Gaming law (also known as ‘gambling law’) involves both federal and state laws that regulate games of chance, ranging from traditional casino-type gambling like card or dice games, to gambling machines, to state-run lotteries, to commercial promotional schemes and fundraising raffles by nonprofits.

Federal laws governing gaming / gambling

The Interstate Wire Act of 1961 (aka the “Federal Wire Act”)

The Federal Wire Act prohibits placing interstate bets, specifically using “a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers...” 18 U.S.C. § 1084.

• Scope: In the past, the Federal Department of Justice (“DOJ”) opined that the Federal Wire Act applied only to interstate betting involving a “sporting event or contest,” the DOJ revised its view in January of 2019, holding in a slip opinion that the Federal Wire Act can apply to interstate betting unrelated to a sporting event or contest. (https://www.justice.gov/olc/file/1121531/download)
• Common Carriers: When notified in writing that they are being used for interstate gambling in violation of Federal, State or local law, common carriers of interstate communications regulated by the FCC must “discontinue or refuse, the leasing, furnishing, or maintaining of such facility, after reasonable notice to the subscriber,” and are not civilly or criminally liable for such compliance. 8 U.S.C. § 1084(d).

Unlawful Internet Gambling Enforcement Act of 2006 (“UIGEA”)

The UIGEA "prohibits gambling businesses from engaging in “restricted transactions,” defined as “knowingly accepting payments in connection with the participation of another person in a bet or wager that involves the use of the Internet and that is unlawful under any federal or state law."

Indian Gaming Regulatory Act (Pub.L. 100–497, 25 U.S.C. § 2701 et seq.)

Indian gaming has proven a litigious prospect since its inception, when the impoverished Cabazon Band of Mission Indians and the Morongo Band of Cahuilla Mission Indians opened bingo parlors and poker halls in Riverside, CA and were promptly shut down and arrested by the sheriff for opting to disregard California’s stringent bingo regulations. The tribe sued successfully based on tribal sovereignty; the Supreme Court noted that the Federal government’s policy of accepting Indian Gaming was relevant but held California’s “interest in preventing the infiltration of the tribal bingo enterprises by organized crime does not justify state regulation of the tribal bingo enterprises in light of the compelling federal and tribal interests supporting them. State regulation would impermissibly infringe on tribal government.” California v. Cabazon Band of Mission Indians, 480 U.S. 202 (1987).

In response to the Supreme Court’s trend toward tribal sovereignty in that and other cases, Congress passed the Indian Gaming Regulatory Act (“IGRA”), which grants “Indian tribes...the exclusive right to regulate gaming activity on Indian lands if the gaming activity is not specifically prohibited by Federal law and is conducted within a State which does not, as a matter of criminal law and public policy, prohibit such gaming activity.” 25 U.S. Code § 2701.

The IGRA also established the federal National Indian Gaming Commission, which regulates Indian Gaming and approves tribal-state agreements to establish Indian gaming in states where gambling is legal.

California State Laws Governing Gaming / Gambling

Principal State Laws

• The California Penal Code, Chapter 10 (Gaming), §§ 330 - 337, criminalizes most commercial gambling and provides a number of applicable definitions;
• The California Gambling Control Act (Business and Professional Code, Division 8, Chapter 5, §§ 19800 - 19987) relies on the Penal Code’s definitions of “controlled gambling” and regulates legal gambling through a series of statutes and the creation of a regulatory body known as the California Gambling Control Commission;
• The California Code of Regulations, Title 4, Division 18, are promulgated by the California Gambling Control Commission to establish policies and procedures for in-state gambling, including licenses to operate and work in California’s legal gambling industry. California Gambling Control Act and regulations are enforced by the California Attorney General’s Bureau of Gambling Control.

“Controlled Gaming”

California prohibits privately operated lotteries, gambling machines, and games of chance in which players compete against a player-dealer (known as the “house” or “bank”) rather than each other (“banked games”), or in which the bank takes a percentage of all bets (“percentage games”.) CA Bus & Prof Code § 19801.

A number of gambling activities are exempted from the “controlled game” definition in the California Penal Code:

• Bingo games operated by nonprofits subject to certain conditions;
• Games conducted by the California State Lottery;
• Parimutuel wagering (pooled betting) on horse races, which is regulated by the California Horse Racing Board; and
• Card games “in private homes or residences, in which no person makes money for operating the game, except as a player.”

California Penal Code § 337(j).

Operating a controlled game in California requires a license issued by the California Gambling Control Commission (the “Commission”). However, cities and counties may impose “more stringent local controls or conditions upon gambling” than those adopted by the Commission, including inspecting or taxing licensed gambling facilities, or may even opt to ban all gambling outright. CA Bus & Prof Code § 19803. Many different municipal regulations govern gaming throughout California.

Gambling Machines Prohibited

Courts have continued to parse what machines or contests qualify as gambling machines under the California Gambling Control Act. The principal discussion surrounds whether there is an element of skill by the player necessary to procure something of value (e.g., prizes or additional games.)

“Pinball and other amusement machines or devices, which are predominantly games of skill, whether affording the opportunity of additional chances or free plays or not, are not included within the term slot machine or device, as defined in this section.” People of the State of California v. Pong Marketing And, FCS047090 (https://trellis.law/ruling/FCS047090/people-of-the-state-of-california-v-pong-marketing-and/20180809740fb1)

[N]oting, among other things, that “California State Lottery is permitted to operate the lottery. Selling the tickets in vending machines, rather than from a salesclerk behind a counter, did not make the process an additional game of chance.” California v. Pong Marketing And, FCS047090 (citing Trinkle v. California State Lottery (2003) 105 Cal.App.4th 1401).

“The determination as to whether skill or chance predominates is not always a triable issue. For example, the determination that video games that simulated card and dice games was held to be a question of law, because no material facts about the games were in dispute.” People of the State of California v. Pong Marketing And, FCS047090 (citing Score Family Fun Ctr. v. County of San Diego (1990) 225 Cal.App.3d 1217.) (https://trellis.law/ruling/FCS047090/people-of-the-state-of-california-v-pong-marketing-and/20180809740fb1)

“[E]ven though all sweepstakes entries were previously arranged in batches (or pools) that had predetermined sequences, that fact does not change our opinion of this issue (i.e., the chance element) because the results would still be unpredictable and random from the perspective of the user.   § 330b, subdivision (d), refers to chance “or of other outcome of operation unpredictable by him or her ․” People ex rel. Green v. Grewal (2015) 61 Cal.4th 544.

“The situation here is clearly analogous to what was described in People ex rel. Lockyer v. Pacific Gaming Technologies, supra, 82 Cal.App.4th 699, where “[a] preset computer program determine[d] the results of the sweepstakes.”  (Id. at p. 702.)   The machine or device in that case (a “VendaTel” that distributed a telephone card to each customer while entering them in a chance to win a prize) had a “ '10 percent payout structure' ” where it would “pay[ ] out $500 in prizes for every $5,000 paid into the machine” with “ ‘predetermined winners' spread out over a period of time.”  (Id. at p. 702, fn. 4.) Under those facts, the Court of Appeal held that the users of the device became entitled to receive cash prizes “purely by chance (without any skill whatsoever).”  (Id. at p. 703, italics added.)” People ex rel. Green v. Grewal (2015) 61 Cal.4th 544.

“Even if the sequence of entries has been electronically frontloaded into defendants' integrated system, patrons win cash prizes based upon “hazard or chance or of other outcome of operation unpredictable by [the patron]” in violation of § 330b, subdivision (d).  Therefore, the chance element is satisfied.” People ex rel. Green v. Grewal (2015) 61 Cal.4th 544.

Reverse-Vending Machines Permitted

Excluded from the prohibition are so-called ‘reverse vending machines’, which “in which empty beverage containers are deposited for recycling and which provides a payment of money” or other thing of value (vouchers, e.g.). California Penal Code § 319.5.

Fraudulent Games

California’s Penal Code also prohibits “concessions” (for-profit games offering prizes to the public for a participation fee) that “diminish the chance of any patron to win a prize” through the use of a hidden mechanical device...obstruction with intent...or by any other fraudulent means.” California Penal Code § 334.

Explicitly included in this prohibition is a well-worn carnival game known as “razzle-dazzle”, defined as “games of skill or chance in which the player pays money or other valuable consideration in return for each opportunity to make successive attempts to obtain points by the use of dice, darts, marbles or other implements, and where such points are accumulated in successive games by the player toward a total number of points, determined by the operator, which is required for the player to win a prize or other valuable consideration.” California Penal Code § 334(c). Such games are traditionally structured in such a way as to make winning a mathematical impossibility.

Card Rooms / Poker Clubs

Although California prohibits gambling in casinos where players bet “against the house”, card games in which players place bets to compete against one another are permitted. Accordingly, California has seen the rise of ‘Card Rooms’, which resemble casinos in appearance and amenities (and often in name), but conform to California law by providing space for players to gamble against one another directly, rotating as dealers during the game. Unlike traditional casinos in Nevada or New Jersey, which gamble against their patrons, California’s gambling clubs make money by charging players a fee to play at their tables.

Third-Party Providers of Proposition Player Services

In order to keep card games going at tables where players decide to cease playing, the Commission has authorized “Third-Party Providers of Proposition Player Services” (“TPPPS”), which are private state-licensed businesses that provide and fund players (known as Third-Party Proposition Players or colloquially as “Props”) to participate in the game as fellow players. California Code of Regulations § 12200. TPPPS’s act as service providers to the casino rooms for a fee, and are required to be separate entities, prohibited from co-mingling funds with the casino room owners.

Prohibited Individuals

The California Gambling commission maintains and distributes to gaming establishments a list of individuals prohibited from attendance, based on their criminal history or “notorious or unsavory reputation”. Business and Professions Code §19844.

Case Law Relating To Regulated Gambling in California

Purpose

“To promote public trust and confidence, the Act requires all gambling establishments and all persons having a significant involvement in gambling operations to be licensed. (§ 19801, subd. (i).) The Act also requires licensure for “[e]very person who . . . receives, directly or indirectly, any compensation or reward, or any percentage or share of the money or property play, for keeping, running, or carrying on any controlled game in this state.” (§ 19850.) If the “person” is an entity rather than a natural person, a license is generally required for the officers, directors, shareholders, managers, members, or owners of the entity, or for any person “who receives . . . any percentage share of the revenue earned by the owner from gambling activities.” (§ 19852.)” Eric G Swallow Vs. California Gambling Control Commission, 34-2016-80002402-CU-WM-GDS (Jan 13, 2017). (https://trellis.law/ruling/34-2016-80002402-CU-WM-GDS/eric-g-swallow-vs-california-gambling-control-commission/20181102241c84)

Licensing of employees in the gambling industry

“The Legislature expressly limited [California state courts’] review of the [California Gambling Control] Commission’s decision[s in licensing potential employees of the gambling industry.] The Commission’s decision may only be reversed upon a finding it was arbitrary and capricious. The court does not reweigh the evidence or substitute its judgment for that of the Commission. However, the Commission’s decision must demonstrate the Commission considered all relevant factors. The decision must also demonstrate a rational connection between those factors and the Commission’s determination. Callaye Jo Strauss vs. California Gambling Control Commission 34-2018-80002882-CU-WM-GDS (citing American Board of Cosmetic Surgery, supra, 162 Cal.App.4th at 547-48.) (https://trellis.law/ruling/34-2018-80002882-CU-WM-GDS/callaye-jo-strauss-vs-california-gambling-control-commission/20180921a0b258)

“To promote public trust and confidence, the [California Gambling Control] Act requires all persons having a significant involvement in gambling operations must be licensed. (§ 19801, subd. (i), (k).) The Act specifies “[e]very key employee shall apply for and obtain a key employee license.” (§ 19854.) A “key employee” is anyone employed “in a supervisory capacity or empowered to make discretionary decisions that regulate gambling operations[.]” (§ 19805, subd. (x).) The Act is administered by the Gambling Control Commission (“Commission”), with help from the Department of Justice’s Bureau of Gambling Control (“Bureau”). (§§ 19811, 19826, 19827.) The Commission has ultimate authority to decide whether to issue a license. (§§ 19856, 19870.) The Bureau investigates the applicants’ qualifications and makes recommendations to the Commission. (§§ 19826, 19868.)” Callaye Jo Strauss vs. California Gambling Control Commission 34-2018-80002882-CU-WM-GDS (despite convincing evidence that the Plaintiff was “an excellent employee who was very successful in her work in controlled gambling,” (https://trellis.law/ruling/34-2018-80002882-CU-WM-GDS/callaye-jo-strauss-vs-california-gambling-control-commission/20180921a0b258)

“The Act provides no license shall be issued unless the Commission is satisfied the applicant is “[a] person of good character, honesty, and integrity . . . whose prior activities, criminal record, if any, reputation, habits, and associations do not pose a threat to the public interest of this state, or to the effective regulation and control of controlled gambling, or create or enhance the dangers of unsuitable, unfair, or illegal practices, methods, and activities in the conduct of controlled gambling[.]” (§ 19857.) The Act also provides, “An application to receive a license constitutes a request for a determination of the applicant’s general character, integrity, and ability to participate in, engage in, or be associated with, controlled gambling.” (§ 19856, subd. (b).) “The burden of proving his or her qualifications to receive any license is on the applicant.” (§ 19856, subd. (a.)” Callaye Jo Strauss vs. California Gambling Control Commission 34-2018-80002882-CU-WM-GDS (https://trellis.law/ruling/34-2018-80002882-CU-WM-GDS/callaye-jo-strauss-vs-california-gambling-control-commission/20180921a0b258)

“License applications are submitted on forms furnished by the Bureau. (§ 19864.) These forms require “complete information and details with respect to the applicant’s personal history, habits, character, criminal record, business activities, financial affairs, and business associates…” Callaye Jo Strauss vs. California Gambling Control Commission 34-2018-80002882-CU-WM-GDS (citing Gilbert v. City of San Jose (2003) 114 Cal.App.4th 606, 609) (Applicants “shall make full and true disclosure” of all required information. (§ 19866.) (https://trellis.law/ruling/34-2018-80002882-CU-WM-GDS/callaye-jo-strauss-vs-california-gambling-control-commission/20180921a0b258)

“The California Gambling Control Commission “‘shall’ deny a license if the applicant (1) fails to clearly establish her eligibility and qualifications, (2) fails to reveal any fact material to her qualifications, or (3) provides untrue or misleading information. (§ 19859, subds. (a), (b), emphasis added.) The Commission “may” deny a license if it determines the applicant’s general character and integrity make her unfit to participate in controlled gambling. (4 Cal. Code Regs §§ 12346, subd. (b), 12355, subd. (b); § 19856.) Callaye Jo Strauss vs. California Gambling Control Commission 34-2018-80002882-CU-WM-GDS (https://trellis.law/ruling/34-2018-80002882-CU-WM-GDS/callaye-jo-strauss-vs-california-gambling-control-commission/20180921a0b258)

Litigation history of applicant for employment license to work in the gambling industry

The California Gambling Control Commission “explained: Litigation history is material to the qualification criteria of an applicant because it may impact the determination of an applicant’s general character, integrity, and ability to participate in, engage in, or be associated with, controlled gambling. Litigation history may also impact whether the applicant poses a threat to the public interest of this state or to the effective regulation of controlled gambling, or creates or enhances the dangers of unsuitable, unfair, or illegal practices, methods, and activities in the conduct of controlled gambling or in the carrying on of the business and financial arrangements incidental thereto.” Callaye Jo Strauss vs. California Gambling Control Commission 34-2018-80002882-CU-WM-GDS (https://trellis.law/ruling/34-2018-80002882-CU-WM-GDS/callaye-jo-strauss-vs-california-gambling-control-commission/20180921a0b258)

“[T]he Commission believes the litigation itself is material to Strauss’s qualifications for licensure – no matter how old.” However, the Commission’s denial of an applicant’s license was remanded to require further elaboration and an evaluation of vagueness where the Commission asked (i) one question concerning bankruptcies in the past ten years; and (ii) a separate question concerning whether the applicant was a party to litigation, and expected applicants to know that bankruptcies constitute litigation and that the litigation question included incidents taking place more than ten years earlier. Callaye Jo Strauss vs. California Gambling Control Commission 34-2018-80002882-CU-WM-GDS (https://trellis.law/ruling/34-2018-80002882-CU-WM-GDS/callaye-jo-strauss-vs-california-gambling-control-commission/20180921a0b258)

Probate - Trustee’s use of trust funds to accompany beneficiary to gambling activities

“[Trustee] Faulkes and [beneficiary] Edmond to go to the racetrack and to Indian gaming casinos. While recognizing that accompanying Edmond to these events is at one level entertainment service provided to a disabled special needs beneficiary, the Court does not accept the premise that season sports tickets and gambling junkets year and year out are exclusively to benefit Edmond, and not atty. Faulkes.” Estate of Irene Schimonsky Jahn, P073323 (https://trellis.law/ruling/P073323/estate-of-irene-schimonsky-jahn/201204268a6e04).

Gambling licensing / Generally

At any time after initial licensure, a gambling establishment may request the Bureau to authorize a gaming activity which has not been previously authorized by the Bureau, for use at that establishment. Within 30 days of a request for authorization of a gaming activity, the Bureau shall review the request for completeness and notify the licensee of any deficiencies in the request, or that the request is complete. Within 90 days from the date a licensee is notified that the request is complete, the Bureau shall act on the request. (11 Cal. Code Regs § 2071, subd. (b), emphasis added.) Pinnacle Casino, LLC Vs. State Of California, Department Of Justice, Bureau Of Gambling Control, 34-2019-80003087-CU-WM-GDS (Superior Court of CA 5/31/2019) (https://trellis.law/ruling/34-2019-80003087-CU-WM-GDS/pinnacle-casino-llc-vs-state-of-california-department-of-justice-bureau-of-gambling-control/20190531f81ab0).

Petitioner also submitted a recent report by the State Auditor that concludes the Bureau “has elected to stop issuing decisions on certain games applications, which has placed some card room owners at an economic disadvantage by preventing them from offering games that the [B]ureau approved for their competitors.” (Ex. P., p. 13.). Pinnacle Casino, LLC Vs. State Of California, Department Of Justice, Bureau Of Gambling Control, 34-2019-80003087-CU-WM-GDS (Superior Court of CA 5/31/2019) (https://trellis.law/ruling/34-2019-80003087-CU-WM-GDS/pinnacle-casino-llc-vs-state-of-california-department-of-justice-bureau-of-gambling-control/20190531f81ab0).

In order to allow the Court sufficient time to consider Petitioner’s new – but late-filed – arguments and evidence, the Court vacates the May 31 hearing date. Unfortunately, due to scheduling issues, the earliest the Court can reschedule the hearing is August 2, 2019, at 1:30

Gambling licensing / Unsuitability or lapse as basis for action

Furthermore, Plaintiff has unreasonably delayed in bringing this Motion. The Bureau of Gambling Control sent a letter to Plaintiff on December 13, 2017 notifying Plaintiff of the pending Asset Purchase and Sales Agreement between Defendant and Polvora, Inc. (Exhibit 1 to the Declaration of Gabriel Pattee.) Plaintiff admits that the letter was received, and even served a subpoena on Polvora, Inc. on February 23, 2018. (Exhibit 2 to the Declaration of Gabriel Pattee.) Plaintiff fails to explain why they waited nearly six months to file the instant motion. A “long delay before seeking a preliminary injunction implies a lack of urgency and irreparable harm.” BVK Gaming, Inc. V. Timothy J. Long, 17CV001155, (citing Miller ex rel. NLRB v. Cal Pac. Med. Or. (9th Cir. 1993) 991 F.2d 536, 544.) (https://trellis.law/ruling/17CV001155/bvk-gaming-inc-v-timothy-j-long/20180523d1b227)

“Business and Professions Code §19850 provides that: Every person who, either as owner, lessee, or employee, whether for hire or not, either solely or in conjunction with others, deals, operates, carries on, conducts, maintains, or exposes for play any controlled game in this state, or who receives, directly or indirectly, any compensation or reward, or any percentage or share of the money or property played, for keeping, running, or carrying on any controlled game in this state, shall apply for and obtain from the commission, and shall thereafter maintain, a valid state gambling license, key employee license, or work permit, as specified in this chapter. In any criminal prosecution for violation of this section, the punishment shall be as provided in § 337j of the Penal Code.” (Golden Pacific Management Group v. Mark Adam 17CV-0240) (civil action for breach of contract and related equity claims for defendant’s actions resulting in the plaintiff’s failure to obtain gambling license.) (https://trellis.law/ruling/17CV-0240/golden-pacific-management-group-v-mark-adam/20171019fa3275)

“The FAC notes that BP § 19857 provides in pertinent part: No gambling license shall be issued unless the commission is satisfied that the applicant is ...[a] person of good character, honesty, and integrity [and] whose prior activities reputation, habits, and associations do not pose a threat to the public interest of this state, or to the effective regulation and control of controlled gambling ...”); see also id. § 198050) (“‘Finding of suitability’ means a finding that a person meets the qualification criteria described in § 19857, and that the person would not be disqualified from holding a state gambling license on any of the grounds specified in [the Act].” Park v. Law Offices of Tracy Buckwalsh, SCV-261163 (https://trellis.law/ruling/SCV-261163/park-v-law-offices-of-tracy-buckwalsh/2018052371bcda)

“As a shareholder, officer, and director of a licensed card room, Swallow was required to hold two gaming licenses, one issued by the State of California and another issued by the City of San Jose.” Garden City, Inc., Et Al. V. Swallow, Et Al., 16-CV-295297 (https://trellis.law/ruling/16-CV-295297/garden-city-inc-et-al-v-swallow-et-al/201803204db8e1)

“There is now a dispute as to Swallow’s entitlement to the Fund because an unlicensed individual cannot be compensated or rewarded any portion of revenue from a gambling establishment and an owner of a gambling establishment must be licensed.” Garden City, Inc., Et Al. V. Swallow, Et Al., 16-CV-295297 (https://trellis.law/ruling/16-CV-295297/garden-city-inc-et-al-v-swallow-et-al/201803204db8e1)

Legality of using Third-Party Providers to provide legal ‘banked games’

This is an action for nuisance, unfair competition and civil conspiracy brought by several Native American tribes against Larry Flynt and several casinos he controls. Plaintiffs, who seek injunctive relief and damages, contend that the defendants' cardrooms are illegally using "TPPs" to offer "banked card games" which by law only the tribes may offer in California. 37-2018-00058170-CU-NP-CTL - Rincon Band Of Luiseno Mission Indians Of The Rincon Reservation California Vs Flynt [E-FILE] (Case is pending and may be highly significant.) (https://trellis.law/ruling/37-2018-00058170-CU-NP-CTL/rincon-band-of-luiseno-mission-indians-of-the-rincon-reservation-california-vs-flynt-e-file/201902203cf06c).

Gambling Player’s Voluntary Self-Exclusion

"Gaming is a regulated industry. The legislature created the Commission and gave it the power to enact comprehensive regulations governing the operation of gaming facilities in Indiana and the power to enforce the regulations and penalize noncompliance. The legislature has not enacted provisions that make a casino operator liable for failing to find and evict a patron on its self-exclusion list before that patron gambles money in its casino. Instead, the legislature expressly provided that the standard of reasonableness for adherence to provisions of a voluntary exclusion program was to be determined by the Commission. See IC 4–33–4–3. We conclude that Indiana's gaming statutes and regulations do not create a private cause of action to protect compulsive gamblers from themselves. "Our conclusion today comports with the court's opinion in Merrill v. Trump Indiana, Inc., 320 F. 3d 729, 732 (7th Cir.2003), in which a federal court applying Indiana law determined that a casino operator does not owe a duty to protect compulsive gamblers from themselves. The court noted that Indiana law does not recognize the existence of a duty between a tavern proprietor and its patrons and stated, Indiana law does not protect a drunk driver from the effects of his own conduct, and we assume that the Indiana Supreme Court would take a similar approach with compulsive gamblers. Id." Id. at 749 (emphasis added).

The Stulajter opinion involves a similar regulatory scheme, and the same type of lawsuit. Therefore, the Court finds that the Stulajter opinion is persuasive and adopts the same conclusion: a private right of action is not permitted. In addition, a cause of action for breach of contract is not (and cannot) be alleged. It is not alleged that Plaintiff either fully performed or was excused from performance. The purported agreement is not supported by consideration. The self-exclusion "agreement" was a regulatory obligation, not a contract.” Trang Vs Penn, 37-2017-00016817-CU-BC-CTL (8/17/2017)(https://trellis.law/ruling/37-2017-00016817-CU-BC-CTL/trang-vs-penn/20170817dffcbc).

The second cause of action is expressly premised on Business & Professions Code §§ 19920 and 19801(m) (the Complaint erroneously references subsection (l)). § 19801(m) provides: "The Legislature hereby finds and declares all of the following: ... ¶ ...(m) The exclusion or ejection of certain persons from gambling establishments is necessary to effectuate the policies of this chapter and to maintain effectively the strict regulation of licensed gambling." However, there is no indication § 19801(m) applies to "self-excluded" persons, and the statute does not provide for a private right of action.

§ 19920 provides: "It is the policy of the State of California to require that all establishments wherein controlled gambling is conducted in this state be operated in a manner suitable to protect the public health, safety, and general welfare of the residents of the state. The responsibility for the employment and maintenance of suitable methods of operation rests with the owner licensee, and willful or persistent use or toleration of methods of operation deemed unsuitable by the commission or by local government shall constitute grounds for license revocation or other disciplinary action." (emphasis added) § 19920 does not create a private right of action, but instead expressly gives regulatory control to the commission. Trang Vs Penn, 37-2017-00016817-CU-BC-CTL (8/17/2017) (https://trellis.law/ruling/37-2017-00016817-CU-BC-CTL/trang-vs-penn/20170817dffcbc).

“Finally, the third cause of action for violation of Business & Professions Code § 17200 is predicated on the same conduct such that it is barred for the same reasons. Krantz v. BT Visual Images, L.L.C. (2001) 89 Cal. App. 4th 164, 178 (17200 cause of action "stand[s] or fall[s] depending on the fate of the antecedent substantive causes of action."). Generally, § 17200 allows a remedy even if the underlying statute confers no private right of action. Stop Youth Addiction, Inc. v. Lucky Stores, Inc. (1998) 17 Cal. 4th 553, 561-567. On the other hand, where the "borrowed" statute creates only an express administrative remedy as opposed to simply being silent on the subject, the UCL claim will be foreclosed. Stern, Business & Professions Code § 17200 Practice (The Rutter Group 2017) at ¶ 7:7. See also Blanks v. Shaw (2009) 171 Cal. App. 4th 336, 366-367 (Plaintiff may not "plead around" administrative remedy by stating the requested relief alternatively as a UCL cause of action). In Samura v. Kaiser Foundation Health Plan, Inc. (1993) 17 Cal. App. 4th 1284, 1301, 1302, the Court stated: "It is immaterial whether or not the challenged contract provisions and business practices comply with these portions of the Knox - Keene Act because the statutes do not define unlawful acts that may be enjoined under Business and Professions Code § 17200.... In basing its order on these provisions, the trial court assumed a regulatory power over Health Plan that the Legislature has entrusted exclusively to the Department of Corporations.... [T]he courts cannot assume general regulatory powers over health maintenance organizations through the guise of enforcing Business and Professions Code § 17200.... To the extent that the order on appeal is based on portions of the Knox–Keene Act having a purely regulatory import, it improperly invades the powers that the Legislature entrusted to the Department of Corporations." The Court cannot invade the regulatory power entrusted to the California Gambling Control Commission.” Trang Vs Penn, 37-2017-00016817-CU-BC-CTL (8/17/2017) (https://trellis.law/ruling/37-2017-00016817-CU-BC-CTL/trang-vs-penn/20170817dffcbc).

Regulation of number of gambling tables

“The language in § 19965(a) is clear that it only applies if, in 2007, a city’s ordinance allowed for five (5) to eight (8) tables “in a gambling establishment.” Petitioner’s argument that this language simultaneously increased the jurisdictional limit is unfounded and inconsistent with the GCA’s use of language specifically distinguishing jurisdictional limits from individual gambling establishment limits. (See Cal. Bus. & Prof. Code § 19961(b)(1) and (b)(3).) In 2007, § 9.08.020 authorized four (4) tables in a gambling establishment, and no more than eight (8) card tables in the entire city. The ordinance did not allow for five (5) to eight (8) tables “in a gambling establishment.” On this plain language, § 19965 does not apply to Merced’s amendment of § 9.08.020 for either the jurisdictional limit or the per gambling establishment limit.” Tongtoua Yang Vs. State Of California, 34-2017-80002744-CU-WM-GDS (Superior Ct. of CA 8/2/2019) (https://trellis.law/ruling/34-2017-80002744-CU-WM-GDS/tongtoua-yang-vs-state-of-california/201908028da160)

“The Court finds that § 19961.06(a) and (b) only apples to the increase of “the number of gambling tables that may be operated in a gambling establishment.” For the same reasons referenced above, these subdivisions, by their plain language, do not apply to an overall increase in the jurisdictional limit. Additionally, the Court finds that because § 9.08.020 was unchanged from January 1, 2010 through January 1, 2013, and because § 19961.06(a) and (b) each provide for an increase “by two . . . above the number of tables authorized in the ordinance that was in effect” on each of those dates, Merced’s total allowable increase under these subsections remained two tables per gambling establishment. Therefore, Merced was authorized to increase by proper amendment, the gambling establishment limit by two tables, i.e., from four (4) tables to a total of six (6) tables. Petitioner’s argument that these provisions provide for a collective increase of four (4) tables per gambling establishment for a total of eight (8) tables per establishment is inconsistent with the statutory language describing the resulting increase as ‘two . . . above the number of tables authorized in the ordinance that was in effect.’” Tongtoua Yang Vs. State Of California, 34-2017-80002744-CU-WM-GDS (Superior Ct. of CA 8/2/2019) (https://trellis.law/ruling/34-2017-80002744-CU-WM-GDS/tongtoua-yang-vs-state-of-california/201908028da160)

“The 2016 amendment of Merced Municipal Code § 9.08.020 purported to increase the number of tables permitted in each gambling establishment from four (4) to twelve (12) and the number of tables permitted in the city from eight (8) to sixteen (16.) This is a violation of the GCA, and as the amended ordinance exceeds the expansion authorized by the statutory scheme, it is invalid.

Because the amendment of § 9.08.020 was invalid, Respondent validly denied Petitioner’s application pursuant to Cal. Code of Regs., tit. 4, § 12359 (b)(1). § 9.08.020 was never validly amended, and thus the number of tables allowed in the jurisdiction remains eight (8) with no more than four (4) in each establishment.” Tongtoua Yang Vs. State Of California, 34-2017-80002744-CU-WM-GDS (Superior Ct. of CA 8/2/2019) (https://trellis.law/ruling/34-2017-80002744-CU-WM-GDS/tongtoua-yang-vs-state-of-california/201908028da160) (citing Tosi v. County of Fresno (2008) 161 Cal.App.4th 799, 804; O’Connell v. City of Stockton (2007) 41 Cal.4th 1061, 1074.)

“Unregulated gambling enterprises are inimical to the public health, safety, welfare, and good order. Accordingly, no person in this state has a right to operate a gambling enterprise except as may be expressly permitted by the laws of this state and by the ordinances of local governmental bodies.” Tongtoua Yang Vs. State Of California, 34-2017-80002744-CU-WM-GDS (Superior Ct. of CA 8/2/2019) (https://trellis.law/ruling/34-2017-80002744-CU-WM-GDS/tongtoua-yang-vs-state-of-california/201908028da160).

Native American / Indian Gaming in California

Applicable Law

After passage of the Indian Gaming Regulatory Act, California amended its Constitution in 2000 with Proposition 1A, authorizing compacts to establish gambling on Indian lands. Since then 66 compacts have been adopted and ratified by the Legislature, and over sixty Indian casinos have been established in the state of California. Notably, Indian lands are permitted to operate much of the gaming prohibited by California’s Gaming Control Act and Penal Code: slot machines, private commercial lotteries, and banked and percentage games.

Case Law

The California Gambling Control Act “does not regulate gambling establishments operated by Indian tribes on Indian lands. Instead, Indian gaming is generally regulated by the federal Indian Gaming Regulatory Act and by compacts between the State and federally recognized Indian tribes.” Callaye Jo Strauss vs. California Gambling Control Commission 34-2018-80002882-CU-WM-GDS (citing generally, Stand Up for California! v. State of California (2016) 6 Cal.App.5th 686; Flynt v. California Gambling Control Commission (2002) 104 Cal.App.4th 1125.) (https://trellis.law/ruling/34-2018-80002882-CU-WM-GDS/callaye-jo-strauss-vs-california-gambling-control-commission/20180921a0b258)

The California Gambling Commission “does not license employees of Indian casinos.” Callaye Jo Strauss vs. California Gambling Control Commission 34-2018-80002882-CU-WM-GDS (https://trellis.law/ruling/34-2018-80002882-CU-WM-GDS/callaye-jo-strauss-vs-california-gambling-control-commission/20180921a0b258)

Standing to challenge representation of tribe in connection with Gambling Commission

A party has standing if it has " 'the requisite interest to support an action or the right to relief.' " (Windham at Carmel Mountain Ranch Assn. v. Superior Court (2003) 109 Cal.App.4th 1162, 1172, fn. 10.) Applying these principles here, there is no basis to question to Miwok Tribe's standing to bring this lawsuit, even if it is involved in a leadership dispute. Regardless of who is the proper leader of the Miwok Tribe and whether the BIA approves of the Miwok Tribe's constitution, it is undisputed that the lawsuit was brought by the Miwok Tribe itself as the sole plaintiff. The Miwok Tribe is undoubtedly a real party in interest because of its stake in the outcome of a dispute over whether the Commission must make payments to it from the RSTF. Thus, we conclude that there is no defect in the standing in this action sufficient to support an order sustaining a demurrer... The court finds the complaint alleges facts sufficient to establish Plaintiff California Valley Miwok Tribe's standing. California Valley Miwok Tribe Vs The California Gambling Control Commission, 37-2017-00050038-CU-MC-CTL (citing CVMT v. California Gambling Control Commission, 2010 WL 1511744, at *6) (https://trellis.law/ruling/37-2017-00050038-CU-MC-CTL/california-valley-miwok-tribe-vs-the-california-gambling-control-commission/20180503a9a445).

Legal Gaming Exempt From the Penal Code Definition of “Controlled Gaming”

The California Lottery

California Penal Code

Under the California Penal Code, privately-run lotteries are prohibited, and the only permissible lotteries in California are those run by the California Lottery Commission. Operating, hosting or selling an interest in an unauthorized lottery in California constitutes a misdemeanor and the proceeds thereof are generally forfeited to the state. California Penal Code §§ 320-325.

The code defines a lottery as “any scheme for the disposal or distribution of property by chance, among persons who have paid or promised to pay any valuable consideration for the chance of obtaining such property or a portion of it, or for any share or any interest in such property, upon any agreement, understanding, or expectation that it is to be distributed or disposed of by lot or chance, whether called a lottery, raffle, or gift enterprise, or by whatever name the same may be known.” California Penal Code § 319.

California’s “lottery” definition also includes “include a grab bag game which is a scheme whereby, for the disposal or distribution of sports trading cards by chance, a person pays valuable consideration to purchase a sports trading card grab bag with the understanding that the purchaser has a chance to win a designated prize or prizes listed by the seller as being contained in one or more, but not all, of the grab bags.” California Penal Code § 319.3.

California Lottery Commission

The California Lottery is a public agency established by the California State Lottery Act of 1984 to administer a lottery and raise supplemental revenue for California schools. Gov. §8880, et seq. The Lottery Act was further amended by Assembly Bill 142 in 2010 to increase the amount of revenue going to schools.

The 5-member Lottery Commission is appointed by the governor to regulate and administer the lottery, including granting licenses to sell lottery tickets.

Players must be at least 18 years of age.

Applicable Case Law

“A right to an accounting is derivative; it must be based on other claims.” (Janis v. California State Lottery Com. (1996) 68 Cal. App. 4th 824, 833.)

As a general matter, an accounting is a remedy, not an independent cause of action. See, e.g., Janis v. California State Lottery Com. (1998) 68 Cal.App.4th 824, 833

Liability of Government Agency

Lottery Commission held to be immune from lawsuit Trinkle v. California State Lottery (1999) 71 Cal.App.4th 1198, 1202 (“Nowhere in the Unfair Competition Act is there a provision imposing governmental liability for violations of the act. Because there is no statute making public entities liable under the UCA, the general rule of governmental immunity must prevail.” In Re Alicia Turnour 34-2016-00198567-CU-PT-GDS - In Re Alicia Turnour (https://trellis.law/ruling/34-2016-00198567-CU-PT-GDS/in-re-alicia-turnour/20160819cc0977).

Assignment of Lottery Winnings

“The petition for assignment of lottery payments will be granted if, prior to the hearing, petitioner files an amended Petition that includes a notification from the California State Lottery of any liens, levies, or claims against Petitioner as reflected in its official records as of the time of the notification.”

Liability of Lender of Funds for Gambling

A lender who advances money to a borrower with the understanding that it is to be used in gambling, or who participates and shares in the gambling transaction thus promoted by his act, becomes particeps criminis and cannot recover the money thus advanced. McDevitt vs. Yates 30-2017-00919650-CU-BC-CJC (citing Rose v. Nelson (1947) 79 Cal.App.2d 751, 752 (Rose); Civ. Code 1667). https://trellis.law/ruling/30-2017-00919650-CU-BC-CJC/mcdevitt-vs-yates/2018100439d014

Similarly, if the lender [who advances money to a borrower with the understanding that it is to be used in gambling and] takes any active part in the gambling contract, such as depositing the loan as margins he cannot recover. McDevitt vs. Yates 30-2017-00919650-CU-BC-CJC (citing Rose v. Nelson (1947) 79 Cal.App.2d 751, 752 (Rose); Civ. Code 1667). https://trellis.law/ruling/30-2017-00919650-CU-BC-CJC/mcdevitt-vs-yates/2018100439d014

Charitable Gambling

Bingo

Under the California State Constitution, the legislature “may authorize cities and counties to provide for bingo games, but only for charitable purposes.” California Constitution, Article IV, § 19. California’s cities and counties have adopted a wide variety of laws governing bingo in their jurisdictions.

The California Penal Code permits Bingo games operated by charitable nonprofits as exempt from requiring a California Gambling Commission license, subject to certain conditions:

• The bingo game must be run on donate or organization-owned/rented property;
• Only organizational members may administer the Bingo game (unpaid, other than those providing security, subject to a $10,000 fine);
• 90% of the proceeds must be used for charitable purposes;
• The game must be open to the public (not merely organization members); and
• Minors are prohibited from participating.

California Penal Code 326.5. Note: this list is not exhaustive.

Exempted nonprofits are defined in California’s tax code.

Raffles

Raffles can be operated by a “private, nonprofit organization that has been qualified to conduct business in California for at least one year prior to conducting a raffle and is exempt from taxation” under California law (governed by Corporation Taxation Law §§ 23701 - 23778.

A raffle is defined as “a scheme for the distribution of prizes by chance among persons who have paid money for paper tickets that provide the opportunity to win these prizes,” subject to several regulations involving the ticketing of the raffle and the requirement that “[a]t least 90 percent of the gross receipts generated from the sale of raffle tickets for any given draw are used by the eligible organization conducting the raffle to benefit or provide support for beneficial or charitable purposes”. California Penal Code § 320.5.

“§ 4(b) of the California Constitution, and Revenue and Taxation Code, § 214 “provide a separate welfare exemption from the taxation of property used for religious purposes, subject to enumerated conditions. (Cal. Const., art. XIII, § 4, subd. (b); Rev. & Tax. Code, § 214, subd. (a).) § 214 provides, in relevant part: “Property used exclusively for religious… purposes owned and operated by community chests, funds, foundations, limited liability companies, or corporations organized and operated for religious… purposes is exempt from taxation…” (Rev. & Tax. Code, § 214, subd. (a).) To qualify under the religious purposes exemption, the property must be owned and operated by a non-profit entity that was organized and operated for religious purposes, no part of whose net earnings inure to the benefit of any private shareholders or individual. (Cal. Const., art. XIII, § 4, subd. (b).)” Noho Arts Center For New Thought Inc vs. County of Los Angeles, et. al., BC620864 (12/5/17). (https://trellis.law/ruling/BC620864/noho-arts-center-for-new-thought-inc-vs-county-of-los-angele/20171205e1214c)

“The Assessor’s Handbook offers as a disqualifying example: “Lease of church property on a regular basis for purposes of generating rental income to non-religious organizations or individuals for non-religious purposes and activities.”[6] (Ibid.; see also ibid. [“If church property is used for bingo, such use is disqualifying under the church exemption, and the church must claim the welfare exemption, at least as to that portion of the property used for bingo.”].)“ Noho Arts Center For New Thought Inc vs. County of Los Angeles, et. al., BC620864 (12/5/17). (https://trellis.law/ruling/BC620864/noho-arts-center-for-new-thought-inc-vs-county-of-los-angele/20171205e1214c)