The five-member California Gambling Control Commission (CGCC) oversees the regulation and licensing of the state’s gambling personnel and operations, primarily card rooms and tribal casinos. The commission sets policy, establishes regulations, conducts audits, issues licenses, controls various gaming funds, and administers the Gambling Control Act and the Tribal-State Gaming Compacts. The Horse Racing Board and the State Lottery Commission are responsible for regulating horse racing and the lottery, respectively, in the state. The CGCC had limited control of certain aspects of bingo until July 2011, when control shifted to localities. The CGCC does not handle law enforcement activities. The Bureau of Gambling Control, within the state Department of Justice, conducts criminal background investigations for the commission regarding applications for licenses. It also conducts ongoing compliance inspections and is “committed to reducing problems that result from pathological gambling.”
About the Commission (CGCC website)
California Gambling Law, Regulations, and Resource Information (Office of the Attorney General) (pdf)
Californians like to gamble; it’s a $14 billion business as measured by the handle. The state has permitted legal gambling for more than 100 years, although actual regulation of establishments didn’t being until 1984.
In 1984, the Legislature enacted the Gaming Registration Act, which required the Attorney General’s office to provide uniform minimum regulation of card rooms, but the scope of regulation was limited and funding was inadequate.
The evolution of California law on gambling parallels changes in Indian-controlled gaming nationally and in the state. There has long been conflict between states and Indian tribes over gaming, which emanates from the fact that both are legally sovereign entities.
A 1976 U.S. Supreme Court decision, Bryan v. Itasca County—considered to be a turning point in the rise of Indian gaming—held that states did not have the right to tax reservation Indians. Within three years, courts were upholding the principle that states can forbid certain activities, like gambling, in their state but once they approve it anywhere (like in a bingo parlor) they don’t have the power to extend their regulatory power to Indian tribes.
In 1987, the high court opened the casino doors when it ruled in the landmark California v. Cabazon Band of Mission Indians that tribes could operate gambling facilities free of state regulation if the state had not directly prohibited gambling. The decision further solidified tribes as sovereign political entities.
The decision prompted Congress to act.
In 1988, President Ronald Reagan signed into law the Indian Gaming Regulatory Act (IGRA), which established the jurisdictional framework that governs Indian gaming on a federal level. The sweeping legislation reserved for the federal government authority over criminal prosecutions at Indian facilities related to state gambling laws unless the state and tribal governments came to a “business” agreement through Tribal-State Gaming Compacts.
IGRA has been a regular source of controversy and litigation.
California replaced the Gaming Registration Act in 1997 with the Gambling Control Act. The new act created a comprehensive scheme for statewide regulation, including establishment of the Division of Gambling Control within the state Attorney General’s Office and the five-member California Gambling Control Commission. (The division was renamed the Bureau of Gambling Control in 2007.)
The commission was constituted in 2000 when Governor Gray Davis made the initial appointments and it received its first budget in August 2001.
Voters passed Proposition 1A in 2000, which amended the California Constitution to permit casino-style gaming on Indian land provided a compact between tribe and state has been approved.
The court held in the 2001 Chickasaw Nation v. United States that Indian tribes were liable for taxes on gambling operations. And in 2009’s Carcieri v. Salazar, the high court ruled that the Department of the Interior could not grant land into trust to tribes recognized after 1934.
In February 2012, Governor Jerry Brown proposed rolling the staff of the commission into the state Justice Department's Bureau of Gambling Control while leaving the commission itself intact as an independent body.
Indian Gaming (California State Library)
Bureau of Gambling Control (Department of Justice website)
Gambling in California (by Roger Dunstan, California Research Bureau)
Gambling Control Act (pdf)
2002 Letter to the Little Hoover Commission (by CGCC Chairman John Hensley) (pdf)
Bryan v. Itasca County (Justia.com)
California v. Cabazon Band of Mission Indians (Findlaw.com)
Chickasaw Nation v. United States (Cornell University Law School)
Carcieri v. Salazar (Cornell University Law School)
Indian Gaming in California (University of California Institute of Governmental Studies)
Brown Seeks to Consolidate Gambling Oversight (by Jim Miller, Press-Enterprise)
California has 58 Indian casinos run by 57 tribes, and 91 card rooms throughout the state. The commission has jurisdiction over all of them.
Card rooms and Proposition Players
The commission has jurisdiction over the operation, concentration and supervision of card rooms. The commission’s responsibilities include:
· Determining suitability for issuance of gambling licenses.
· Issuing work permits to card room employees.
· Ensuring no ineligible, unqualified, disqualified or unsuitable persons are associated with controlled gambling actives.
· Assessing and acting upon certain restricted transactions including ownership changes and lending arrangements.
· Granting temporary licenses, permits and approvals.
· Developing and implementing the Gambling Control Act.
· Handling financial reports.
· Adjudicating recommendations concerning license denials or revocations, or disciplinary actions.
The commission is also responsible for the Third-Party Provider of Proposition Player Services industry. A proposition player is a card room employee who is paid to play in shorthanded games to ensure that there are sufficient players to start a game or keep it going. The commission has the responsibility and authority to issue registrations and licenses.
About the Commission (CGCC website)
Proposition Player (Poker Dictionary)
Tribal Gaming
The commission’s responsibilities for tribal gaming include oversight of casino-type games; distribution of gaming revenues to various state funds and non-compact tribes; monitoring of key employees, vendors and financial sources; validation of gaming operation standards; and fiscal auditing of tribal payments.
More specifically, the commission is charged with:
· Making suitability recommendations for tribal key employees, gaming resource suppliers, financial sources and Tribal Gaming Agency members.
· Performing audits, including financial audits of the tribes’ net win calculations from the Indian Gaming Special Distribution Fund (SDF) and general fund and more.
· Serving as the trustee for the Revenue Sharing Trust Fund, including collecting and accounting license fees, preparing reports and distributing funds to Non-Compact Tribes.
· Conducting field tests of gaming devices. The commission is in the process of implementing a field inspection program to test gaming devices and a technical services program to develop the technical expertise to determine whether gaming devices are functioning correctly ensuring that public gaming is conducted honestly and fairly.
· Ensuring that the allocation of gaming devices among the Compact Tribes does not exceed the allowable number of machines.
· Registering gaming manufacturers and distributors.
· Developing regulations related to the compacts with the Tribal-State Gaming Association.
The five-member commission is led by a governor-appointed commissioner. An executive director oversees the legislative office, a legal division, a compliance division, support services, a licensing division, an information security officer and a public affairs office.
Organizational Chart (CGCC website)
The commission does not receive money from the state General Fund or the federal government. License fees and revenues it collects from card room operators are deposited in the Gambling Control Fund.
But a much larger sum of money is collected from Indian tribes as a percentage of net winnings and placed in the Indian Gaming Special Distribution Fund. That money is spent to address four needs:
It allocates money to the Indian Gaming Revenue Sharing Trust Fund, which is mostly distributed to tribes without gambling compacts or with relatively small gambling operations. That smaller fund also collects quarterly fees from tribes based on the number of gaming devices (like slot machines) they operate, in addition to an annual license fee.
Money is distributed to the Office of Problem and Pathological Gambling, which is administered by the Alcohol and Drug Programs.
It pays the operating costs of the Indian gaming regulatory functions of the commission and the state Department of Justice.
It supports local governments impacted by tribal gambling.
Top 8 Contractors: The department's largest service contractors in 2012, according to the State Contract & Procurement Registration System (eSCPRS) in the Department of General Services, were:
| Supplier Name | Total Price |
| Department of General Services | $45,000 |
| Smile Business Products, Inc | $27,910 |
| California Reporting, LLC | $20,000 |
| Brandywine Realty Trust / Natomas Gateway Corporate Center | $19,997 |
| Granite Data Solutions | $17,272 |
| Bird Rock Systems, Inc. | $14,734 |
| ISInc | $13,600 |
| T3 Toner LLC | $5,715 |
3-Year Budget (pdf)
2011 Indian Gaming Special Distribution Fund (State Auditor) (pdf)
Indian Gaming Revenue Sharing Trust Fund
“The Gambling Commission has operated amidst controversy since its inception in August 2000, with wide-ranging questions raised about its appropriate role, authority, and many of its actions related to Indian gaming.”
With that introduction, the Bureau of State Audits embarked upon a review in 2004 of the commission’s first four years of work, focusing on its administration of a trust fund used to collect and disperse Indian gaming money among the tribes.
The bureau noted that the compacts signed between the tribes and the state were “ambiguous” and that the commission’s various interpretations were “defensible,” but that the current state of affairs was responsible for repeated clashes between the parties over how many gambling devices could be operated, how much money should change hands and the timing of those distributions.
The bureau also chastised the commission for not adequately conveying to its members and staff its conflict-of-interest policy, not following its own procedures for allocating gaming devices and probably messing up a funding allocation on one occasion.
2004 Audit of the California Gambling Control Commission (State Auditor) (pdf)
Buying Political Influence
Indian tribes are major players in California politics.
Three of the tribes made the Fair Political Practices Commission’s “Billion Dollar Club” of 15 special interests that spent a combined $1 billion during the decade ending December 31, 2009 to influence the outcome of government decision in California.
Big spenders in that 10-year period included: the Morongo Band of Mission Indians (#4 at $83.6 million), the Pechanga Band of Luiseno Indians (#5 at $69.3 million) and the Agua Caliente Band of Cahuilla Indians (#10 at $49.1 million).
Honorable mention went to the San Manuel Band of Mission Indians (#19 at $29.7 million) and the Pala Band of Mission Indians (#21 at $24 million) who didn’t make the club but nonetheless distinguished themselves.
The Big 3 tribes spent $125 million on gaming ballot measures.
Proposition 70 in 2004 sought 99-year tribal-state gambling compacts with no limits on the type or number of casino games.
Proposition 68, also in 2004, aimed to allow expansion of gambling at non-tribal establishments, such as racetracks and card rooms.
Propositions 94, 95, 96 and 97 in 2008 were successful in dramatically increasing the number of slot machines at four Indian casinos.
The Pechanga Band of Luiseno Indians were among four groups that spent the most money on behalf of state and local candidates, $9.7 million. The “Club” as a whole spent $80 million.
All five of the tribes that appeared in the report shared common spending habits. They overwhelmingly contributed money to influence voters (95%) rather than lobby officials. More than 76% of their money was spent on ballot initiatives, 9% on candidates; 6% on campaign committees and 3% on political parties. The rest was spent on lobbying officials.
Big Money Talks: California's Billion Dollar Club (Fair Political Practices Commission) (pdf)
Schwarzenegger and Tribal Gaming
When California voters approved four Indian gambling expansion agreements (Props 94 through 97) in 2008, adding up to 17,000 slot machines to the region, it paved the way for some of the world’s largest casinos in Southern California. In a statement, the opposition campaign said the vote reflected Californians’ worries about the state budget. Governor Arnold Schwarzenegger and other proponents said the deals would mean hundreds of millions for the state, although opponents called those estimates overblown. In 2004, Schwarzenegger signed five similar pacts, citing a large increase in tribal contribution to the state’s budget. The signing of these pacts also paved way for bigger urban casinos.
Voters Approve Indian Gambling Expansion (by Michelle DeArmond, The Press-Enterprise)
Governor, Five Tribes Sign Gaming Pacts (by John M. Hubbell, The San Francisco Chronicle)
Schwarzenegger Signs New Tribal Compacts (Associated Press)
California Deals Help LV Group (by Rod Smith, Las Vegas Review-Journal)
Following the Money
In 2007, California gambling officials met with representatives from the gaming tribes to try to work out one of the more important details in the compacts: How to monitor and measure gaming revenues. At issue were “minimum internal control standards,” or MICS, which outline how to keep track of money from the moment it leaves a gambler’s hands to when a portion of it ends up in state coffers. No other gaming issue so directly pits tribal sovereignty against the state’s desires to attain guaranteed gaming revenues. In 2008, Governor Arnold Schwarzenegger signed two tribal gaming compacts that implemented MICS.
Tribes, State Debate Monitoring of Gaming (by Malcolm Maclachlan, Capitol Weekly)
California Governor Signs Two Tribal Gaming Compacts (San Francisco Sentinel)
Uniform Tribal Gaming Regulation CGCC-8 (CGCC website) (pdf)
Consolidation
In February 2012, Governor Jerry Brown proposed rolling the staff of the Gambling Control Commission into the state Justice Department's Bureau of Gambling Control while leaving the commission itself intact as an independent body. The bureau has 160 employees and the commission has more than 70.
Gambling regulatory bodies are scattered throughout California government. In addition to the bureau and the commission, the state lottery commission, the state Horse Racing Board, the Office of Problem Gambling in the Department of Alcohol and Drug Programs, and the governor’s office all play a role.
Brown Seeks to Consolidate Gambling Oversight (by Jim Miller, Press-Enterprise)
Bingo
Remote caller bingo is a modernization of the popular game that is used by nonprofits such as churches, schools and veterans organizations to raise money. Audio and video of a live game is broadcast at multiple locations of an organization, reducing overhead costs while increasing participation and prizes. Without the remote feature, many organizations wouldn’t conduct the fundraisers.
In July 2011, the Gambling Control Commission terminated its Remote Caller Bingo Program because it failed to produce enough revenues to be self-sufficient as required by the state Legislature.
Anticipating the termination, Democratic state Senator Lois Wolk introduced a bill to allow continuation of the Remote Bingo Program as a streamlined program regulated at the local level, just as traditional bingo currently is regulated. If this bill becomes law, local jurisdictions would have the authority to approve and regulate remote caller bingo but would not be required to do so. The commission’s authority over the program would also be eliminated.
Remote Caller Bingo (CGCC website)
Program Termination Letter (pdf)
Wolk Bill Makes it Easier for Charities to Use Innovative Fundraising Tool (Senator Lois Wolk website)
Wolk Bill Eases Rules for Charitable Fundraising Tool (by Enterprise Staff, The Davis Enterprise)
Urban Casinos
In December 2010, California’s Democratic Senator Dianne Feinstein proposed changes to tribal gaming laws that would make it more difficult to open urban casinos. The changes proposed to the federal Indian Gaming Regulatory Act called for tribes to show both a “substantial direct aboriginal connection to the land” and “substantial direct modern one.” While many tribes have sited and argues historical connections to lands they wish to acquire and use for gaming, showing a current connection to empty urban lands may be difficult.
Feinstein Wades into Urban Gaming Fight (by Malcolm Maclachlan, Capitol Weekly)
Online Poker
Online poker sites are illegal in the United States, but millions continue to play the virtual card game each week. Around 2,300 unregulated Internet gambling sites operate outside the United States and an estimated million Californians illegally play poker online each year.
The Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) essentially bars people within the United States from playing online poker by prohibiting gambling businesses from taking and paying out money, unless the bets are made and paid within a state that has laws regulating it. No state currently does.
But that could change. Federal legislation, which has the support of Democratic Senate Minority Leader Harry Reid of Nevada, would end the ban and set up an interstate licensing program that would give states authority to run online sites.
Two bills proposed in the California Legislature in December 2010 have presented different approaches to legalization. Democratic state Senator Lou Correa’s SB 40 called on the state Gambling Control Commission to offer licenses utilizing Indian tribal compacts to legalize online poker sites, while Democratic state Senator Rod Wright’s SB 45 sought to legalize an eclectic array of online gambling games.
Is it time for California to ante up?
Keep the Ban
Wrong time, wrong plan, wrong jurisdiction. It’s just wrong.
Once you get past those who feel that the state shouldn’t be encouraging gambling of any sort—loss of productivity, the human cost of addiction, the high price of sin—you run into a host of arguments against current Internet poker plans that are kicking around.
If the games are available on home personal computers, how will underage youths be excluded? Democratic Senator Dianne Feinstein from California suspects they can’t be. “I oppose Internet gambling. . . . Internet gambling has become too easily accessible to minors, subject to fraud and criminal misuse, and is often used to evade state gambling laws.”
Some people say if the U.S. is going to allow online poker, it should be uniformly regulated by the federal government to minimize corruption, cutthroat interstate competition and dubious state plans. California could be a case in point.
While some Indian tribes support the move primarily because they hope to be the recipient of its benefits (e.g. the San Manuel Band of Mission Indians), others, like the Pala Band of Mission Indians, have joined the California Tribal Business Alliance in opposition because they fear their brick-and-mortar casinos will suffer and they won’t be cut in on the business up front.
“There are numerous stakeholders who stand to be irreparably harmed should legislation be 'ram-rodded' through this legislative year, and this surely would be a disservice to all Californians, tribal and nontribal alike,” Robert H. Smith, chairman of the alliance, wrote in a letter to state lawmakers.
The online poker plan offered by Senator Correa set off a lobbying frenzy and inter-tribal skirmishing over who would control the gambling hubs. The result is loads of money sloshing around in political circles, fostering the worst kind of deal-cutting, favor-exchange legislating that is more about political influence than good public policy.
Support for Correa’s plan was led by the California Online Poker Association, which counts among its members the Morongo Band of Mission Indians and the San Manuel Band of Mission Indians. The California Gambling Control Commission would license and regulate online poker within California. The Morongo and San Manuel bands of Indians together spent more than $337,000 on lobbying last year. They have spent nearly that much more, $304,000, on lobbying just in the first half of this year.
Ante-Up. Let’s Play
Supporters of online poker range from libertarians who think it’s none of government’s business what games people play to strict moralists who fear the sinful threat but want the tax revenues to alleviate chronic budget deficits.
In between are those who want safe and sane regulations for behavior that seems to be occurring anyway. And some don’t think that behavior should necessarily be considered gambling.
“Poker is a uniquely American game, but it isn't a game of chance—it is a game of skill,” claims Texas Republican Congressman Joe Barton. “To win you have to know how to read the cards and read people. I enjoy the challenge of playing and the camaraderie formed around a Texas Hold'em table and I am not alone—many of our greatest Presidents have also been Poker players.”
Supporters of online poker question what they perceive to be the hypocrisy of governments that support, if not actually encourage, horse racing, casino gambling and lotteries while opposing online poker.
“Indeed, federal and state governments have applied fragmented and sometimes inconsistent policies to this new technology for delivering a very old form of entertainment,” the American Gaming Association said in a white paper.
And, then, there are the tax revenues.
“Online poker will provide California with $250 million dollars immediately and billions more in the future,’’ said Ryan Hightower, a spokesman for the California Online Poker Association. The group includes a coalition of 29 tribes and 30 card room operators.
Cormac Barry of online betting giant Paddy Power agrees. “Based on research from GBGC (Global Betting and Gaming Consultants), the California online poker market will be $150 to $200 million within three years,” he told state legislators in 2010.
Senator Correa said if California can get in on the ground floor, it could also mean 1,300 jobs for the state. Barry concurs. “It's a unique opportunity to become the center of excellence for online poker, not only in California, but worldwide,” he said. “Another state will eventually do this, and if California hasn't, that's where all the operators will go to set up jobs.”
Proponents in California say legalization is inevitable and if the state doesn’t move quickly it will miss an opportunity to cash in early. Its neighbor, Nevada, passed legislation in June 2011 that positions it to have legalized online poker by January 2012.
Senate Bill 40 (pdf)
Internet Poker Battle Waged in Sacramento (by Patrick McGreevy, Los Angeles Times)
Bill to Allow Online Gambling Sites in California Pits Tribe Against Tribe (by Josh Richman, Oakland Tribune)
Wright Submits New Poker Bill, Reid Says His is Still Alive (by Malcolm Maclachlan, Capitol Weekly)
Assembly’s Washington Lobbyist Worrying Some Gambling Tribes (by Laurel Rosenhall, The Sacramento Bee)
California’s Internet Gambling Bills Generate Conversation, Cash (by Laurel Rosenhall, The Sacramento Bee)
California Lawmaker Could Be Key to Online Poker's Future (by Paul C. Barton, Gannett Washington Bureau)
California Online Poker Faces Many Obstacles (by Vin Narayanan, Casino City Times)
Richard J. Lopes, 2013-2014
Stephanie Shimazu, 2011-2012
John E. Hensley, 2000-2003
Burks “Dean” Shelton, 2004-2010
- Table of Contents
- Overview
- History
- What it Does
- Where Does the Money Go
- Controversies
- Suggested Reforms
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