California Legislature Seeks To Resolve Legality Of Games In Cardrooms

July 12, 2023
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The debate over whether California cardrooms that offer blackjack or baccarat dealt by third-party proposition players are in violation of tribal exclusivity rights to offer house-banked gaming could be headed to state court, according to a controversial legislative proposal.

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The debate over whether California cardrooms that offer blackjack or baccarat dealt by third-party proposition players (TPPP) are in violation of tribal exclusivity rights to offer house-banked gaming could be headed to state court, according to a controversial legislative proposal.

Senate Bill 549 would provide tribes standing for a one-time lawsuit to resolve the matter.

The bill passed the Senate with a 37-0 vote, with three senators not voting, in May, but faces a Friday (July 14) deadline in which bills that have already passed the Assembly or Senate must get through committees in the other chamber to be remain active this session.

Lawmakers in California will adjourn Friday for a month-long summer recess. The measure was referred to the Assembly Rules Committee after members of the Assembly Judiciary Committee voted 6-0 in favor on July 5.

As of late Tuesday (July 11), there was no hearing scheduled on the bill. If approved as amended by the Assembly, the bill would also need to return to the Senate for concurrence.

James Siva, chairman of the California Nations Indian Gaming Association (CNIGA), said his association supports SB 549, as it provides the clearest path to resolve the dispute of the legality of the gaming being offered at commercial cardrooms.

“In the words of the Legislative Counsel, this bill simply seeks ‘a declaration as to whether a controlled game operated by a licensed California card club and banked by a third party proposition player services provider constitutes a banking card game that violates state law and tribal gaming exclusivity,’” he said.

Siva told VIXIO GamblingCompliance that the bill does not pick winners or losers, nor does it challenge the right of card clubs to operate non-banked legal card games.

“Though we strongly believe we are ultimately right in our belief that these games are illegal, there is risk for tribes and a positive outcome for us is not guaranteed,” Siva said. “However, if commercial card clubs, whose interests largely oppose this bill, are confident in what they are doing is legal, then they should be as eager as we are to put this before the courts.”

As California’s tribes are considered sovereign nations, and cannot be sued or sue, the state legislature needs to clear the way for tribes to have a state court determine the legality of the games offered by the state’s 72 cardrooms.

Under the bill, tribes will get a three-month window beginning on January 1, 2024 to pursue one lawsuit only against the cardrooms. The legislation also proposes to consolidate all litigation in the Sacramento County Superior Court, where every cardroom would have a legal right to intervene in the lawsuit.

Proposed amendments also clarify that “nothing in this bill waives the state of California’s sovereign immunity and no entity of the state can be sued.”

Additionally, SB 549 provides that no monetary damages or attorney fees can be recovered by any party. The measure also does not directly comment on the legality of the games played by cardrooms and defers the ultimate determination on the matter to the courts.

The legislative effort to allow a state court judge to determine the legality of the games comes about two months after Democratic Governor Gavin Newsom signed a bill prohibiting gaming regulators from issuing new cardroom licenses for the next 20 years.

Cardrooms and tribes were able to agree on the new moratorium with a carve-out that allows cardrooms with fewer than 20 tables to add two additional table games beginning in 2024, then two more every four years until they reach a maximum of ten games.

Cardrooms, as well as several local communities dependent on gaming tax revenue, oppose the bill, claiming it threatens to drive them out of business and that the issue is settled law.

Among those opposed to the bill are the California Cardroom Alliance, Communities for California Cardrooms, and several cities including Bell Gardens, Commerce, and Hawaiian Gardens in southern California and San Jose.

Tribes and cardrooms have long disputed the legality of the “player-dealer” position in cardrooms, the role essentially played by the TPPP. Under existing law, only tribal casinos are allowed to offer house-banked card games.

In 2016, then California Attorney General Kamala Harris began a review of the Bureau of Gambling Control’s licensing issue. Despite launching the review, seven years later no decision has been made.

That was followed in 2018 when a San Diego gaming tribe sued cardrooms claiming the “player-dealer” model violated the state’s Unfair Competition Law. The Court of Appeals of California in 2021 dismissed the suit filed by the Rincon Band of Luiseno Mission Indians saying the tribe lacked legal standing to bring the case.

In 2019, U.S. District Court Judge John Mendez in Sacramento similarly dismissed a lawsuit brought by three tribes — Yocha Dehe Wintun Nation, Viejas Band of Kumeyaay Indians and the Sycuan Band of the Kumeyaay Nation — over claims their compacts with the state gave them exclusive right to games such as blackjack.

Following that defeat, several tribes added a provision to the ill-fated Proposition 26 that would have empowered private citizens to launch civil enforcement actions against illegal gambling violations not being pursued by the state attorney general.

Voters in November overwhelmingly defeated the ballot initiative that would also have allowed tribes to amend their gaming compacts with California to offer retail sports betting.

Siva said tribal exclusivity is guaranteed in the California Constitution, which was amended by voters with the passage of Proposition 1A in 2000 to grant the state’s federally-recognized tribes’ exclusivity to operate slot machines and banked card games.

“SB 549 will greatly benefit California tribes, California card clubs, third-party proposition player service providers and the state by conferring legal standing to secure a clear judicial declaration interpreting California law,” Siva said in a statement emailed to VIXIO.

“It will erase any ambiguity whether controlled games, operated by California card clubs using third-party proposition player service providers as banks, constitute banking card games that violate California law and tribal gaming exclusivity.”

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