. (a) Any individual, firm, corporation, or other legal
entity applying for a license to manufacture or assemble video gaming
machines or video gaming machine associated equipment for sale or
use in this state shall submit to the director two copies of machine
illustrations, schematics, block diagrams, circuit analysis,
technical and operation manuals, program source codes and hexadecimal
dumps, with the compiled computer program presented in base 10
format. The director may require the applicant to submit for
examination, testing, and analysis, two working models of the video
gaming machine and video gaming machine associated equipment that the
applicant is proposing to offer for sale or use in this state. The
director may completely disassemble machines or equipment submitted
for testing purposes, and the applicant waives any claim against the
commission or its staff for any damage to, or destruction of, such
machine.
(b) The director may employ an independent technical expert to
assist in testing a machine or machines submitted under this section
to certify that the machine or machines are in technical compliance
with this article and the commission's regulations. The applicant
shall pay any costs incurred by the commission for testing the
machines and associated equipment.
(c) The director shall provide the applicant with a written report
of the test results for machines and equipment submitted for testing
pursuant to this section. If the machines or equipment fail to meet
the commission's testing standards, the commission shall inform the
applicant of the necessary modifications required to meet those
testing standards.
(d) No applicant shall be issued a license as a manufacturer of
video gaming machines or associated equipment until the applicant has
satisfactorily completed the testing requirements of the commission.
8881.7. (a) Fees for licenses issued pursuant to this article
shall be as follows:
(1) For video gaming machine manufacturers, an application and
license fee of twenty-five thousand dollars ($25,000) for the first
year of licensure, and a fee of five thousand dollars ($5,000) for
each year of licensure thereafter.
(2) For video gaming machine distributors, an application and
license fee of fifteen thousand dollars ($15,000) for the first year
of licensure, and a fee of five thousand dollars ($5,000) for each
year of licensure thereafter.
(3) For video gaming machine operators, an application and license
fee of five thousand dollars ($5,000) for the first year of
licensure, and a fee of one thousand dollars ($1,000) for each year
of licensure thereafter.
(4) For each licensed premise, an application and license fee of
one hundred dollars ($100) for the first year of licensure, and a
license fee for video gaming machines not to exceed one hundred
dollars ($100) per year for each video gaming machine per licensed
premise, when the licensed premise has four or fewer machines. For
those licensed premises that have been approved by the commission for
five or more machines, the video gaming machine license fee shall
not exceed one hundred dollars ($100) for the first four machines,
and shall not exceed five hundred dollars ($500) for each additional
machine.
(b) The license fees prescribed in this section shall be expended
to cover the administrative expenses incurred by the commission in
administering this article.
8881.8. (a) A license issued pursuant to this article shall be
revoked upon a finding that the licensee has done any of the
following:
(1) Has knowingly provided false or misleading material
information to the commission or its employees.
(2) Has been convicted of a felony, gambling related offense, or
any crime of moral turpitude.
(3) Is a member or associate of any organized crime group.
(b) A license may be suspended, revoked, or not renewed for any of
the following causes:
(1) Failure to notify the commission about a change of business
location.
(2) A delinquency in remitting money owed to the commission.
(3) Any violation of any regulation adopted by the commission.
8881.9. No license issued pursuant to this article shall be
assignable or transferable.
8881.10. (a) Every licensed manufacturer of video gaming machines
and video gaming associated equipment shall submit a training program
for the service and maintenance of those machines and equipment for
approval by the commission. The training program shall include an
outline of the training curriculum, a list of instructors and their
qualifications, a copy of the instructional materials, and the dates,
times, and location of training classes. No service and maintenance
program shall be held until approved by the commission.
(b) Every service employee shall complete the requirements of the
manufacturer's training program before the employee performs service,
maintenance, or repairs on video gaming machines or video gaming
machine associated equipment.
8881.11. (a) Upon the successful completion by a service employee
of the training program required by Section 8881.10, the commission
shall issue a certificate authorizing the employee to service,
maintain, and repair video gaming machines and video gaming machine
associated equipment. No certificate shall be issued to any service
employee until the commission has ascertained that the employee has
completed the required training program.
(b) Any person certified as a service employee under this section
shall pass a background investigation pursuant to regulations adopted
by the commission.
(c) The commission may revoke certification upon finding a
service employee in violation of a commission regulation.
8881.12. (a) Video gaming machines offered for distribution in
this state shall be approved by the commission and only offer video
games authorized by the commission.
(b) Video gaming machines distributed in this state shall meet all
of the following criteria:
(1) Be incapable of manipulation to effect the random probability
of winning plays.
(2) Have one or more mechanisms that accepts coins or currency in
exchange for game credits, and those mechanisms shall be designed to
prevent players from obtaining credits by means of physical
tampering.
(3) Be capable of suspending play until reset at the direction of
the director as a result of physical tampering.
(4) Have nonresettable mechanical and electronic meters housed in
a locked area of the machine that maintain a permanent record of all
moneys inserted into the machine, all refunds of winnings, all
credits played, and all credits won by players.
(5) Have a printing mechanism capable of printing the readings of
electronic meters, ticket vouchers stating the value of the cash
prize won by the player at the completion of each game, the date and
time of day the game was played in a 24-hour format showing hours and
minutes, the machine serial number, the sequential number of the
ticket voucher, and an encrypted validation number for determining
the validity of the winning ticket voucher.
(6) Be capable of being linked to the commission's central
computer communications system for the purpose of auditing the
operation, financial data, and program information as required by the
director.
8881.13. The holder of a video gaming machine operator's license
shall do all of the following:
(a) Offer for inspection and licensure by the commission each
individual video gaming machine before the machine is placed in
operation to ensure that the machine complies with this article and
the regulations adopted by the commission. Upon the successful
completion of inspection and payment of the applicable video gaming
machine license fee, the director shall seal the software programs on
the logic board on each machine presented for inspection in
accordance with procedures established by the commission, and shall
issue a license for each individual machine. The license shall be
prominently displayed on the machine by the video gaming machine
operator.
(b) Provide service and maintenance for all licensed video gaming
machines and video gaming machine associated equipment owned by an
operator as required by the commission.
(c) Maintain a written service and maintenance log for each
licensed video gaming machine placed in service. The service and
maintenance log shall be stored inside the main access cabinet of the
machine. Any service employee or employee of the commission gaining
entry for the service, maintenance, or repair of a licensed machine
shall sign the log, record the date, time, and purpose of the entry,
the electronic and mechanical meter readings, and the parts of the
machine inspected or repaired. Service and maintenance log forms
shall be obtained from the commission and retained by the operator
for a period determined by the commission, not to exceed five years.
Service and maintenance logs shall be available for inspection by
the director, upon request.
(d) Maintain records of the operation of each licensed machine
placed into use by the licensed video gaming machine operator
pursuant to this section. The records shall be kept in a secure
place by the licensed video gaming machine operator, subject to
inspection by the commission, and shall include, but not be limited
to, an audit tape that records an exact duplicate of all tickets
printed, transactions recorded, and licensing records.
8881.14. (a) The director shall contract with licensed video
gaming machine operators for the operation of video gaming machines
and video gaming machine associated equipment. Notwithstanding
anything in Article 6 (commencing with Section 8880.56) to the
contrary, contracts shall be one year in duration, automatically
renewable subject to the video gaming machine operator's continued
compliance with article, and require the operator to all of the
following:
(1) Pay to the commission 25 percent of the net machine income
during the first two years from the date that video gaming machines
are first offered for play to the public in this state, and 35
percent of the net machine income for each year thereafter.
(2) Provide the commission with all information and bank
authorizations necessary to ensure the timely transfer of moneys due
and payable to the commission.
(3) Maintain an account balance and surety bond, as required by
the commission, sufficient to cover the amount due and payable to the
commission.
(4) Maintain accurate records of net machine income.
(b) No licensed operator shall obtain an interest in or operate
more than 10 percent of the total number of video gaming machines
authorized for play by the public under this article.
8881.15. Any operator who fails to maintain an account balance
sufficient to cover the amount due and payable to the commission
shall be assessed an interest penalty equal to 12 percent of the
amount due and payable. Each operator shall post a bond, as provided
in Section 8880.54, in an amount not to exceed the average amount
due and payable to the commission in that operator's fifteen-day
collection cycle. Failure to make payments on any amount past due
and payable to the commission on or before the next electronic
transfer date shall be grounds for suspension or revocation of the
operator's license and the removal of the licensee's machines from
play.
8881.16. No video gaming machine shall be placed into play by an
operator until both of the following occur:
(a) The premise license applicant's location has been licensed by
the commission and the licensed video gaming machine or machines have
been connected to the commission's central computer communications
system. It shall be the responsibility of the premise location
licensee to provide the phone line to connect to the central computer
communications system.
(b) A licensed operator and the premise license applicant have
entered into a written agreement to place the video gaming machine
operator's machine or machines for play at the location stated on the
premise license application. The agreement between the video gaming
machine operator and the premise licensee shall ensure equal
distribution of net machine income less applicable payments to the
state by electronic transfer. The agreement shall have a term of 36
months and be automatically renewed for one-year terms unless written
notice is given by either party at least 30 days prior to the date
of renewal.
8881.17. Video gaming machines, video gaming machine associated
equipment, and video games authorized by the commission for play
shall not be construed as gambling devices or the offering of
gambling to the public or participation in gambling activities for
the purpose of Chapter 9 (commencing with Section 319) of, or Chapter
10 (commencing with Section 330) of, Title 9 of Part 1 of the Penal
Code, or any local ordinance. No license issued pursuant to Division
9 (commencing with Section 23000) of the Business and Professions
Code for the onpremise consumption of alcoholic beverages shall be
denied, suspended, or revoked because the license holder is a
licensed participant in the state video gaming network authorized by
this article. However, suspension or revocation of a lottery retail
location's liquor license may result in action against the location's
video lottery license or the location's authority to operate video
gaming machines.
8881.18. No holder of a license issued pursuant to this article
shall use the word "casino" in any sign or advertisement in
connection with a video gaming machine.
8881.19. Pursuant to Section 1172 of Title 15 of the United States
Code, the State of California, does hereby, in accordance with and in
compliance with that section, declare and proclaim that Section 1172
of Title 15 of the United States Code does not apply to any gambling
device in this state where the transportation of the device is
specifically authorized by and accomplished in compliance with this
article, any other applicable statute of this state, and any
regulations adopted pursuant thereto, and that any gambling device
transported in compliance with state law and regulations shall be
exempt from the application of that section.
8881.20. Any person who physically tampers with a licensed video
gaming machine with the intent to interfere with the proper operation
of the machine, or to manipulate the outcome or payoff of the
machine, is guilty of a felony.
8881.21. Any individual, firm, corporation, or other legal entity
who places in operation or continues to have in place any gray area
device for use by members of the public at any licensed premise or
any other place is guilty of a felony.
8881.22. All revenues received by the commission pursuant to this
article shall be deposited by the commission in the State Lottery
Fund. All license fees paid to the commission pursuant to Section
8881.7 and deposited in the fund in accordance with this section
shall be expended to cover the administrative expenses incurred by
the commission in administering this article.
SEC. 4. The Legislature finds and declares that this act furthers
the purposes of the California State Lottery Act of 1984.
SEC. 5. No reimbursement is required by this act pursuant to
Section 6 of Article XIIIB 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 XIIIB of the California Constitution.
Notwithstanding Section 17580 of the Government Code, unless
otherwise specified, the provisions of this act shall become
operative on the same date that the act takes effect pursuant to the
California Constitution.