California Regulators Propose New Advertising Rules

January 30, 2023
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After finding numerous examples of advertisements from cardrooms and third-party providers that fail to include responsible gambling information, the California Gambling Control Commission has proposed regulations to ensure the messages are included in every industry ad.

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After finding numerous examples of advertisements from cardrooms and third-party providers that fail to include responsible gambling information, the California Gambling Control Commission (CGCC) has proposed regulations to ensure the messages are included in every industry ad.

The CGCC noted that some of the advertisements for cardrooms did not contain referral services for problem gamblers, violating existing regulations.

"Further, the existing regulations do not specify how information must be presented, which has resulted in some advertisements delivering the information in an unclear and inconspicuous manner," the agency said in a notice of proposed regulatory action.

"This has the result of nullifying the regulatory requirement by making it difficult, if not impossible, for the public to review and understand the required information."

Additionally, the commission said it was aware that, as a current industry practice, many gambling establishments provide charitable support to local youth and community functions, such as Little League sports teams, toy drives, and holiday tree lighting ceremonies.

"This includes placing a gambling establishment's name and/or logo on the children's uniforms, team banners, event programs and pamphlets. While these sponsorships are well-intended and benefit the local community, regulations are needed to ensure this is done in a manner that does not make gambling appeal to the impressionable youth."

Under the state's gaming act, the proposed regulations would require the CGCC to allow for the disapproval of deceptive advertising by a licensee, as determined by the Bureau of Gambling Control, an agency within the state's Department of Justice.

The law specifies that an advertisement is presumptively deceptive if it appeals to children or adolescents, or offers gambling as a means of becoming wealthy.

Some of the advertisements reviewed by the commission contain "Nevada style" or "Vegas style" in reference to games or activities offered by licensees. Other advertisements include a name that differs from that of the approved games.

The CGCC did not identify the licensees whose advertisements caused them concern, but noted that these types of statements "can mislead the public into thinking that a gaming establishment offers house-banked games, which are prohibited from being offered."

Currently, there is no regulatory framework or procedure that allows the Bureau of Gambling Control to reject an advertisement that it considers deceptive. The proposed regulations would also allow for enforcement measures should a licensee fail to correct a deceptive advertisement.

The CGCC published its notice for the proposed regulatory action pertaining to cardrooms and third-party providers of proposition player services (TPPPS) on December 30, 2022. The proposed regulations are subject to a 45-day public comment period, which will end on February 13.

A hearing addressing the public comments and regulations will take place after the public comment period.

California regulators are in the process of implementing a series of new and updated regulations, including requirements for the issuance of subpoenas and clarification of discovery procedures in a commission hearing.

The commission is also scheduled on Wednesday (February 1) to approve changes to the state's licensing fee structure. An auditor's report released in May 2019 found licensing processes and fees were not aligned with costs.

That was followed by Senate Bill 189, which Democratic Governor Gavin Newsom signed into law on June 30, 2022, which provides the commission with the ability to charge an annual fee to cardrooms to cover its expenses, instead of using a fee structure each cardroom was required to pay.

The fee structure was based on the number of tables the cardroom was licensed to operate or the gross revenue of the cardroom.

According to the commission, the annual fee amounts are zero for a surrendered or revoked license, $5,237 for non-operational licenses, $10,473 for active licenses with a three-year average gross revenue under $1.5m, and 1.29 percent of the three-year average gross revenue for active licensees with a three-year average gross revenue of $1.5m or more.

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