Regulators Ready To Crack Down On California Card Rooms

Martin Derbyshire October 30, 2018 994 Reads
California Card Rooms

California’s Bureau of Gambling Control (BGC) is poised to begin a crackdown on card rooms offering games like blackjack, as the latest lines in the battle over what games the would-be casinos can legally spread are drawn.

In 2000, Native American tribes were given what they believe is a constitutional guarantee that only tribal casinos can offer casino-style gambling in California. However, California card rooms, which had been traditionally poker-only, wanted a piece of the pie.

A year later, the card rooms successfully lobbied California lawmakers to amend the law. It now allows card rooms to offer games like blackjack and Pai Gow with one caveat. It states players must act as the bank, not the house.

The card rooms began referring to the games as California or Asian games. This simply means games like blackjack and Pai Gow with a rotating player-dealer position.

Soon after, many of the states’ now 74 card rooms started skirting around the law by hiring proposition players to bankroll the games and cut them in. In fact, a cottage industry has been born out of it, with third-party proposition player firms establishing themselves to work with the card rooms.

Some card rooms simply ignored the law altogether and started banking their own casino games.

Native American gaming tribes cry foul

Native American tribes have long cried foul, claiming the activity infringes upon their exclusive right to offer casino-style games in California.

At the end of last month, the BGC, an arm of Attorney General Xavier Becerra’s Department of Justice, suddenly decided to do something about it.

BGC Director Stephanie Shimazu issued a memo on Sept. 25 stating the BGC plans to take away card room approvals for those with games that are much too similar to the casino games prohibited by state law, including blackjack.

Shimazu said the BGC is planning to notify card rooms across the state and delay enforcement for now. A move that would give the card rooms time to prepare for the inevitable action against them. She also swore to uphold regulations for California and Asian games requiring the games to be player banked.

On the surface, the crackdown would appear to appease gaming tribes in the state, which own California’s 63 tribal casinos. However, Steve Stallings, chairman of the California Nations Indian Gaming Association, told CDC Gaming Reports it’s all political posturing:

“It’s a delaying tactic. At this point, we’re suing.”

Of course, California gaming tribes have been threatening for years to sue regulators and card rooms. The tribes claim allowing casino-style gaming at the card rooms is a violation of various tribal-state compacts. Plus, tribes claim it goes against the 2000 California ballot initiative that promised the tribes exclusivity on casino-style gambling.

All sides angered

Obviously, the card rooms are not happy about the crackdown either. Austin Lee, executive director of Communities for California Cardrooms, called the BGC’s move unprecedented:

“The Bureau’s announcement to revoke game approvals for various versions of blackjack on a statewide basis is unprecedented. It would require cardrooms to significantly adjust operations.”

Meanwhile, the many California municipalities that have come to depend on tax revenues local card rooms generate are also concerned.

California card rooms generate an estimated $300 million in federal, state, and local taxes. Some municipalities across the state depend on municipal taxes from card rooms to cover up to 60 percent or more of the municipal budget.

City of Commerce City Manager Edgar Cisneros told CALmatters a crackdown on card rooms would likely force Commerce to make 25 percent cuts across the board. The cuts would impact things like libraries, sheriff’s services, and parks. The local Commerce Casino & Hotel is the largest card room in the world. It features 240 tables spreading poker and a variety of “Cal Games” including baccarat, blackjack, Pai Gow, Ultimate Texas Hold’em, and 3 Card Poker.

Impacting California sports betting and online poker

The fight between card rooms and tribes over the type of gaming each can offer continues to have an impact on other gambling expansion initiatives in the state as well.

Lawmakers efforts to legalize sports betting have been caught up in it. Plus, gaming tribes stand firmly against a private ballot initiative by Californians for Sports Betting to legalize sports betting. Particularly because it would also permit card rooms to offer casino games.

The two sides have also spent a decade arguing over online poker operator suitability. A part of the card room-tribal gaming battle that has prevented the state from moving forward with online poker legislation.

At this point, Stallings said the tribes stand opposed to any kind of gambling expansion. Particularly anything that threatens the tribes’ exclusivity on casino-style gambling:

“Right now our position is we do not support expansion of gaming in California. We’ll wait to see how things develop.”

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