New regulations for California cardrooms proposed by the state Bureau of Gambling Control will mean the end of the $5.6 billion industry, say representatives of that industry such as California Gaming Association President Kyle Kirkland, himself a casino owner.
Last month, Kirkland called the draft regulations “a clear attack on the card room industry and a message that the bureau is intent on eliminating this lawful $5.6 billion industry and putting 32,000 Californians out of work.”
Unlike Las Vegas casinos, where card games are run by a dealer who works for the casino and acts as a banker, California cardrooms are forbidden by law to have any financial stake in the game. Instead, they contract with dealers and companies that act as bankers, known as third-party proposition players (TPPPs).
Under the new regulations, the players themselves would have to take turns acting as the banker, i.e. “the house.” They would rotate every two rounds, which would create delays between rounds, and casinos would collect fewer fees per hour. It is feared that players who don’t want to be the banker might visit a tribal casino instead, and players who refuse to be the “house” wouldn’t be able to play at all. The game would stop if no players accept being the banker.
Clarke Rosa, owner of the Capitol Casino, told the Sacramento Business Journal that his cardroom could lose 70 percent of its revenue under the draft regulations.
Gaming tribes have long sought to eliminate the ability of cardrooms to offer banked games, saying that this violates the state constitution and most tribal state gaming compacts.
In 2018, the Rincon Band of Luiseño Indians and Santa Ynez Band of Chumash Indians teamed to file lawsuits challenging cardrooms in California Superior Court. Other tribes filed suit against the state on the same issue. Those lawsuits have so far not been resolved.
At the same time, the card club industry feels threatened by an initiative proposed by 18 gaming tribes that would amend the state’s constitution to allow sports betting but limit it to tribal casinos and racetracks, leaving the cardrooms out in the cold.
Card clubs believe the initiative carries a hidden agenda that would allow gaming tribes to file civil actions targeting them.
So the recent high profile fine levied on one of 72 cardrooms in the Golden State couldn’t come at a worse time. The second largest cardroom in the state, Hawaiian Gardens Casino, was fined a total of $6 million for misleading gaming regulators and for not doing enough to discourage money laundering. Since the settlement, the casino says it is has put “strong procedures in place” to keep these kinds of violations from recurring.
California Attorney General Xavier Becerra says the Hawaiian Gardens Casino will be watched closely for the next two years to make sure it follows those procedures. Its license rests on such compliance, he said.
The current debate over cardrooms and the general inability of the state’s lawmakers to agree on gaming expansion goes back several years. State lawmakers and gaming tribes couldn’t agree on how to legalize online poker, an effort that began in 2010 and continued for several years. At one point, racetracks in the state agreed to accept subsidy in return for not pressing for the right to offer the games.
However, the major rift came between gaming tribes that fought against allowing PokerStars to participate, labeling the company a “bad actor,” and other tribes that would only support a solution that included PokerStars.
Many poker supporters became discouraged, and since 2017, there has been no effort in the legislature to legalize online poker.
The same could be true of sports betting. The same rivalries between tribal gaming and cardrooms make it harder for interests to unite on a common front.
In 2018, the U.S. Supreme Court opened a new kettle of fish by ruling that the federal law that had banned sports betting since 1992 was unconstitutional. This made way for various states to legalize or not legalize sports betting according to their own rules.
Rep. Adam Gray, who had worked to legalize online poker, also took the point on sports betting. His 2018 bill did not advance, but in 2019 he worked with state Senator Bill Dodd on SCA6. If passed by both houses, it would put a referendum on the ballot to give voters the chance to amend the state constitution to allow sports betting.
Unlike the tribal proposal, SCA6 allows for mobile gaming and doesn’t limit sports betting to tribal casinos and racetracks. Dodd is scheduled to begin hearings January 8 on the bill in a joint Senate-Assembly meeting.
At this point, the tribes are lining up behind the ballot measure and the card clubs are supporting SCA6.
