BILL ANALYSIS
AB 2179
Page 1
Date of Hearing: April 25, 2000
Counsel: Fredericka McGee
ASSEMBLY COMMITTEE ON PUBLIC SAFETY
Carl Washington, Chair
AB 2179 (Wesson) - As Amended: April 11, 2000
SUMMARY : Prohibits Internet gambling and authorizes the
Attorney General (AG) to bring criminal and civil actions
against violators. Specifically, this bill :
1)Makes the following legislative findings and declarations:
a)Online gambling threatens the health, safety, and welfare
of the citizens of California because it is unregulated.
b)Online gambling poses an unacceptable risk of fraudulent
business practices to its customers.
c)Online gambling businesses cannot accurately access whether
minors are gaining access to the product.
d)Online gambling businesses falsely and misleadingly
advertise that Californians can legally play these games.
e)In enacting this bill, it is the Legislature's intent to
remove any ambiguity as to the illegality of online
gambling in California and to codify court decisions that
hold that gambling losses and debts from illegal gambling
are unenforceable.
2)Prohibits any person from operating or betting against any
prohibited online gambling game, including any banking or
percentage games played with dice, cards, or devices (e.g.
Craps, Roulette, Blackjack, slot machines, Poker, Baccarat,
Bingo, sportsbook wagering, or lottery games).
3)Provides that a person who knowingly offers, solicits or
facilitates for play any prohibited online gambling game to a
California resident, as specified, is guilty of a misdemeanor
punishable by imprisonment in a county jail not to exceed 90
days, or a fine not to exceed $1,000 per transaction, or a
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combination of both imprisonment and fine.
4)Provides that persons who wager at or against any prohibited
online game are guilty of an infraction punishable by a fine
of $100 per transaction.
5)Provides that debts incurred as a result of wagering on a
prohibited online gambling game are not enforceable in
California.
6)Authorizes the AG to enforce this bill and bring appropriate
criminal and civil actions. The AG is also authorized to
review advertisements of online gambling businesses for
accuracy, and may demand that the advertisements disclose that
these online games are illegal in California.
EXISTING LAW :
1)Provides that the Legislature has no power to authorize
lotteries and shall prohibit the sale of lottery tickets in
California. But allows the Legislature to provide for the
regulation of horse races and horse race meetings and wagering
on the results and to authorize by statute cities and counties
to provide bingo games for charitable purposes. The
Constitution also authorizes the Governor to negotiate and
conclude compacts, subject to ratification by the Legislature,
for the operation of slot machines and for the conduct of
lottery games, and banking and percentage card games by
federally recognized Indian tribes on Indian lands in
California in accordance with federal law. (California
Constitution, Article IV, Section 19.)
2)Defines "gaming" as any game of faro, monte, roulette,
lansquenet, rouge et noire, rondo, tan, fan-tan,
seven-and-a-half, twenty-one, hokey-pokey, or any banking or
percentage game played with cards, dice or any device, for
money, checks, or credit. (Penal Code Section 330.)
3)Provides that any person who participates in gaming is guilty
of a misdemeanor punishable by up to six months in jail and a
fine of not less than $100 and up to $1,000 or by both
imprisonment and fine. (Penal Code Section 330.)
4)Provides that any person who possesses a slot or card machine
in any room, space, enclosure or building is guilty of a
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misdemeanor punishable by up to six months in jail and a fine
of not less than $100 and up to $1,000 or by both imprisonment
and fine. (Penal Code Section 330a.)
5)Allows for the forfeiture of any slot machine or device and
money seized in connection with such machine. (Penal Code
Sections 330.3 and 335a.)
6)Specifies that any person who engages in any pool selling or
bookmaking upon the results of any contest or event, as
defined, is subject to a penalty of imprisonment in a county
jail or state prison for up to one year. (Penal Code Section
337a.)
7)Establishes the Gambling Control Commission within the
Department of Justice and grants it jurisdiction over the
operation of card clubs and of all persons having an interest
in the operation of card clubs. Creates the Division of
Gambling Control to investigate and enforce controlled gaming
activities in California. Existing law defines a "controlled
game" as any game of chance, including any gambling device,
played for currency or any other thing of value that is not
prohibited and made unlawful by statute or local ordinance.
FISCAL EFFECT : Unknown
COMMENTS :
1)Author's Statement : According to the author, "The
proliferation of offshore Internet gambling sites is
staggering. The ease with which one can access a cyber-casino
over the Internet is alarmingly simple. In a matter of
seconds, a person can access any on the hundreds of gambling
sites on the Internet and gamble in virtual anonymity 24 hours
a day, seven days a week. This form of unregulated gambling
preys on two segments of our society that are vulnerable:
minors and pathological gamblers.
"Under AB 2179, a person who knowingly offers, solicits or
facilitates the play of any prohibited online game to a
California resident would be guilty of a misdemeanor. Persons
who wager at or against any prohibited online game would be
guilty of an infraction.
"In addition, the bill would authorize the AG to bring criminal
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and civil actions against violators of this law. The bill
would also allow the AG to review advertisements of online
gambling business for accuracy and require the advertisements
to disclose that these online games are illegal in this state.
"Finally, the bill would codify over 100 years of legal
precedent by clarifying that Internet gambling debts are
unenforceable in California. My goal is to send a clear
message that gambling debts incurred online are not
enforceable in a California court."
2)Background : By many accounts, gambling activity on the
Internet is experiencing tremendous growth. A recent
financial analysis of the industry indicates that some 250
companies now operate at least 700 Internet gambling sites
around the world. In fact, from 1998 through 1999, Internet
wagering increased 80% to an estimated $1.2 billion in wagers,
with that number possibly exceeding $3 billion based on
current growth rates. Moreover, the stocks of dozens of
publicly traded companies involved with Internet gambling are
traded on United States financial markets.
3)Federal Legislation : S. 692 and H.R. 3125 both enact the
"Internet Gambling Prohibition Act of 1999." S. 692 passed
the Senate and is in conference, the House version is waiting
further consideration. Both bills prohibit using the Internet
to gamble, except if conducted in accordance with the laws of
a state relating to lotteries or to pari-mutuel wagering
(e.g., horse racing).
4)Other State Action : Given the traditional responsibility of
the states regarding the regulation of gambling, several
states have introduced and/or enacted legislation. According
to the California Research Bureau, Louisiana, Michigan, Nevada
and South Dakota have already enacted Internet gaming
prohibitions. Illinois, Michigan, Minnesota, New York,
Pennsylvania, Tennessee and Virginia are currently considering
legislative prohibitions.
5)Federal Law : The Wire Communication Act of 1961 prohibits the
use of "wire communication" facilities to transmit wagers or
information assisting in the placing of bets on any sporting
event or contest. The use of wire communication facilities is
exempt if it is in relation to wagers made to and from states
or foreign countries where that type of wagering is legal
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(e.g., horse racing). The Wire Communication Act of 1961 was
enacted before the advent of the Internet to address
bookmaking problems and did not contemplate the Internet or
wireless technology. Moreover, federal law is silent on
whether games such as Blackjack, Craps, and Poker, for
instance, are illegal if wagered upon using the Internet.
6)Enforceability of Gambling Credit Card Debts : There are an
increasing number of lawsuits filed against credit card
companies charging them with facilitating and profiting from
illegal online gambling. The lawsuits allege that the credit
card companies participate and profit from illegal online
gambling by issuing merchant accounts to offshore casinos that
then accept bets from Californians. The credit card companies
and their affiliated banks are paid a fee by the Internet
casinos, usually between 2% and 5% for each illegal on-line
transaction. In addition, interest and late fees are assessed
on credit card holder's balances that may be inflated due to
gambling losses.
a)Case Law : In general, an agreement for a bet or wager is
illegal. [ Kyne v. Kyne (1940) 16 C.2d 436, 438; Matthew v.
Lopus (1914) 24 C.A. 63, 66; Schenck v. Hirshfeld (1913) 22
C.A. 709, 710.] A "bet or wager" is defined as one in
which the promisor agrees to perform on the happening of a
condition, and for which performance he or she receives no
agreed exchange.
b)Independent Bank Action: Providian National Bank in San
Francisco recently decided not to process gambling
transactions with offshore casinos for its 11 million
customers as a result of a civil suit brought by one of its
cardholders who lost thousands of dollars to an offshore
Internet gambling company.
7)Is Online Gambling Currently Prohibited? Since the
mid-1800's, the California Constitution has generally
prohibited all lottery and sale of lottery tickets. (Penal
Code Section 330 et seq.) In 1911, slot machines were
prohibited under the Penal Code Section 330a. However, in
1984 the Constitution was amended to permit lotteries and took
the power from the Legislature to authorize any casinos of the
type currently operating in Nevada and New Jersey and
specifically prohibited such casinos. Article IV, section
19(e) of the California Constitution states that, "[t]he
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Legislature has no power to authorize?casinos of the type
currently operating in Nevada and New Jersey". In March 2000,
California voters amended the California Constitution to allow
gaming pursuant to state compacts on Indian tribal lands.
None of these actions have addressed the issue of this
prohibited activity occurring while a person is online. This
bill seeks to prohibit only those games that are specifically
identified on Page 6, Lines 9 through 27. This bill is silent
as to whether a game not listed would be legal.
8)National Gambling Impact Study Commission (NGISC) : The NGISC
was charged by Congress to conduct a comprehensive study of
the social and economic implications of gambling in the United
States. In June 1999, NGISC made several recommendations with
respect to Internet wagering. The Commission members
unanimously agreed that the President, Congress, and the
Department of Justice should prohibit Internet gambling,
except for those types of gambling (that use the Internet)
already authorized within the United States (e.g., pari-mutuel
wagering on horse racing).
Further, the Commission recommended that the Federal Government
develop enforcement strategies that include Internet service
providers, credit card issuers, money transfer agencies,
wireless communication systems manufacturers, and others who
intentionally or unintentionally facilitate Internet gambling
transactions. The Commission also recommended the passage of
legislation stating that any credit card debts incurred while
gambling on the Internet are unrecoverable.
The Commission noted that since Internet servers for gambling
operations are physically located offshore, dishonest gambling
operators and other criminal elements may operate without fear
of regulation, thus placing the public at risk of credit card
fraud, invasion of privacy, and other harms.
9)Should Ignorance of the Law be a Defense ? AB 2179 proposes on
Page 5, Lines 24 through 29, a defense for any person or
entity that knowingly or solicits another person in California
to play or bet a prohibited on-line game. Generally,
ignorance of the law is not a defense to the crime. The
intent necessary to commit a crime refers to the person's
knowledge of their actions, not whether the actions themselves
are illegal. The Committee staff would recommend that the
author make the following amendments to the bill:
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a)At Page 5, Line 25, strike "a person or entity".
b)At Page 5, Strike Lines 26 through 30, and insert: "if a
person or entity has received a warning form the Attorney
General that online gambling is illegal, this evidence
shall not be rebuttal as to the 'knowingly' element of the
crime."
10)Technical Amendments . The author has indicated that it is
his intent that both local district attorneys and the AG have
the authority to enforce this bill's provisions. To clarify
this, Committee staff recommends the following amendments:
a)At Page 5, Line 30, insert after "Attorney General", "or
local district attorney".
b)At Page 7, at the end of Line 15, insert: "Nothing in this
subdivision shall be interpreted to limit the current
authority of a district attorney to enforce the provisions
of this section."
11)Arguments in Support : According to the California State
Sheriffs Association, "this bill would prohibit gaming that is
currently illegal in California from being run via the
Internet and thus legalized. Essentially, the provisions of
this bill conform on-line gaming to the rules governing live
gaming. We suggest that by ensuring that California has one
rule as it pertains to percentage games, whether in a casino
or on-line, AB 2179, makes good sense."
12)Arguments in Opposition : According to the Committee on Moral
Concerns, "California desperately needs a statute prohibiting
gambling over the Internet. This bill, by outlawing only 11
specific forms of online betting, would legalize other online
gambling games. The bill specifically exempts online horse
race betting and the State Lottery from Internet prohibitions.
It therefore, allows gamblers to bet on horse races without
going to a race track or satellite facility. And if the State
Lottery Commission creates online games, the bill would allow
those, too. ? There is no prohibition of future forms of
gambling that are not based on today's games. Knowledge games
(I-Jeopardy, for instance) and skill games, similar to kids'
games with the added element of gambling, would be legal under
the bill."
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REGISTERED SUPPORT / OPPOSITION :
Support
California Peace Officers' Association
California Police Chiefs Association
California State Sheriffs Association
Opposition
Committee on Moral Concerns
National Coalition Against Gambling Expansion
Analysis Prepared by : Fredericka McGee / PUB. S. / (916)
319-3744