Californian Tribes Threaten to Sue State Regulators and Card Rooms

Long-simmering disputes between California gaming tribes and the state’s dozens of private cardrooms now threaten to erupt into lawsuits as the tribes have announced their intention to sue both these poker clubs and the regulatory authorities. At the heart of the matter is the tribes’ contention that these commercial card facilities are spreading non-permitted games that basically amount to casino gambling, which ought to be reserved for the tribes under the terms of their gaming compacts.

About the Games in Question

At the center of this dispute lie what are called “Asian” or “California” games. These are variants of such casino staples as blackjack and pai gow poker. They involve individual players banking their own action against each other rather than having the house act in opposition to each participant. The games were introduced to get around California’s prohibition on percentage and banked games: that is, gambling activities where the house has an interest in the results. With the deal rotating to each player in turn, everyone taking a seat at these tables theoretically has equal standing.

Cardroom operators take for themselves a cut of the total action. Because their fee for each hand is determined by the size of the wagers made, kind of similar to how the rake works in poker, they don’t have any stake in who wins a particular bet.

Many of the state’s 74 card rooms began offering Asian games, but they didn’t really catch on at first among customers. Then a few card room owners got creative. They started hiring proposition players – that is, individuals who use their own bankrolls but are paid to play – to sit in these games. At the same time, the dealer position stopped moving around the table, instead being occupied almost exclusively by the proposition player. Several third-party proposition player services firms even popped up to handle the increasing demand.

Cardrooms claim that because proposition players aren’t banked by the house, hiring them to generate more action at the tables isn’t against the law. Opponents counter that a proposition player functions more or less as a de facto house. It doesn’t really matter that they’re not employed directly by the room.

Tribes Getting Frustrated

Asian games have proliferated since third-party proposition player services gained popularity in the late ’90s. Rather than attempting to shut them down, the state approved of their operations and even granted these corporations licenses to legally conduct their business.

As could have been predicted, the more than 60 tribes that manage casinos in the state were less than pleased. They viewed these activities as cutting into the revenue of their own casino games. The Proposition 1A ballot initiative, which was approved by the voters in the year 2000, contains the language: “The Legislature has no power to authorize, and shall prohibit, casinos of the type currently operating in Nevada and New Jersey.” The next section of Proposition 1A exempted tribal gaming from this prohibition provided an appropriate compact was negotiated between a tribe and the state.

California Finally Acts

The California Bureau of Gambling Control belatedly decided that Asian games are contrary to the law. The head of the agency, Stephanie Shimazu, issued a memorandum near the end of October wherein she declared that the Bureau “plans to rescind game rules approvals for games too similar to 21/blackjack that are prohibited by state law…We will notify cardrooms and defer enforcement for a specified period of time to enable cardrooms to prepare for this action.”

However, Indian gaming interests aren’t buying it. Steve Stallings, chairman of the California Nations Indian Gaming Association, said, “It’s a delaying tactic. At this point, we’re suing.” The tribes intend to file suit against the Bureau of Gambling Control as well as the Gambling Control Commission. Separate actions are being contemplated against the individual cardrooms that are perceived to be in violation of the rules.

Cardrooms Unhappy Too

Though the California tribes believe that the cardrooms have been getting away with too much for too long, things appear different on the other side of the fence. Some cardroom managers have questioned the abrupt regulatory sea change announced by Shimazu without the input of either the gambling industry or the public at large.

Municipalities are also saddened by this decision because many of them rely on local gambling taxes to fund their budgets. City of Commerce City Administrator Edgar Cisneros said: “We would immediately look at 25 percent cuts across the board.” City of Commerce is home to the Commerce Casino, which is proud of its designation as the largest cardroom in the world. However, the very fact that its name includes the word “casino” tends to support the tribes’ case against it.

Sports Betting at Issue

Now that the U.S. Supreme Court has overturned the federal ban on sports betting with its Murphy v. NCAA ruling, a few states have legalized this type of wagering, and more are looking to do so in the near future. With a large population and already existing ecosystems for cardrooms and tribal casinos, California seems like a prime candidate. However, the California Nations Indian Gaming Association has promised to block any attempts to introduce sports betting to the state until this problem of illegal casino games in the cardrooms is dealt with. Because of the political clout the tribes wield, they will have to be appeased somehow to make CA-licensed sportsbooks a reality.