BILL NUMBER: AB 9 INTRODUCED BILL TEXT INTRODUCED BY Assembly Member Gatto DECEMBER 1, 2014 An act to add Chapter 5.2 (commencing with Section 19990.101) to Division 8 of the Business and Professions Code, relating to gambling, making an appropriation therefor, and declaring the urgency thereof, to take effect immediately. LEGISLATIVE COUNSEL'S DIGEST AB 9, as introduced, Gatto. Gambling: Internet poker: unlawful gambling activity. (1) Existing law, the Gambling Control Act, provides for the licensure of certain individuals and establishments that conduct controlled games, as defined, and for the regulation of these gambling activities by the California Gambling Control Commission. The Department of Justice has related investigatory and enforcement duties under the act. Any violation of these provisions is punishable as a misdemeanor, as specified. This bill, which would be known as the Internet Poker Consumer Protection Act of 2015, would establish a framework to authorize intrastate Internet poker, as specified. The bill would authorize eligible entities to apply to the commission for a 10-year nontransferable license to operate an intrastate Internet poker Web site offering the play of authorized Internet poker games to registered players within California, as specified. The bill would require that the license be automatically renewed every 10 years upon application, as specified. The bill would prohibit the offer or play of any gambling game provided over the Internet that is not an authorized Internet poker game permitted by the state pursuant to this bill. The bill would provide that it is unlawful for a person to aggregate computers or any other device with Internet access capabilities in a place of public accommodation within the state, including a public or private club or other association, in a public or private setting, that can accommodate multiple players to simultaneously play authorized games on the Internet, or to promote, facilitate, or market that activity. The bill would provide that any violation of the Internet Poker Consumer Protection Act of 2015 is punishable as a misdemeanor. By creating new crimes, the bill would impose a state-mandated local program. This bill would require the commission, and any other state agency with a duty pursuant to these provisions, to adopt regulations within 180 days after the operative date of this bill, in consultation with the department and federally recognized California Indian tribes, to implement these provisions, and to facilitate the operation of authorized poker Web sites and expedite the state's receipt of revenues. The bill would require an eligible entity, as defined, to pay an application processing fee sufficient to cover all reasonable costs associated with the issuance of the license, for deposit into the Internet Poker Fund, as created by the bill, to be continuously appropriated to the department and the commission in the amounts necessary to perform their duties pursuant to this bill. An operator license applicant that is a federally recognized Indian tribe also would be required to submit a limited waiver of its sovereign immunity. The bill would require a service provider to apply to the commission for a service provider license before providing goods or services to a licensed operator in connection with the operation of an authorized poker Web site and pay an application processing fee sufficient to cover the reasonable costs associated with the issuance of the license. The bill would require the department to review the suitability of a service provider applicant and would require the department, prior to issuing a service provider license, to issue a finding of suitability and conduct a full investigation of the service provider license applicant. The bill would require a marketing affiliate to apply to the commission for a marketing affiliate license or registration before providing marketing services to a licensed operator in connection with the operation of an authorized poker Web site and pay an application processing fee sufficient to cover the reasonable costs associated with the issuance of the license. Except as provided, the bill would require the department to review the suitability of a marketing affiliate license or registration applicant and would require the department, prior to issuing a license or registration, to issue a finding of suitability and conduct a full investigation of the marketing affiliate license or registration applicant. The bill would require employees of a licensed operator, a licensed service provider, or a licensed or registered marketing affiliate to obtain employee work permits, and owners, officers, and directors of a licensed operator to be subject to a suitability review and obtain employee work permits, and would authorize the commission to refuse to issue a license to, or suspend or revoke a license of, a licensed operator that fails to comply with these requirements. The bill would establish a tribal gaming regulatory authority process for the purpose of processing employee work permits, and authorize a tribe that is a licensed operator to elect to participate in the tribal gaming regulatory authority process. This bill would authorize the commission to revoke or suspend any license or work permit upon reaching a finding that the licensee or employee is in violation of the provisions described above, or any regulation adopted pursuant to these provisions. However, the bill would prohibit a tribal licensee from having its license suspended or revoked, or being fined or otherwise penalized for complying with any applicable federal law or regulation when operating an authorized poker Web site on Indian lands. The bill would specify that to the extent that any state requirement is more strict than any applicable federal law requirement, the tribal licensee is required to comply with the state requirement. This bill would require a registered player account to be established in person, and would also require that specified deposits into and withdrawals out of those accounts be made in person. In order to satisfy those in-person requirements, the bill would authorize a licensed operator to enter into an agreement for the operation of one or more satellite service centers, which would be authorized to act on behalf of, or in coordination with, the licensed operator in carrying out those in-person requirements. The bill would require a licensed operator to ensure, among other things, that the satellite service center is financially, logistically, and technologically capable of performing specified duties in accordance with the bill's provisions. The bill would provide that both the satellite service center and the licensed operator may be held liable for any violation of the bill's provisions arising out of an agreement between the satellite service center and the licensed operator to provide specified in-person services. The bill would also authorize the commission to promulgate regulations regarding satellite service centers for the protection of licensed operators, registered players, and intrastate Internet poker, or that otherwise serve the purposes of the bill. This bill would require the payment of an annual regulatory fee, for deposit into the Internet Poker Fund, to be continuously appropriated for the actual costs of license oversight, consumer protection, state regulation, and other purposes related to this bill. The bill would require each licensee to pay a one-time license deposit into the General Fund in the amount of $5,000,000. The license deposit would be credited against quarterly fees equivalent to 5% of the licensee's gross gaming revenue proceeds, as specified. The bill would require an applicant for an operator license to provide documentation establishing that the applicant is qualified to pay the one-time license deposit through its own net position or through credit directly to the applicant, as specified. This bill would establish the Unlawful Gambling Enforcement Fund within the General Fund for purposes of ensuring adequate resources for law enforcement charged with enforcing the prohibitions and protections of the provisions described above. The bill would authorize the Attorney General, and other public prosecutors, as specified, to bring a civil action to recover a civil penalty in an unspecified amount against a person who engages in those prohibited activities described above, or other specified unlawful gambling activities. The bill would provide for an unspecified percentage of revenues from civil penalties collected to be deposited into the fund and used for law enforcement activities pursuant to these provisions, upon appropriation by the Legislature. This bill would require the commission, in consultation with the department, the Treasurer, and the Franchise Tax Board, to issue a report to the Legislature describing the state's efforts to meet the policy goals articulated in this bill within one year of the operative date of this bill and, annually, thereafter. The bill would also require the Bureau of State Audits, at least 4 years after the issue date of any license by the state, but no later than 5 years after that date, to issue a report to the Legislature detailing the implementation of this bill, as specified. This bill would require the state to affirmatively elect to be subject to a federal Internet gambling law, and would prohibit the state from participating in any Internet gambling agreement between states or foreign jurisdictions without an affirmative legislative act. The bill would provide that if the state elects to be subject to a federal Internet gambling law or to participate in an Internet gambling agreement between states or foreign jurisdictions, an operator licensee shall not be required to pay the one-time license fee or the quarterly fees described above and would require the state to refund within 30 days all unused license fees paid to the state, as specified. The bill would authorize a licensee to enforce this provision in the superior court. The bill would provide that specified provisions are not severable. (2) 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. (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. (4) This bill would declare that it is to take effect immediately as an urgency statute. 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. Chapter 5.2 (commencing with Section 19990.101) is added to Division 8 of the Business and Professions Code, to read: CHAPTER 5.2. THE INTERNET POKER CONSUMER PROTECTION ACT OF 2015 Article 1. Title, Legislative Declarations, and Statement of Legislative Intent 19990.101. This chapter shall be known and may be cited as the Internet Poker Consumer Protection Act of 2015. 19990.102. The Legislature hereby finds and declares all of the following: (a) Since the development of the Internet, Web sites offering gambling have raised consumer protection and enforcement concerns for federal and state governments as these Internet Web sites are often operated by unknown persons located in many different countries, subject to little or no oversight, and have sought to attract customers from the United States. (b) Californians participate in illegal online gambling on unregulated Internet Web sites every week. 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 online gambling are being realized by offshore operators and do not provide any benefits to the citizens of California. (c) The presence, operation, and expansion of offshore, unlicensed, and unregulated Internet gambling Web sites available to Californians endanger Californians because the current Internet gambling Web sites operate illegally and without regulation as demonstrated by criminal investigations of some Internet gambling purveyors, and questions have arisen about the honesty and the fairness of the games played on Internet gambling Web sites as well as the true purpose for, and use of, proceeds generated by these unregulated Internet gambling Web sites. In addition, some of the unlicensed and unregulated Internet gambling activity interferes with rights Californians preserved to federally recognized tribal governments when amending the state's Constitution, with that amendment providing federally recognized tribes the sole and exclusive right to engage in slot machine and house-banked casino-style gaming in California. California, thus, has a state interest in authorizing and regulating legitimate Internet poker and in ensuring that those activities are consistent with existing public policy regarding the playing of poker games within the state. The public interest will be best served by requiring that those entities who desire to own or operate Internet poker Web sites within the state continue to comply with the existing standards and rigorous scrutiny that must be met in order to qualify to offer poker games within the state. (d) These rights were separately guaranteed in 1999, and at various times thereafter, when the state negotiated and entered into compacts with tribes pursuant to the federal Indian Gaming Regulatory Act of 1988 (IGRA), under which signatory tribes possess the exclusive right within the state to operate "gaming devices." "Gaming device" is defined in those compacts to include any electronic, electromechanical, electrical, or video device that, for consideration, permits: individual play with or against that device or the participation in any electronic, electromechanical, electrical, or video system to which that device is connected; the playing of games thereon or therewith, including, but not limited to, the playing of facsimiles of games of chance or skill; the possible delivery of, or entitlement by the player to, a prize or something of value as a result of the application of an element of chance; and a method for viewing the outcome, prize won, and other information regarding the playing of games thereon or therewith. Internet gaming necessitates the use of an electronic device, whether in a private or a public setting, to participate in a game. The authorization of Internet gaming could, therefore, constitute a breach of those compacts and jeopardize the payments being made to the state. As such, the Legislature recognizes that the forms of Internet gaming authorized to be played within the state must be strictly limited and that the authorization of any form of Internet gaming, with the exception of poker as described in this chapter, would violate compact exclusivity. This includes, but is not limited to, any slot or casino-style game. (e) Tribally owned and operated casinos have contributed to local economies, generated tens of thousands of jobs for Californians, provided hundreds of millions of dollars in revenues for the state since the advent of Indian gaming, and are entitled to the full protection of the laws of this state. As such, the state is presently engaged in regulatory and enforcement efforts to combat the rise of illegal gambling activity that threatens not only protected rights, but the health and welfare of all Californians. (f) Card rooms have been offering poker games in California since before California became a state. Card rooms have contributed to local economies, generated tens of thousands of jobs for Californians, provided hundreds of millions of dollars in revenues for state and local governments, and are entitled to the full protection of the laws of this state. (g) In October 2006, Congress passed the SAFE Port Act (Public Law 109-347), to increase the security of United States ports. Embedded within the language of that act was a section entitled the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA), which prohibits the use of banking instruments, including credit cards, checks, or fund transfers, for interstate Internet gambling. UIGEA includes exceptions, including, but not limited to, one that permits individual states to create a regulatory framework to enable intrastate Internet gambling, provided the bets or wagers are made exclusively within a single state whose state laws or regulations comply with all of the following: (1) Contain certain safeguards regarding those transactions, including both of the following: (A) Age and location verification requirements. (B) Data security standards designed to prevent access to minors and persons located outside of that state. (2) Expressly authorize the bet or wager and the method by which the bet or wager is made. (3) Do not violate any federal gaming statutes, including all of the following: (A) The Interstate Horseracing Act of 1978. (B) The Professional and Amateur Sports Protection Act. (C) The Gambling Devices Transportation Act. (D) IGRA. (h) State authorization to operate Internet poker consistent with federal law, and heightened regulation and enforcement regarding Internet gambling activity that goes beyond poker, provides 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, citizens participating in Internet poker activities are protected, and the state is not deprived of income tax revenues to which it would otherwise be entitled from these activities. (i) The Legislature recognizes that the regulation of gambling activities within the state's jurisdiction is of particular concern to the public interest, particularly with the advent of the Internet, and inherent dangers associated with online gambling activities, and accordingly recognizes the need to protect Californians from an unprecedented expansion of gambling activities within the state. This chapter is a vehicle to generate additional resources to protect Californians from this increased illegal Internet gambling activity. (j) The state currently maintains and implements substantial regulatory and law enforcement efforts to protect thousands of Californians who gamble and play, among other things, real-money poker in licensed California card rooms. (k) Federally recognized Indian tribes in California offer real-money poker, including electronically aided poker, on their Indian lands as a "class II" game under IGRA. (l) While the state, federal government, and tribal governments exercise regulatory authority over various real-money poker games offered in California, none of those entities presently provide licensing requirements, regulatory structure, or law enforcement tools to protect millions of Californians who play the same games daily for money on the Internet. (m) In order to protect Californians who gamble online, allow state law enforcement to ensure consumer protection, and ensure compliance with the California Constitution and negotiated compacts and secretarial procedures, it is in the best interest of the state and its citizens to authorize, implement, and create a legal system for intrastate Internet gambling that is limited to the game of poker. (n) The California Gambling Control Commission and the Department of Justice, in conjunction with other state agencies and tribal gaming regulatory authorities, have the expertise to issue licenses to conduct intrastate Internet poker to existing operators of regulated gaming that are otherwise eligible to conduct real-money poker games in California. Further, strict suitability standards must be imposed on those persons and entities seeking to work for or provide services to licensed operators in order to ensure that the highest level of integrity is maintained. (o) The state also possesses a legitimate interest in protecting the integrity of state-authorized intrastate Internet poker by licensing only those entities that are otherwise eligible to offer real-money poker games within the state that have significant experience operating in a regulated land-based gaming facility environment. The state's interests are best met, therefore, by licensing only those entities in California that have experience operating card rooms and tribal gaming facilities that are currently permitted to offer live real-money poker games and are in good standing with the appropriate state, federal, and tribal regulatory agencies. (p) In granting licenses to engage in intrastate Internet poker, the state also has a substantial interest in carefully assessing the suitability of any entity or person who seeks to operate Internet poker games in the state. In order to protect the integrity of, and promote public confidence in, intrastate Internet poker, the Legislature finds that licenses should not be granted to those entities and persons who knowingly engaged in unlawful Internet gaming after December 31, 2006. In addition, the Legislature finds that the use for intrastate Internet poker of brand names, trademarks, customer lists, software, and other data associated with, or developed or used in connection with, unlawful Internet gaming after December 31, 2006, is likely to undermine public confidence in intrastate Internet poker and to be inconsistent with the purpose of this chapter to protect the people of California by permitting regulated intrastate Internet poker that has no connection to previous unlawful Internet gaming activity. In the Legislature's judgment, a knowing decision to purchase or otherwise acquire that data for use in connection with Internet poker in the state bears directly on the applicant's suitability and must be considered in any determination whether to license that applicant under this chapter. (q) This chapter will permit a qualified card room to obtain a license from the state to operate poker games via the Internet for players within the jurisdiction of California. In addition, this chapter will permit a qualified federally recognized California Indian tribe to obtain a license from the state to operate poker games via the Internet for players physically located within California. (r) Participation by tribes will further the interests of the state because tribes have significant experience operating and regulating real-money games. (s) The authorization of intrastate Internet poker pursuant to this chapter does not violate any tribal-state compact or the California Constitution. Application of UIGEA in California, as set forth in this chapter, also does not violate federal Indian law by impinging upon protected tribal sovereignty. Accordingly, nothing in this chapter shall alter, diminish, or impact the rights and obligations of tribes in existing tribal-state compacts or secretarial procedures approved pursuant to IGRA, or require that those compacts be renegotiated. At the same time, a tribal licensee does not relinquish any rights under its compact with the state by virtue of participating in intrastate Internet poker pursuant to this chapter, which is intended to respect the regulatory obligations and responsibilities of state, tribal, and federal authorities. 19990.103. It is the intent of the Legislature to create a licensing and regulatory framework and enforcement mechanisms to do all of the following: (a) Ensure that authorized Internet poker games 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 and by empowering the department to retain a portion of receipts collected from illegal operations and, as necessary, receipts collected in accordance with this chapter. (c) Authorize and direct the commission to issue a license to certain existing operators of card rooms and gaming facilities in California, at which regulated real-money poker games may be offered, and that meet the eligibility requirements and timely submit the required application and registration fees. (d) Ensure that each licensee complies with applicable laws and regulations. (e) Grant power to the state agencies authorized in this chapter to oversee the operations of each licensee, including the operations of those licensed by a tribal gaming regulatory authority under this chapter whose licenses and permits have been reviewed and approved by the commission in accordance with this chapter, and to enforce the provisions of this chapter to ensure that the interests of the state and registered players are protected. (f) Establish a process that includes a background investigation of owners, officers, directors, and key employees, requires that each employee of a licensee receives all necessary work permits from the state, and coordinates that investigation with any suitability review undertaken by a participating tribe's gaming regulatory authority. (g) Ensure that the state is able to collect income tax revenues from registered players participating in Internet poker activity in the state. (h) Deposit regulatory fees collected by the state from each licensed operator into the Internet Poker Fund, as established in Section 19990.801, which shall be administered by the department, and continuously appropriated for the following: (1) The actual costs of license oversight, consumer protection, state regulation, and problem gambling programs. (2) Other purposes related to this chapter as the Legislature may decide, including, but not limited to, enforcement efforts related to illegal Internet gambling activities. (i) Create systems to protect each registered player's private information and prevent fraud and identity theft. (j) Ensure that registered players are able to have their financial transactions processed in a secure, timely, and transparent fashion. (k) Require that each licensed operator provide registered players with accessible customer service. (l) Require that each licensed operator's Internet poker Web site contain information relating to problem gambling, including a telephone number that an individual may call to seek information and assistance for a potential gambling addiction. (m) Ensure that the licensed operator maintains responsibility for the Internet poker business and is not serving as a facade for an entity not eligible to be a licensed operator. The Internet poker Web site shall identify who is the actual licensed operator to ensure protection of players. (n) Create an express exemption from disclosure, pursuant to the California Public Records Act under subdivision (b) of Section 6253 of the Government Code, that exempts from public disclosure proprietary information of a license applicant or a licensee in order to permit disclosure of confidential information to state agencies while achieving the public policy goals of deploying secure systems that protect the interests of both the state and players. (o) As a matter of statewide concern, preempt any city, county, or city and county from enacting any law or ordinance regulating or taxing any matter covered in this chapter. Article 2. Definitions 19990.201. For the purposes of this chapter, the following words have the following meanings: (a) "Authorized Internet poker game" means any of several card games, duly authorized by the commission and played on an authorized poker Web site, that meet the definition of poker as specified by this section. (b) "Authorized poker Web site" means a Web site on which authorized Internet poker games are offered for play by a licensed operator pursuant to this chapter. (c) "Background investigation" means a process of reviewing and compiling personal and criminal history and financial information through inquiries of various law enforcement and public sources to establish a person's qualifications and suitability for any necessary license or employee work permit issued pursuant to this chapter. (d) "Bet" means the placement of a wager in a game. (e) "Card room" means a gambling enterprise, as defined in subdivision (m) of Section 19805. (f) "Commission" means the California Gambling Control Commission. (g) "Core functions" and "core functioning" mean any of the following: (1) The management, administration, or control of bets on authorized Internet poker games. (2) The management, administration, or control of the games with which those bets are associated. (3) The development, maintenance, provision, or operation of a gaming system. (h) "Corporate affiliate" means any person controlled by, controlling, or under common ownership with, another person or entity. A person or entity will be deemed to control another person or entity if it possesses, directly or indirectly, the power to direct the management or policies of the other entity, whether through ownership of voting interests or otherwise, or if, regardless of whether or not it has that power, it holds 10 percent or more of the ownership or control of the other entity, whether as a stockholder, partner, member, trust interest, or otherwise. (i) "Covered asset" means any brand or business name, including any derivative brand name with the same or similar wording, or any trade or service mark, software, technology, operational system, customer information, or other data acquired, derived, or developed directly or indirectly from, or associated with, any operation that has accepted a bet or engaged in a financial transaction related to that bet from any person in the United States on any form of Internet gaming after December 31, 2006, except when permitted under federal law and laws of the state where the player was located. (j) "Department" means the Department of Justice. (k) (1) (A) "Eligible entity" includes both of the following: (i) A card room that operates pursuant to Chapter 5 (commencing with Section 19800) whose owner or owners have been authorized, subject to oversight by, and in good standing with, the applicable state regulatory authorities. (ii) A federally recognized California Indian tribe that operates a gaming facility pursuant to a facility license issued in accordance with a tribal gaming ordinance approved by the Chair of the National Indian Gaming Commission and that is eligible to conduct real-money poker at that facility. (B) An entity identified in this paragraph shall have operated its card room or gaming facility for at least three years immediately preceding its application to secure a license to operate an Internet poker Web site pursuant to this chapter, and shall be in good standing during that time period with the applicable federal, state, and tribal regulatory authorities. However, an incorporation or other change in legal form of ownership during the three years immediately preceding application for licensure that did not alter the beneficial ownership of a card room, shall not disqualify a card room otherwise eligible for licensure. (2) A group of federally recognized California tribes or California card rooms is eligible to jointly apply for a license pursuant to this chapter, through an entity organized under state or federal law, if each entity within the group independently satisfies the requisite eligibility requirements identified in this chapter. (3) Subject to any applicable limited waiver of sovereign immunity as set forth in subdivision (d) of Section 19990.402, this chapter does not restrict a tribal licensee from participating as an instrumentality of a tribal government or a political subdivision of a tribe, or from forming a separate business entity organized under federal, state, or tribal law to apply for or hold any license issued pursuant to this chapter. (4) (A) This chapter does not restrict a card room owner from forming a separate business entity organized under state law to apply for or hold any license issued pursuant to this chapter. (B) The beneficial owners of an entity described in subparagraph (A) shall be the card room owner, except for permitted ownership transfers pursuant to Section 19990.522. (C) The entities described in this paragraph are "eligible entities." (5) A federally recognized California Indian tribe that operates a gaming facility that accepts bets from players within this state but who are not physically present on Indian lands when making those bets is not an eligible entity, unless those bets are accepted in accordance with this chapter on authorized Internet poker games played on an authorized poker Web site. (l) "Employee" means any natural person employed in, or serving as a consultant or independent contractor with respect to, the core functioning of the actual operation of an authorized poker Web site. (m) "Employee work permit" means a permit issued to an employee of the licensed operator or a service provider, or to a nonemployee owner, officer, or director of a licensed operator, by the commission pursuant to this chapter. (n) "Finding of suitability" or "determination of suitability" means a finding by the commission that a licensee meets the qualification criteria described in Article 4 (commencing with Section 19990.401), and that the licensee would not be disqualified on any of the grounds specified in that article. (o) "Gambling" means to deal, operate, carry on, conduct, maintain, or expose for play any game for money. (p) "Game" means any gambling game. (q) "Gaming system" means the technology, including hardware and software, used by a licensee to facilitate the offering of authorized Internet poker games to registered players. (r) "Good standing" means that a person has not had a gambling license suspended or revoked by a final decision of the commission or been finally ordered by a court of competent jurisdiction to cease conducting gaming activities. (s) (1) "Gross gaming revenues" means the total amount of moneys paid by players to the operator to participate in authorized games before deducting the cost of operating those activities except for fees to marketing affiliates and payment processing fees. (2) "Gross gaming revenues" does not include player account deposits or amounts bet, except to the extent any portion of those bets are retained as fees by the operator, discounts on goods or services, rebates or promotional awards, discounts or stakes provided to players, or revenues from nongaming sources, such as from food, beverages, souvenirs, advertising, clothing, and other nongaming sources. (t) "IGRA" means the federal Indian Gaming Regulatory Act of 1988 (18 U.S.C. Sec. 1166 et seq. and 25 U.S.C. Sec. 2701 et seq.). (u) "Initial operator license" means an operator license that is issued pursuant to subdivision (h) of Section 19990.402. (v) "Internet Poker Fund" means the fund established pursuant to Section 19990.801. (w) "Intrastate" means within the borders and jurisdiction of California. (x) "Key employee" means any natural person employed by a licensed operator, service provider, or marketing affiliate, or by a holding or intermediary company of a licensed operator, service provider, or marketing affiliate, who is an officer or director of the licensed operator or service provider, or who, in the judgment of the commission, has the authority to exercise significant influence over decisions concerning the operation of the licensed operator or service provider as that operation relates to the Internet poker authorized by this chapter. (y) "Land-based gaming facility" means a card room operated pursuant to Chapter 5 (commencing with Section 19800) or a casino operated by a federally recognized Indian tribe on Indian land in California. (z) "Licensed operator" means an eligible entity licensed pursuant to this chapter to offer the play of authorized Internet poker games to registered players on an authorized poker Web site. (aa) "Licensed service provider" means a person licensed pursuant to this chapter to provide goods or services to a licensed operator for use in the operation of an authorized poker Web site. (ab) "Licensee" means a licensed operator, licensed service provider, or registered or licensed marketing affiliate. (ac) (1) "Marketing affiliate" means either of the following: (A) Any person other than the licensed operator who, for a fee or other consideration, provides or refers players to the licensed operator's authorized poker Web site. (B) Any subaffiliate of a person described in subparagraph (A) who, for a fee or other consideration, provides or refers players to the licensed operator's authorized poker Web site. (2) "Marketing affiliate" does not include a provider of goods or services who provides similar advertising or marketing for purposes other than the operation of Internet gambling activities for the same rates or fees, cost or pay per impression, or click as charged nongambling businesses, and is not otherwise directly or indirectly involved in the operation of an authorized poker Web site. (ad) "Net position" means the residual difference between assets and liabilities, as defined by generally accepted accounting principles. (ae) "Online self-exclusion form" means a form on which an individual notifies a licensed operator that he or she must be excluded from participation in authorized Internet poker games for a stated period of time. (af) "Owner" means any person that is eligible to own a land-based gaming facility in California and that has a financial interest in, or control of, a person or entity required to be found suitable under this chapter, including shareholders, partners, and members of limited liability companies holding more than 10 percent of the equity or voting control of the person or entity and any person found by the commission to be exerting management or control of the person or entity in fact. "Owner" does not include the members or government officials of a federally recognized California Indian tribe. (ag) "Per hand charge" means the amount charged by the licensed operator for registered players to play in a per hand game. (ah) "Per hand game" means an authorized Internet poker game for which the licensed operator charges the player for each hand played. (ai) "Person" means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, government, governmental subdivision, agency, or instrumentality, public corporation, or any other legal or commercial entity, including any federally recognized California Indian tribe, or an entity that is wholly owned by the tribe. (aj) "Play-for-fun game" means a version of a lawfully played gambling game in which there is no requirement to pay to play or any possibility of winning any prize or other consideration of value, including, but not limited to, games offered only for purposes of training, education, marketing, or amusement. (ak) "Play-for-free game" means a version of a lawfully played gambling game that may include prizes or pots, without requiring a fee or other consideration for the right to play. (al) "Play settings" means the options and default parameters made available by a licensed operator to a registered player in the play of authorized Internet poker games. (am) (1) "Poker" means any of several nonbanked card games commonly referred to as "poker" that meet all of the following criteria: (A) Played by two or more individuals who bet and play against each player and not against the house on cards dealt to each player out of a common deck of cards for each round of play, including those games played over the Internet using electronically generated and displayed virtual cards. (B) The object of the game is to hold or draw to a hand containing a predetermined number of cards that, when all cards to be dealt in the round have been distributed and the betting is completed, meets or exceeds the value of the hands held by the other players or where the winning player is the last active player in the hand. The pot of bets made is awarded to the player or players holding the combination of cards that qualify as the winning combination under the rules of play. Values may be assigned to cards or combinations of cards in various ways, including in accordance with their face value, the combinations of cards held, such as cards of a similar suit or face value, the order of the cards that are held, or other values announced before the round. (C) The house may deal or operate and officiate the game, and may collect a fee for doing so, but is not a participant in the game itself. The house has no stake in who wins or loses. (D) Poker may be played in a variety of ways, including dealing all cards to the players so that they may not be seen by others, dealing the cards open face to the players, dealing through a combination of both, or creating a common set of cards that may be used by all players. The particular rules and winning combinations are made known to the players before each round is dealt. (E) All bets are placed in a common pot. At one or more predetermined points during the game a player may resign, challenge other players to make additional bets into the pot, or demand that players reveal their hand so a winner can be determined. (F) A poker game that has been approved by the commission for play in an authorized live poker room in California pursuant to the Gambling Control Act (Chapter 5 (commencing with Section 19800)) shall be eligible for qualification by the commission as the basis of an authorized Internet poker gambling game, except that pai gow and any other game in which persons other than authorized players to whom the cards in the game have been dealt, and by whom they are held and played, are permitted to bet on a game outcome or other game feature or may in any way control or influence the play of the hand, shall not be authorized, offered, or played in connection with an authorized Internet poker game. Subject to this limitation, the rules governing play in an authorized Internet poker game pursuant to this chapter shall generally be the same as if the game were lawfully played in a live poker room. (G) Video games, slot machines, and other similar devices that individuals play against the house or device and win based on valuations or combinations of cards that are similar to those valuations or combinations used in live, interactive poker games, commonly known as "video poker" and "video lottery," are not "poker" and are not permitted under this chapter. (2) Other characteristics defining "poker" pursuant to this chapter include any of the following: (A) Live players with equal chances of winning competing against each other over the Internet in real time and not against the house or any device. (B) Success over time may be influenced by the skill of the player. (C) The bets of one player may affect the decisions of another player in the game, and the decisions of one player may affect the success or failure of another. (3) The term "poker" includes poker tournaments in which players pay a fee to the operator of the tournament under tournament rules approved by the applicable gaming regulatory agency. (an) "Promotion" includes a jackpot, high hand bonus, royal flush bonus, aces cracked, splash pot, or other promotional prize that is appended to the play of an authorized Internet poker game, provided that the promotion is approved by the commission and does not create a banked or illegal game. (ao) "Proprietary information" means all information, including, but not limited to, computer programs, databases, data, algorithms, formulae, expertise, improvements, discoveries, concepts, inventions, developments, methods, designs, analyses, drawings, techniques, strategies, new products, reports, unpublished financial statements, budgets, projections, billing practices, pricing data, contacts, client and supplier lists, business and marketing records, working papers, files, systems, plans, and all related registrations and applications that, whether or not patentable or registerable under patent, copyright, trademark, or similar statutes, meet either of the following: (1) The information can be protected as a trade secret under California law or any other applicable state, federal, or foreign law. (2) The information derives independent economic value, actual or potential, from not being generally known to the public or to other persons that can obtain economic value from its disclosure or use. (ap) "Proxy player" means a machine, device, or agent, other than the registered player, that is used to play an authorized Internet poker game. (aq) "Registered player" means a player who has registered with a licensed operator to play authorized Internet poker games on the licensed operator's authorized poker Web site. (ar) "Registration information" means the information provided by a person to a licensed operator in order to become a registered player. (as) "Robotic play" means the use of a machine or software to automate the next player action at any point in a game, including the use of a proxy player. (at) "Satellite service center" means a facility operated pursuant to subdivision (c) of Section 19990.505 (au) (1) "Service provider" means any person, other than an employee, that does any of the following: (A) On behalf of a licensed operator, manages, administers, or controls bets on authorized Internet poker games provided over the Internet by a licensee pursuant to this chapter. (B) On behalf of a licensed operator, manages, administers, or controls the games with which the bets described in subparagraph (A) are associated. (C) On behalf of a licensed operator, develops, maintains, provides, or operates a gaming system. (D) Sells, licenses, or otherwise receives compensation for selling or licensing, information on individuals in California, and that person is not a marketing affiliate. (E) Provides any product, service, financing, or intellectual property, including patents related to the gaming system, and the trademarks, trade names, or service marks to a licensed operator and is paid a percentage of gaming revenue by the licensed operator, other than employees, not including fees to financial institutions, legal settlements, and payment providers for facilitating a deposit by a customer. (2) "Service provider" does not include either of the following: (A) A provider of goods or services that provides similar goods or services to the public for purposes other than the operation of Internet gambling activities. (B) A provider of goods or services that is not otherwise directly or indirectly involved in the control or operation of an authorized poker Web site, including via any person controlled by or under common control with a service provider. (av) "State" means the State of California. (aw) "Terms of Use Registered Player's Agreement" means the agreement offered by a licensed operator and accepted by a registered player delineating, among other things, permissible and impermissible activities on an authorized poker Web site and the consequences of engaging in impermissible activities. (ax) "Tournament" means a competition approved by the commission in which registered players play a series of authorized Internet poker games to decide the winner. (ay) "Tournament charge" means the amount charged by the licensed operator for registered players to play in a tournament. (az) "Tournament winnings" means the amount of any prize awarded to a registered player in a tournament. (ba) "Tribal gaming regulatory authority" means the gaming regulatory authority of a federally recognized California Indian tribe that has the authority to regulate gaming on the tribe's Indian lands pursuant to IGRA. (bb) "Tribe" means a federally recognized California Indian tribe, including, but not limited to, the governing body of that tribe or any entity that is wholly owned by the tribe. (bc) "Unlawful Gambling Enforcement Fund" means the fund established pursuant to Section 19990.802, the revenue of which is dedicated to enforcing the prohibitions of this chapter. Article 3. Authorized Internet Poker Games Offered in California 19990.301. Under the federal Unlawful Internet Gambling Enforcement Act of 2006, California is permitted to authorize games played via the Internet as long as all players and the online wagering is located within the jurisdiction of the state and the games are not played by minors. 19990.302. Notwithstanding any other law, a person who is 21 years of age or older and located within California is hereby permitted to participate as a registered player in an authorized Internet poker game provided by a licensed operator on an authorized poker Web site. 19990.303. (a) A person shall not do any of the following: (1) Offer any game of poker on the Internet in this state unless that person holds a valid license issued by the state to offer the play of authorized Internet poker games on an authorized poker Web site pursuant to this chapter. (2) Offer to any player located within California any game provided on the Internet that is not authorized by the state pursuant to this chapter. (3) As a player located in this state, play any game provided on the Internet that is not authorized by the state pursuant to this chapter. (b) Subject to an opportunity to cure pursuant to Section 19990.521, a violation of this chapter is punishable as a misdemeanor. 19990.304. This chapter does not limit or restrict activities or conduct permitted pursuant to Chapter 5 (commencing with Section 19800) or IGRA. 19990.305. This chapter does not authorize any game offered in Nevada or New Jersey other than poker. 19990.306. A person shall not do either of the following: (a) Aggregate computers or any other device with Internet access capabilities in a place of public accommodation within the state, including any public or private club or other association, in a public or other setting, that can accommodate multiple players to simultaneously play authorized games on the Internet. (b) Promote, facilitate, or market the activity described in subdivision (a). 19990.307. (a) If a federal law authorizing Internet gambling in the state is enacted, and that federal law provides that states may elect to be governed by its provisions, that election by the state shall only be through an affirmative legislative act. (b) If a federal law authorizing Internet gambling agreements between states or foreign jurisdictions is enacted, the state shall participate in those agreements only through an affirmative legislative act. (c) If the state elects to be governed by a federal law authorizing Internet gambling pursuant to subdivision (a) or to participate in Internet gambling agreements between states or foreign jurisdictions pursuant to subdivision (b), a licensed operator shall not be required to pay the fees set forth in subdivisions (b) and (c) of Section 19990.519. In that event, a licensed operator may apply to the commission for a refund of any unused license deposit fee paid to the state pursuant to subdivision (a) of Section 19990.519, which shall be refunded to the licensed operator as follows: (1) The state shall provide any refund owed to licensed operators from the Unlawful Gambling Enforcement Fund. (2) If there are insufficient funds in the Unlawful Gambling Enforcement Fund to provide these refunds, the state shall provide the remaining amount from the General Fund. (d) A licensed operator may bring suit to enforce subdivision (c) in the superior court. Article 4. Licensing of Operators, Service Providers, and Marketing Affiliates 19990.401. (a) (1) Within 180 days after the effective date of this chapter, the commission, and any other state agency with a duty pursuant to this chapter, shall, in consultation with the department and tribes, adopt regulations pursuant to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) to implement this chapter, and to facilitate the operation of authorized poker Web sites and expedite the state's receipt of revenues in compliance with this chapter. The initial adoption, amendment, or repeal of a regulation authorized by this section is deemed to address an emergency, for purposes of Sections 11346.1 and 11349.6 of the Government Code, and the commission and those other state agencies are hereby exempted for that purpose from the requirements of subdivision (b) of Section 11346.1 of the Government Code. After the initial adoption, amendment, or repeal of an emergency regulation pursuant to this section, the commission and those other state agencies shall not request approval from the Office of Administrative Law to readopt the regulation as an emergency regulation pursuant to Section 11346.1 of the Government Code, but shall promulgate permanent regulations in accordance with all applicable law. (2) The regulations adopted by the commission shall at a minimum address all of the following: (A) Underage gambling and problem gambling. (B) Resolution of player disputes and complaints. (C) Gaming system technical standards and practices. (D) Approval of games and game rules. (E) Hardware and software standards and compliance. (F) License, registration, and work permit issuance, investigation, and processes. (G) Suitability standards and determinations. (H) Temporary, provisional, and emergency approvals. (I) Temporary licensing of, licensing of, or findings of suitability for receivers, trustees, beneficiaries, executors, administrators, conservators, or successors in interest affecting the ownership or control of a licensee. (J) The disclosure of the source of assets, including any covered asset, intended to be used by the applicant or licensee or on the applicant's or licensee's behalf, including, but not limited to, software and marketing information or data. (K) Appeals from adverse decisions. (L) Accusations, disciplinary proceedings, and hearings. (M) Accounting, minimum internal controls, and reporting practices. (N) Marketing affiliate agreements and reporting. (O) Promotions. (P) Work permits, approvals, suitability determinations, and renewals permitting a person to use a single permit, approval, determination or renewal for work, services, or association with land-based gaming facilities and licensees under this chapter. (b) (1) Each state agency with a duty pursuant to this chapter shall identify a contact person at that agency and describe the responsibility of the contact with respect to the state agency's duty. (2) Any notice provided by a licensee to a state agency pursuant to this chapter shall be addressed to the contact identified by the state agency pursuant to paragraph (1). (3) Unless otherwise provided by this chapter, notice by a licensee to the state shall be deemed effectively given upon personal delivery, three days after deposit in the United States mail by certified or registered mail, return receipt requested, one business day after its deposit with any return receipt express courier, prepaid, or one business day after electronically confirmed transmission by facsimile. 19990.402. (a) Authorized Internet poker games may be offered only by entities licensed pursuant to this chapter. An eligible entity seeking to offer authorized Internet poker games shall apply to the commission for an operator license. The commission shall require an application processing fee sufficient to cover the reasonable costs associated with the issuance of the license. (b) Employees of the licensed operator shall undergo a suitability review and obtain work permits pursuant to Article 6 (commencing with Section 19990.601). Owners, officers, and directors of licensed operators shall also undergo suitability review and obtain employee work permits pursuant to Article 6 (commencing with Section 19990.601). The commission may refuse to issue a license to, or suspend or revoke a license of, an operator that fails to comply with this requirement. (c) In order to ensure that licensed operators are not mere facades for unlicensed, unqualified, or undisclosed interests, an applicant for an operator license pursuant to this chapter shall provide documentation to the commission establishing that, if the license is granted, the license applicant will be able, through its own net position or through credit extended directly to the applicant, and with full recourse to it, by a federal or state chartered financial institution not involved with the core functions of the authorized poker Web site, that is entirely secured by an equivalent amount of its own net position, to pay the license deposit required by subdivision (a) of Section 19990.519. In addition, a licensed operator shall submit regular financial reports to the department establishing that the operator meets financial viability requirements, as determined by the commission. The commission may terminate a license if the operator fails to submit the required reports or meet the financial viability requirements. (d) An applicant for an operator license pursuant to this chapter that is a tribe shall include with its license application a limited waiver of the applicant's sovereign immunity exclusively to the state and no other party solely for the limited purpose of enforcing this chapter and any regulations adopted pursuant to this chapter, and with regard to any claim, sanction, or penalty arising therefrom against the licensed operator by the state, and for no other purpose. (e) The commission shall issue an operator license to an applicant determined by the commission to qualify as an eligible entity within 90 days of receiving an application, if the applicant submits a completed application form and pays the required application processing fee described in subdivision (a). (f) The state may issue operator licenses only to eligible entities identified within this chapter. Any of the eligible entities may jointly apply for an operator license, either as a consortium or by forming an entity comprised entirely of eligible entities. Each eligible entity may have an interest in only a single operator license. (g) An operator license shall be issued for a term of 10 years. Subject to the power of the commission to revoke, suspend, condition, or limit any license, as provided in this chapter, a license shall be automatically renewed every 10 years thereafter upon application. Failure of a licensed operator to file an application for renewal may be deemed a surrender of the license. (h) Each initial operator license issued pursuant to this section shall take effect on the same date. That date shall be one year after this chapter becomes effective, unless the commission determines that good cause exists for those licenses to take effect in unison on a subsequent date. (i) A licensed operator may cease its operations after providing the department with a 90-day advance notice of its intent and a statement explaining its reasons for doing so, which may include the fact that continuing to operate the authorized poker Web site is commercially infeasible. In response to that notice, the state may file an action in the Superior Court of the County of Sacramento as it deems necessary to protect any state interests, including, but not limited to, the interests of registered players. (j) This chapter does not apply to play-for-fun or play-for-free games. 19990.403. (a) A licensee's employees in direct, individual-to-individual contact with registered players shall be physically present in the state. (b) All facilities, bank accounts, and accounting records of the licensee related to authorized Internet poker shall be located in the state, except for redundant servers and except as may be permitted by the commission for a service provider, if the service provider ensures access to and jurisdiction over the relevant facilities, bank accounts, and accounting records. (c) Notwithstanding subdivisions (a) and (b), a licensee shall have discretion to use the expertise of personnel, facilities, bank accounts, and accounting records not physically present in the state when necessary to protect registered players and state interests for the purposes of diagnosing and addressing technological problems, investigating fraud and collusion, and developing and supervising software and configuration changes. (d) In addition to any other confidentiality protections afforded to license applicants, the state and its agencies shall treat the proprietary information of a license applicant as confidential to protect the license applicant and to protect the security of any prospective authorized poker Web site. This chapter does not prohibit the exchange of confidential information among state agencies considering a license application. The confidentiality provisions of this chapter exempt proprietary information supplied by a license applicant to a state agency from public disclosure consistent with subdivision (b) of Section 6253 of the Government Code. (e) A license applicant shall submit to the commission, together with its application, an application processing fee as specified in subdivision (a) of Section 19990.402. All moneys collected by the state pursuant to this subdivision shall be deposited into the Internet Poker Fund. 19990.404. (a) An entity seeking to act as a service provider shall apply to the commission for a service provider license, and obtain a service provider license, before providing goods or services to a licensed operator in connection with the operation of an authorized poker Web site. (b) The department shall review the suitability of an applicant for a service provider license. The applicant for a service provider license shall pay an application processing fee sufficient to cover the reasonable costs associated with the issuance of the license. (c) The department may establish a process to conduct a preliminary determination of suitability based on a partial investigation. A partial investigation is intended to screen out applicants that do not meet the suitability requirements of this chapter. A partial investigation shall include fingerprint-based state and federal criminal history checks and clearances, and inquiries into various public databases regarding credit history and any civil litigation. A partial investigation shall also include a review of the service provider's financial status, which shall include the submission of a report prepared by a forensic accounting, audit, or investigative firm approved by the department, in a format developed by the department, and at the service provider's expense. The report shall include the financial information necessary for the department to make a preliminary determination of suitability. The department may specify additional requirements regarding the contents of the report and any other financial information or documentation required to be submitted. A full investigation shall be conducted of only those service providers that pass the partial investigation and that will undergo a full investigation pursuant to subdivision (d). Those service providers that do not pass the partial investigation may appeal the decision to the commission. (d) Before issuing a service provider license to an applicant, the department shall conduct the full investigation required by this section of all of the following persons: (1) All officers of the license applicant. (2) The owner or owners of either of the following: (A) The license applicant. (B) Any corporate affiliate of the license applicant. (3) Any persons otherwise providing goods to, or performing services for, the license applicant related to core functions. (4) Any person deemed by the department to have significant influence over the license applicant or its service providers or their respective operations. (5) In the case of a tribe or a wholly owned tribal entity that is a service provider, the investigation shall be limited to the business officers of the tribal entity that will serve as the service provider. (e) A full investigation shall include a review and evaluation of the service provider's qualifications and experience to provide the services anticipated, which shall include the required submission of a report prepared on each service provider by an outside firm contracted and supervised by the department, in a format developed by the department, and at the service provider's expense. The report shall include information necessary for the department to make a determination of suitability, as specified in regulations adopted pursuant to this chapter, consisting of, but not limited to, personal history, prior activities and associations, credit history, civil litigation, past and present financial affairs and standing, and business activities, including whether the applicant or an affiliate of the applicant has a financial interest in any business or organization that is or was engaged in any form of gaming or transactions related to gaming prohibited by the law of the federal or state jurisdiction in which those activities took place. The department may specify additional requirements regarding the contents of the report and other information or documentation required to be submitted. (f) (1) Unless the service provider or its affiliate was licensed or authorized pursuant to this chapter or comparable federal or state law in the jurisdiction in which the bet was accepted or the transaction was permitted, there is a rebuttable presumption that an applicant for a service provider license is unsuitable if either of the following apply: (A) The service provider, or any corporate or marketing affiliate of the service provider, accepted any bet, or engaged in transactions related to those bets, from persons in the United States in any form of Internet gaming after December 31, 2006. (B) The service provider, or any corporate or marketing affiliate of the service provider, proposes to use covered assets, whether owned by the applicant or any other entity, that were used to accept the bets described in subparagraph (A) or engage in a financial transaction related to those bets. (2) (A) A service provider may rebut the presumption described in subparagraph (A) of paragraph (1) by presenting clear and convincing evidence of both of the following: (i) The acceptance of the bet or engagement in the transaction was not knowing or intentional. (ii) The bet was accepted or the related financial transaction was engaged in notwithstanding reasonable efforts by the service provider, its affiliate or subsidiary, to exclude bets from persons located in a jurisdiction in which it was not licensed or authorized to accept bets. (B) A service provider may rebut the presumption described in subparagraph (B) of paragraph (1) by presenting clear and convincing evidence of either of the following: (i) The applicant did not know, and should not reasonably have known, of the prior unauthorized activity when it purchased or acquired the covered assets. (ii) Use of the covered assets would not adversely affect the integrity of, or undermine public confidence in, intrastate Internet poker or otherwise pose a threat to the public interest or to the effective regulation and control of intrastate Internet poker. In making that determination, the department shall consider, along with any other factors the department deems relevant, the extent to which the service provider proposes to make use of covered assets for intrastate Internet poker and the extent to which the covered assets have been developed or used in connection with, or publicly associated or identified with, unlawful gaming activity. (g) An institutional investor holding less than 10 percent of the equity securities of a service provider's holding or intermediary companies shall be granted a waiver of an investigation for a finding of suitability or other requirement if all of the following apply: (1) The securities are those of a corporation, whether publicly traded or privately held. (2) Holdings of those securities were purchased for investment purposes only. (3) The institutional investor annually files a certified statement with the department to the effect that it has no intention of influencing or affecting the affairs of the issuer, the licensee, or service provider, as applicable, or its holding or intermediary companies. (4) Notwithstanding paragraph (3), the institutional investor may vote on matters submitted to the vote of the outstanding security holders. (5) The certification described in paragraph (3) shall do all of the following: (A) Include a statement that the institutional investor beneficially owns the equity securities of the corporation for investment purposes only, and in the ordinary course of business as an institutional investor, and not for the purposes of causing, directly or indirectly, the election of members of the board of directors, or effecting a change in the corporate charter, bylaws, management, policies, or operations of the corporation of any of its affiliates. (B) Indicate any changes to the structure or operations of the institutional investor that could affect its classification as an institutional investor, as that term is listed in paragraph (8). (C) State that the institutional investor and corporation shall maintain gaming compliance policies and procedures to implement and ensure compliance with this chapter and regulations adopted pursuant to this chapter. (6) An institutional investor granted a waiver under this subdivision that subsequently decides to influence or affect the affairs of the issuer shall provide not less than 30 days' notice of that intent and shall file with the department a request for determination of suitability before taking an action that may influence or affect the affairs of the issuer. However, the institutional investor may vote on matters submitted to the vote of the outstanding security holders. If an institutional investor changes its investment intent, or the department finds reasonable cause to believe that the institutional investor may be found unsuitable, the institutional investor shall take no action other than divestiture with respect to its security holdings until it has complied with any requirements established by the department, which may include the execution of a trust agreement. The institutional investor and its relevant holding, related, or subsidiary companies shall immediately notify the department and, if a tribal license is involved, the tribal gaming regulatory authority, of any information about, or actions of, an institutional investor holding its equity securities when that information or action may impact upon the eligibility of the institutional investor for a waiver pursuant to paragraph (2). (7) If at any time the department finds that an institutional investor holding a security of a licensee under this chapter has failed to comply with the terms of this chapter, or if at any time the department finds that, by reason of the extent or nature of its holdings, whether of debt or equity securities, an institutional investor is in a position to exercise such a substantial impact upon the controlling interests of a licensee that investigation and determination of suitability of the institutional investor are necessary to protect the public interest, the department may take any necessary action otherwise authorized by this chapter to protect the public interest. (8) For purposes of this subdivision, an "institutional investor" includes all of the following: (A) A retirement fund administered by a public agency for the exclusive benefit of federal, state, or local public employees. (B) An investment company registered under the federal Investment Company Act of 1940 (15 U.S.C. Sec. 80a-1 et seq.). (C) A collective investment trust organized by banks under Part 9 of the Rules of the Office of the Comptroller of the Currency (12 C.F.R. Sec. 9.1 et seq.). (D) A closed-end investment trust. (E) A chartered or licensed life insurance company or property and casualty insurance company. (F) A federally or state-regulated bank, savings and loan, or other federally or state-regulated lending institution. (G) An investment adviser registered under the federal Investment Advisers Act of 1940 (15 U.S.C. Sec. 80b-1 et seq.). (h) The commission and department shall give priority consideration to service provider applications from persons with contractual agreements with licensed operators or licensed operator applicants. 19990.405. (a) An entity seeking to act as a marketing affiliate shall apply to the commission for a marketing affiliate license or registration, and obtain a marketing affiliate license or registration, before providing marketing services to a licensed operator in connection with the operation of an authorized poker Web site. (b) (1) A marketing affiliate that is a card room or a tribe operating a land-based gambling facility in good standing shall register with the commission as a marketing affiliate. (2) A background investigation shall not be required for a marketing affiliate registrant described in this subdivision. (3) A marketing affiliate registrant described in this subdivision shall pay a registration processing fee sufficient to cover the reasonable costs associated with the issuance of the registration. (4) A marketing affiliate registrant described in this subdivision shall provide annual reports to the commission regarding its marketing affiliate activity. (c) (1) A marketing affiliate that is not eligible to register pursuant to subdivision (b) and that receives a flat fee per customer referral or customer registration that is not directly or indirectly related to player deposits or activity, and with revenues from those referrals of less than thirty thousand dollars ($30,000) per quarter shall register with the commission. (2) The department shall conduct a background investigation of the registrants described in this subdivision, as provided in commission regulations. The investigation shall include for the applicant and its owners fingerprint-based state and federal criminal history checks and clearances, work and business history, and inquiries into various public databases regarding any criminal proceedings or civil litigation. (3) A marketing affiliate registrant described in this subdivision shall pay a registration processing fee sufficient to cover the reasonable costs associated with the issuance of the registration and background investigation. (4) A marketing affiliate registrant described in this subdivision shall provide quarterly reports to the commission regarding its marketing affiliate activity. (d) Notwithstanding subdivisions (b) and (c), the commission may, at its discretion, require any person to apply for a marketing affiliate license under subdivision (e), including any person suspected of having any financial interest in any business or organization that is or was engaged in any form of gaming or transactions related to gaming prohibited by the law of the federal or state jurisdiction in which those activities or transactions originated or took place. (e) A marketing affiliate that is not eligible to register pursuant to subdivision (b) or (c), or that is required by the commission pursuant to subdivision (d), shall apply to the commission for a marketing affiliate license. The department shall review the suitability of an applicant for a marketing affiliate license. An applicant for a marketing affiliate license shall pay a license processing fee sufficient to cover the reasonable costs associated with the issuance of the license. Before issuing a marketing affiliate license to an applicant, the department shall conduct the full investigation required by this section of all of the following persons: (1) All officers of the license applicant. (2) The owner or owners of either of the following: (A) The license applicant. (B) Any corporate affiliate of the license applicant. (3) Any persons otherwise providing goods to, or performing services for, the license applicant in exchange for a payment based on volume or revenues. (4) Any person deemed by the department to have significant influence over the license applicant. (5) Any other person specified by the commission. (f) A full investigation shall include a review and evaluation of the information necessary for the department to make a determination of suitability, as specified in regulations adopted pursuant to this chapter, consisting of, but not limited to, personal history, prior activities and associations, credit history, civil litigation, past and present financial affairs and standing, and business activities, including whether the applicant or an affiliate of the applicant has a financial interest in any business or organization that is or was engaged in any form of gaming or transactions related to gaming prohibited by the law of the federal or state jurisdiction in which those activities or transactions originated or took place. The commission or department may specify additional information or documentation required to be submitted. (g) (1) Unless the applicant for a marketing affiliate license or registration or its affiliate was licensed or authorized pursuant to this chapter or comparable federal or state law in the jurisdiction in which the bet was accepted or the transaction was permitted, there is a rebuttable presumption that an applicant for a marketing affiliate license or registration is unsuitable if either of the following apply: (A) The applicant, an owner of the applicant, or any affiliate of the applicant accepted any bet, or engaged in transactions related to those bets, from persons in the United States in any form of Internet gaming after December 31, 2006. (B) The applicant, an owner of the applicant, or any affiliate of the applicant proposes to use covered assets, whether owned by the applicant or any other entity, that were used to accept the bets described in subparagraph (A) or engage in a financial transaction related to those bets. (2) An applicant may rebut the presumption described in paragraph (1) by presenting clear and convincing evidence of both of the following: (A) The acceptance of the bet or engagement in the transaction was not knowing or intentional. (B) The bet was accepted or the related financial transaction was engaged in notwithstanding reasonable efforts by the applicant, an owner of the applicant, or any affiliate of the applicant to exclude bets from persons located in a jurisdiction in which it was not licensed or authorized to accept bets. (h) The commission and department shall give priority consideration to marketing affiliate applications from persons with contractual agreements with licensed operators or licensed operator applicants. 19990.406. (a) The department may issue a finding of suitability for a license applicant to obtain a license only if, based on all of the information and documents submitted, the commission is satisfied that each of the persons subject to investigation pursuant to Section 19990.404 is both of the following: (1) A person of good character, honesty, and integrity, or, if an entity, in good standing in its jurisdiction of organization and in all other jurisdictions in which it is qualified, or should be qualified, to do business. (2) A person whose 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 authorized Internet poker games, or create or enhance the dangers of unsuitable, unfair, or illegal practices, methods, and activities in the conduct of authorized Internet poker games or in the carrying on of the business and financial arrangements incidental thereto. (b) The commission shall issue a finding that a license applicant is not suitable to obtain a license if it finds that a person subject to investigation pursuant to this article is described by any of the following: (1) Failed to clearly establish eligibility and qualifications in accordance with this chapter. (2) Failed to timely provide information, documentation, and assurances required by this chapter or requested by the department, or, with respect to a licensed applicant, failed to reveal any fact material to qualification, or supplied information that is untrue or misleading as to a material fact pertaining to the suitability criteria. (3) Been convicted of a felony, including a conviction by a federal court or a court in another state or foreign jurisdiction for a crime that would constitute a felony if committed in California, except that a conviction of a felony involving the hunting or fishing rights of a tribal member while on his or her reservation shall not be included among the class of disqualifying felonies. (4) Been convicted of a misdemeanor in a jurisdiction 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. However, 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 department or affect the applicant's burden. (5) Has associated with criminal profiteering activity or organized crime, as defined in Section 186.2 of the Penal Code. (6) Has contemptuously defied a legislative investigative body, or other official investigative body of a state or of the United States or a foreign jurisdiction, when that body is engaged in the investigation of crimes relating to poker, official corruption related to poker activities, or criminal profiteering activity or organized crime, as defined in Section 186.2 of the Penal Code. (7) Is less than 21 years of age. (8) Has knowingly and willfully accepted a bet, or engaged in a financial transaction related to that bet, after December 31, 2006, from a person located in the United States on any form of Internet gambling, including, but not limited to, poker, that has not been affirmatively authorized by the law of the United States or of the state in which the person initiating the bet or where the related financial transaction was located, or has been the holder of a direct or indirect financial interest in a person or entity that has accepted that bet or engaged in that transaction. (9) Has knowingly facilitated or otherwise provided services with respect to bets or gambling games using the Internet, or engaged in financial transactions related to those bets, involving persons located in the United States for a person described in paragraph (8), acting with knowledge of the fact that these bets, financial transactions, or gambling games involved persons located in the United States, except when these bets were accepted after December 31, 2006, by the holder of a federal or state license making the acceptance of these bets or related financial transactions lawful. (10) Has purchased or acquired the covered assets of any entity described in paragraph (8) or (9), and will use any of those assets in connection with Internet poker in the state. (c) License applications shall be treated as follows: (1) The commission shall reject the license application of an applicant found to be ineligible for licensure. (2) If denial of the application, or approval of the license with restrictions or conditions on the license, is recommended, the department shall prepare and file with the commission written reasons upon which the recommendation is based. Prior to filing its recommendation with the commission, the department shall meet with the applicant, or the applicant's duly authorized representative, and inform the applicant generally of the basis for a proposed recommendation that the application be denied, restricted, or conditioned. (3) This section does not require the department to divulge to the applicant confidential information received from a law enforcement agency or information received from a person with assurances that the information would be maintained confidential, nor to divulge any information that might reveal the identity of an informant or jeopardize the safety of a person. (4) Denial of an application shall be without prejudice to a new and different application filed in accordance with any regulations adopted by the commission with respect to the submission of applications. (5) An applicant may withdraw its application for a license at any time prior to final action on the application by the commission by filing a written request with the commission to withdraw the application, absent knowledge of a specific reason to suspect that the person or entity may be found unsuitable. (6) The commission shall waive the application of paragraph (8) or (9) of subdivision (b) for an applicant who demonstrates by clear and convincing evidence that its conduct in connection with bets and games involving persons located in the United States was not unlawful under federal law and the laws of each state in which persons making the bets were located. In making this determination, the commission may consider evidence that the applicant was prosecuted under the laws of any state, the United States, or another jurisdiction. However, the termination of a prosecution in a manner other than a conviction does not demonstrate that the applicant's conduct was lawful. This section does not waive the need to comply with all otherwise applicable license and suitability requirements. (7) The commission shall waive the application of paragraph (10) of subdivision (b) for an applicant who demonstrates by clear and convincing evidence any of the following: (A) The applicant did not know and should not reasonably have known that the covered assets were acquired, derived, or developed directly or indirectly from or associated with any operation that has accepted a bet or engaged in a financial transaction related to that bet from any person in the United States on any form of Internet gaming after December 31, 2006. (B) (i) The applicant's conduct involving the covered assets in connection with bets and gambling games involving persons located in the United States was not unlawful under federal law and the laws of each state in which persons making the bets were located. (ii) In making a determination pursuant to this subparagraph, the commission may consider evidence that the applicant was prosecuted under the laws of any state, the United States, or another jurisdiction. However, the termination of a prosecution in a manner other than a conviction does not demonstrate that the applicant's conduct was lawful. (C) (i) The applicant's use of the covered assets in connection with intrastate Internet gaming will not adversely affect the integrity of, or undermine public confidence in, intrastate Internet poker or otherwise pose a threat to the public interest or to the effective regulation and control of intrastate Internet poker. (ii) In making a determination pursuant to this subparagraph, the commission shall consider, along with any other factors the commission deems relevant, the extent to which the applicant proposes to make use of covered assets for intrastate Internet poker and the extent to which the covered assets have been developed or used in connection with, or publicly associated or identified with, unlawful gaming activity. 19990.407. (a) This chapter does not restrict the authority of a tribe that is a licensed operator or that owns a tribal enterprise that is a licensed operator to conduct suitability reviews of its service providers. (b) This chapter also does not prohibit a tribal gaming regulatory authority from providing the results of its suitability investigations or determinations to the commission or department for its consideration in issuance of licenses pursuant to this chapter. Article 5. Requirements for the Operation of an Authorized Poker Web Site 19990.501. (a) A licensed operator shall ensure that registered players are eligible to play authorized Internet poker games 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. (b) A registered player shall be physically located within the State of California at the time of gambling. (c) A registered player shall be at least 21 years of age. (d) Each licensed operator shall do all of the following, whether directly or through the actions of its licensed service providers or a satellite service center: (1) Prior to registering a person as a registered player or permitting a person to play an authorized Internet poker game, the licensed operator shall verify that the person is 21 years of age or older. The licensed operator shall attempt 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. (2) 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. For the purposes of this section, a valid form of government identification includes a driver' s license, state identification card, passport, official naturalization or immigration document, such as an alien registration receipt card or an immigrant visa, or United States military identification. (3) The licensed operator shall verify that the name and physical billing address associated with any financial instrument provided by a person to make deposits matches the name and, if applicable, the physical billing address that was verified at the time of that person's registration. (4) (A) The licensed operator shall require a registered player to make the initial deposit into his or her registered player account in person at the land-based gaming facility operated by the licensed operator or at a satellite service center operated pursuant to subdivision (c) of Section 19990.505. (B) The licensed operator shall require a registered player to make a withdrawal from his or her registered player account in person at the land-based gaming facility operated by the licensed operator or at a satellite service center operated pursuant to subdivision (c) of Section 19990.505 if either of the following apply: (i) The withdrawal is ____ dollars ($____) or more. (ii) The registered player's cumulative withdrawals in a seven-day period total ____ dollars ($____) or more. (C) Except as provided in subparagraphs (A) and (B), the licensed operator may permit a registered player to make deposits and withdrawals by any electronic means or in person at the land-based gaming facility operated by the licensed operator or at a satellite service center operated pursuant to subdivision (c) of Section 19990.505. (5) The licensed operator shall submit information to each payment provider through which it makes sales, in an appropriate form and format so that the words "Internet poker" or equivalent description is printed on the purchaser's statement with that payment provider, when a payment to a licensed operator is made and the transaction is categorized as required by law. (e) A licensed operator is not in violation of this section if the operator can demonstrate that it has complied with the requirements of paragraphs (1) and (2) of subdivision (d), and a person under 21 years of age participates in an authorized Internet poker game provided by the licensed operator. (f) The department may assess civil penalties against a person who violates this section, whether a licensed operator, owner, service provider, or player, 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) The commission shall, by regulation, provide a process for a person to voluntarily restrict his or her play on an authorized poker Web site, and for a licensee to exclude from play any person who has filled out an online self-exclusion form. The regulations shall also provide for a voluntary self-exclusion program that restricts play with all licensed operators. A person shall not self-restrict or self-exclude for more than five years at a time unless the regulations give a person the right to petition for a change in his or her status. (1) The commission shall develop an online self-exclusion form within six months of the effective date of this chapter. (2) The commission shall deliver the form to each licensed operator. (3) A licensed operator shall prominently display a link to the department's Responsible Gambling Internet Web page and the online self-exclusion form on the authorized poker Web site that is displayed when either of the following occurs: (A) A person registers as a registered player. (B) Each time a registered player accesses the authorized poker Web site prior to playing. (4) A licensed operator shall retain the online self-exclusion form to identify persons who want to be excluded from play. A licensed operator shall exclude those persons from play. (5) A licensed operator that has made commercially reasonable efforts to comply with this subdivision shall not be held liable in any way if a person who has filled out an online self-exclusion form plays despite that person's request to be excluded. 19990.502. A licensed operator shall offer only authorized Internet poker games and process bets in accordance with the specified game and betting rules established by the licensed operator and approved by the commission pursuant to Section 19990.503. 19990.503. (a) In order to propose a game for play, a licensed operator shall provide the commission with both of the following: (1) Game rules and betting rules it proposes to offer to registered players. (2) Documentation relating to development and testing of the game' s software. (b) A licensed operator shall not offer a game for play until the commission has approved the game rules and betting rules. 19990.504. (a) A licensed operator shall ensure that games are fair. (b) A licensed operator shall display a link on its authorized poker Web site that includes the following information for each game offered: (1) The name of the game. (2) Any restrictions on play. (3) The rules of the game. (4) All instructions on how to play. (5) The unit and total bets permitted. (6) The registered player's current account balance, which shall be updated in real time. (7) Any other information that a licensed operator determines is necessary for the registered player to have in real time to compete fairly in the game. (c) Data used to create game results shall be unpredictable so that it is infeasible to predict the next occurrence in a game. (d) A licensed operator shall deploy controls and technology to minimize fraud or cheating through collusion, including external exchange of information between different players, or any other means. (1) If a licensed operator becomes aware that fraud or cheating is taking place or has taken place, it shall take steps to stop those activities immediately and inform the department of all relevant facts. (2) The department shall not impose a fine against a licensed operator to prevent fraud or cheating if the licensed operator can demonstrate that it acted responsibly to prevent those activities as soon as the licensed operator became aware of them. (e) In a per hand game, if the gaming server or software does not allow a game to be completed, the game shall be void and all funds relating to the incomplete game shall be returned to the registered player's account. (f) In a tournament, if the gaming server or software does not allow the tournament to be completed, all prize money shall be distributed among players in accordance with the procedure published by the licensed operator prior to the commencement of the tournament. (g) A licensed operator shall display or allow the results from any authorized Internet poker game, including the redemption of winnings from any game, to be displayed or represented only by showing the card faces of the winning hand and the dollar amount won. (h) A licensed operator shall not do any of the following: (1) Display or allow the outcome from any authorized Internet poker game, including the redemption of winnings from any game, to be displayed or represented in a manner that mimics a slot machine or any other casino style games, including, but not limited to, blackjack, roulette, or craps. (2) Use casino game graphics, themes, or titles, including, but not limited to, depictions of slot machine-style symbols, banked or banking card games, craps, roulette, keno, lotto, or bingo. (3) Allow the use of robotic play at any time by itself, a service provider, or a player. 19990.505. (a) A licensed operator shall register players and establish registered player accounts prior to play. (b) A person shall not participate in any game provided by a licensed operator unless the person is a registered player and holds a registered player account. (c) (1) A registered player account shall be established in person at the land-based gaming facility operated by the licensed operator or at a satellite service center operated pursuant to paragraph (2). (2) (A) In order to satisfy the in-person registration and transactional requirements of paragraph (1) of this subdivision and paragraph (4) of subdivision (d) of Section 19990.501, a licensed operator may enter into an agreement for the operation of one or more satellite service centers. A satellite service center may act on behalf of, or in coordination with, the licensed operator in carrying out those requirements. (B) Both the satellite service center and the licensed operator may be held liable for any violation of this chapter arising out of an agreement between the satellite service center and the licensed operator to provide the in-person services described in clause (ii) of subparagraph (C). (C) A licensed operator shall ensure that a satellite service center meets both of the following: (i) Is either of the following: (I) A card room with a land-based gaming facility licensed pursuant to Chapter 5 (commencing with Section 19800). (II) A tribe that operates a casino pursuant to a tribal-state compact. (ii) Is financially, logistically, and technologically capable of performing all of the following in-person services at the satellite service center in