The Evolving Landscape of California’s Cardrooms: A Clash of Interests
In California, the ongoing tension between tribal authorities and cardrooms is far from new, but recent proposed regulations could reshape this dynamic considerably.
As 2023 unfolded, California Attorney General Rob Bonta, alongside the Bureau of Gambling Control (BGC), initiated significant regulatory changes affecting cardrooms, particularly concerning blackjack gameplay and player-dealer operations.
In early February, a round of proposals was released but was later retracted for further public input. A second set of proposals emerged on April 11, closing the comment period just days later.
During recent public hearings, feedback primarily came from cardroom advocates, who expressed strong opposition to the proposed changes, which would fundamentally alter blackjack as it is currently known and impose new requirements on player-dealers.
The potential implementation of these regulations raises concerns about far-reaching effects on cardrooms across California. The BGC’s own impact assessment alluded to the possibility of vast revenue losses, potentially amounting to hundreds of millions of dollars, coupled with job reductions in cardrooms that serve as vital financial resources for small towns dependent on the taxes generated by these establishments.
Legal Challenges Ahead
As California charts its course with these regulations, cardrooms find themselves embroiled in a significant legal battle against state gaming tribes. While tribes are generally sovereign and limited in their ability to pursue legal actions, state legislators introduced a special bill, SB 549, last November, providing a unique opportunity for a lawsuit.
Filed in January by a coalition of tribes against the state’s cardrooms, the suit is being heard by the Sacramento County Superior Court, with the next hearing set for August 8. The claims within the lawsuit closely mirror the rule changes proposed by the BGC, although the intersection of these two issues remains complex and uncertain. Given the lawsuit’s intricate nature, its resolution could extend over several years.
It’s noteworthy that the regulatory discussions predated the lawsuit and are not directly tied to its proceedings.
Understanding the Current Situation
California’s tribal gaming landscape is distinct, as tribes possess exclusive rights to Class III gaming, leaving no room for commercial casinos that offer house-banked games. According to the National Indian Gaming Association, California’s tribal gaming operations generated an impressive $12 billion in gross revenue in the last fiscal year.
Instead of commercial venues, California is home to numerous legal cardrooms, which operate on a player-to-player basis. While this structure is lawfully compliant, cardrooms have increasingly relied on third-party player services, known as TPPPS, for gaming facilitation. These independent providers are state-licensed and allow recreational players to enjoy dealer-free gameplay, but tribes argue this practice undermines their exclusive rights.
After years of dispute over the legality of TPPPS, the January lawsuit by tribes culminated from long-standing tensions.
Contrasting Perspectives
In their legal filings, tribal representatives argue that cardrooms and their third-party partners have flouted legal provisions, resulting in unjust profits. Conversely, cardroom operators assert that their practices are entirely legal under existing state regulations.
Kyle Kirkland, president of the California Gaming Association, underscored this point, expressing confidence that the legal system would favor the interests of thousands of Californians whose livelihoods depend on these establishments, as well as the essential services funded by cardroom-generated tax revenue.
Radical Changes to Blackjack
Bonta’s proposed adjustments to blackjack would transform the game to an unrecognizable form. If enacted, traditional blackjack would be prohibited, requiring cardrooms to alter their operation and seek reapproval for each game.
Key changes include:
- The elimination of the “bust” feature, whereby players or dealers lose automatically for exceeding 21.
- Redefining wins and losses based solely on point comparisons, discarding the 21 target.
- Disallowing the terms “21” or “blackjack” in gameplay.
Cardrooms would subsequently need a brief 60-day period to resubmit applications for game modifications.
Stringent Player-Dealer Regulations
Additionally, the proposed changes to player-dealer roles introduce a host of new regulations that resonate with tribal concerns. Under this proposal, player-dealers must:
- Remain seated throughout the game, with opportunities to assume that role clearly advertised to all players.
- Adhere to specific rotation requirements, ensuring the role rotates among players.
- Allow only one TPPPS per table and limit their activities related to wagering.
As with the blackjack regulations, a 60-day period for modification requests would be established.
A Shift in Power Dynamics
The current landscape of California gaming appears to be at a pivotal juncture. Tribal groups have gained substantial momentum, having recently achieved significant legislative successes and rejecting commercial sports betting measures in 2022.
Conversely, cardrooms are facing increased scrutiny, with local officials voicing alarm over potential losses to this vital sector, particularly as seen in the case of Hawaiian Gardens, where local tax revenue heavily relies on a major cardroom.
Mayor Dandy de Paula articulated the critical role the cardroom plays in the city’s financial framework, urging caution against the proposed regulations, which could drastically affect its operational viability.
Despite these challenges, cardrooms still wield considerable influence in the state. Following the passage of SB 549, they invested significant resources to lobby against specific lawmakers, resulting in several electoral defeats.
As Keith Sharp, a legal representative for Hawaiian Gardens, remarked, the industry desires recognition and respect rather than marginalization. The evolution of California’s cardrooms is unfolding, reflecting broader tensions and interests that define the state’s gaming sector.