Brief Background of Gambling and Betting in California

Betting on games of chance is generally illegal in California and the State Constitution currently prohibits sports wagering. But Californians still wager and gamble in a number of ways discussed in this article.

Legal Wagering in California

Tribes —   Recognized Tribes who have negotiated compacts with the State of California may offer what is generally thought of “gambling” and in the Federal lingo is either Class II (bingo) or Class III gaming (slots). Tribes with compacts in California may offer card games, dice games, and slot machine games at Tribal Casinos on Tribal land. Tribes without compacts may only offer bingo slot machine games (Class II) on their land.

Class II machines look mostly similar to traditional slots but are somewhat slower, as they must follow bingo rules rather than random-chance instantaneous gameplay. Tribal casinos are similar to “Vegas style” gambling except they cannot offer free alcohol.

California Lottery — The State does have one Lottery, approved by the voters in 1984, which is governed by a state Commission with a mission to produce funding for the State’s education system (about 1% of state school money is attributed to the Lottery).  Californians may also participate in a multi-state lottery.

Cardrooms — The Gambling Control Act, effective in 1998, regulates cardrooms, but also imposed both state moratorium on new cardrooms and allowed for additional restrictions by cities, counties, or the City and County of San Francisco (unique in its joint grouping).  Its precursor, the Gaming Registration Act, was enacted in 1984, but cardroom gambling has existed in California pre-Statehood.

There are currently 88 active cardrooms in the State, and a few inactive ones. They range in table size from 1 table to 270, although only nine cardrooms are approved for more than 50 tables.

Anyone who controls or participates in the management of a casino, cardroom, or gambling business must be licensed, as must all employees who participate in the conduct of games. A cardroom is considered a “financial institution” under California Law and is subject to the Federal Bank Secrecy Act.

While the Vegas saying that the “House always wins” may be true in Vegas, in California, the “house” is not also the bank.  Due to allegations (and evidence) of cheating by Gold Rush saloon owners against gold miners, “banked games” are not allowed in California, therefore a cardroom charges players either a per hand or per hour fee to play, and separate gambling businesses (third party providers of proposition player services, such as Gaming Fund Group, Network Management, Acme Player Services, and Majesty Partners) have evolved to meet the banking/betting needs of players – some in contract with the cardrooms and some as free agents. 

Recent controversy has arisen as some tribes contend that the rotating player position requirement to prevent house banking has evolved to one cardroom being the bank for another cardroom, thus undercutting the statutory prohibition on house banking.  Lawsuits have been filed; this may be an area of legislative or regulatory focus in 2019.

Bingo — Bingo is allowed in California by charitable entities who must register with the Department of Justice (DOJ), under local jurisdiction rules and policing.  Remote Caller Bingo  is (as of 2013) regulated by the Gambling Control Commission after vetting by the DOJ Bureau of Gambling Control, as long as it is authorized by local jurisdictions. There are currently 37 active recognized organizations conducting remote caller bingo, including veteran’s groups (American Legion and VFW posts), religious groups (Knights of Columbus, Catholic schools, and churches), sporting groups, and fraternal organizations (Moose, Elks, and Eagle Lodges).  Although some received interim approval in 2011, there is only one entity active without interim approval.

Horse Racing — Horse and mule racing is regulated by the Department of Consumer Affairs, Horse Racing Board. The Board licenses jockey and trainers, regulates veterinary care, and sets racing days for the State.  After legislation in 2001, in addition to racetracks, there are also 41 satellite betting facilities up and down the California coast  — this allows “Advance Deposit Wagering” to be considered “wagering instructions” through the use of an account.  In 2014, the total amount wagered by patrons through this system was more than $600 million.

Boxing and Related Martial Arts — Boxing, Wrestling, and Martial Arts are regulated by the Department of Consumer Affairs. This jurisdiction covers professional and amateur boxing, kickboxing, any mixed martial arts, etc., with any matches held or conducted within California, with the exception of any contest conducted under the supervision of the United States Government (military bases, for example) or schools in which the contestants are students. The Department licenses clubs, referees, judges, matchmakers, timekeepers, managers, agents, and all professional fighters, trainers, chief seconds, and seconds.

Some Recent Legislative Attempts to Expand Betting

In the 2015-2016 legislative session, there was a move by State Assemblymember Adam Gray of Merced with AB 1437 to make Fantasy Sports legal, but many opposition groups pointed out that a constitutional amendment would be required.  Issues regarding potential conflicts with tribal gaming compacts and unanswered questions regarding funding for the Problem Gambling Fund also remained.

The Internet Fantasy Sports Games Consumer Protection Act, as the bill was named, stalled in the Legislature, but would have allowed sports betting by licensed card rooms, licensed horse racing associations, and federally recognized Indian tribes, if the federal sports wagering ban was ever lifted.

Gray proposed that the system in California be regulated by the state Department of Justice. In arguing for the bill, the Assemblymember cited a 2015 estimate by the American Gaming Assn. that Americans were expected to make $3.8 billion worth of illegal bets on the 2015 Super Bowl, compared with the $100 million legally bet on the game each year.

Gray’s AB 1441 in that same legislative session, introduced in February 2015 (initially) a spot bill on alcohol, then amended September 10, 2015 to substantively address sports betting, would have enacted the California Interactive Sports Wagering Consumer Protection Act:

…which would authorize the owner or operator of a card room that holds a state gambling license, a racing association or racing fair with a current license, or a federally recognized California Indian tribe that operates a gaming facility pursuant to a facility license issued in accordance with a tribal gaming ordinance, to accept and facilitate wagering on a sports event, as defined, by any legal system or method of wagering, including, but not limited to, exchange wagering, parlays, over-under, moneyline, and straight bets, by applying to the Department of Justice for a license and authorization to conduct sports wagering, as defined. The bill would require sports wagering to be accepted and executed only using telephone, computer, or another method of electronic wagering communication. The bill would require each licensed operator to pay an annual fee of $_____ to the State Department of Public Health for deposit in the Gambling Addiction Program Fund. The bill would require each licensed operator to remit to the Treasurer on a quarterly basis for deposit in the ______ Fund an amount equal to _____ from the total win amount from the facilitation of a sports event wager. The bill would require the department to adopt regulations to implement these provisions, including authority to adopt regulations establishing fees in a reasonable amount necessary to recover the costs incurred by the department relating to the administration of these provisions.

This bill would require the department to, among other things, monitor the conduct of all licensed operators. The bill would prohibit a licensed operator from, among other things, accepting a wager from any person who is under 21 years of age or whose name appears on a self-exclusion list. Any willful violation of these provisions would be punishable as a misdemeanor. By creating a new crime, this bill would impose a state-mandated local program.

This bill would provide that its provisions would become operative only if the federal Professional and Amateur Sports Protection Act is amended or repealed to allow sports wagering in California and a state constitutional amendment to authorize sports wagering has been approved by the voters.

But this language was completely gutted in January 2016 amendment, leaving the bill to die as a spot horse racing bill in the Assembly Governmental Organization Committee.

Assemblymember Gray then proposed AB 2863 in February 2016, which would have created the Internet Poker Consumer Protection Act of 2016.  Following on the United States’ Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA, 31 U.S.C. 5361 et seq.), the bill would have authorized intrastate Internet poker by licensed operators to registered players (over the age of 21) in California.  (Poker games would not allow any feature which uses an element of chance to determine the amount or availability of any prizes, payments, or awards.  Poker is also played against other “live” players and not against the “house” or any device.)  While being overseen by the Gambling Control Commission, the horse racing industry would have been included in the budgeting as an annual subsidy.  Tribes would have been included as potential operators.  However, AB 2863 also died in November 2016, in its house of origin.

Previously, in 2012, the state Senate voted 33-2 to approve a bill by then-Senator Rod Wright of Inglewood that would have established a framework for allowing sports betting in the state at any licensed gambling establishment, horse racing track and satellite wagering facility. The measure was contingent on a change in federal law that prohibited such betting.  A similar bill in 2013 stalled. The proposal would have allowed state fees to be charged amounting to 7.5% of gross revenue generated by sports wagering activities.

As proposed constitutional amendment, Assembly Constitutional Amendment 18, pushed by State Assemblymember Adam Gray, did not pass committee last legislative session, it could not be placed on the ballot for this past November election (as many had hoped).  In 2019, new legislation may be proposed again to make sports betting legal in California.  Such a bill would require a two-thirds approval in the state Legislature to be placed on the ballot as an amendment to the California State Constitution. If it passes both houses, the proposal would then go to voters in a regular election, where it would require a majority vote of approval.

In the meantime, there are some moves federally to legislate sports betting – both to limit it and to open it up – but we’re not betting on that outcome.

If you need assistance in navigating this complicated and highly regulated area of card rooms or gaming in California, please call the experts at Simas & Associates.