California Wrestles With Dual Licensure For Gaming, Marijuana

October 12, 2021
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Like in Nevada, gambling regulators in California are expressing some concern at potential interactions between state-licensed gaming businesses and the lawful marijuana industry.

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Like in Nevada, gambling regulators in California are expressing concern over potential interactions between state-licensed gaming businesses and the lawful marijuana industry.

Yolanda Morrow, assistant director of the California Bureau of Gambling Control (BGC), told gaming policymakers her agency is concerned about commingling of funds should they approve a proposal for dual licensure within the cannabis and gaming industries.

"We are concerned about fusing money into the cardroom where the source would be difficult to track down or potentially federally illegal," Morrow told the Gaming Policy Advisory Committee (GPAC) last week.

The nine-member committee makes recommendations on gaming policy that are forwarded to the California Gambling Control Commission for approval.

The GPAC has spent most of the year considering whether to recommend that the commission approve regulations allowing licensed owners of cardrooms and third-party providers to own cannabis dispensaries, which are legal under state law.

However, federal law deems cannabis to be a Schedule 1 illegal drug under the Controlled Substances Act, putting it on par with heroin.

"There is also a concern about the cardroom's cage being used as a bank," Morrow told the GPAC during last week's meeting in Sacramento. "Since the cardroom is a financial institution … a cannabis business could not get a license."

Casinos and cardrooms also must consider federal anti-money laundering (AML) requirements when any gaming transactions involve people in the marijuana business.

Morrow said the bureau is further concerned about ensuring that money from a cannabis business does not commingle with cardroom funds and that the two businesses remain separate.

She cautioned the committee that should they end up proposing regulations to the commission, policymakers need to ensure that money from both businesses "doesn't get combined in any way."

The Nevada Gaming Commission in 2018 approved a set of policy requirements for casinos and other gaming licensees to keep their distance from the state's lawful marijuana industry.

The gaming policy committee, chaired by then Nevada Governor Brian Sandoval, voted unanimously in favor of five proposals limiting interactions between gaming and pot businesses, while allowing casino-resorts to host conventions that may be related to the marijuana industry.

Keith Sharp, a member of the California committee that has been tasked to create a policy, said that of the states that regulate both gaming and cannabis, only Nevada has approved regulations denying dual licensure.

Still, Sharp agreed with Morrow's concerns, saying they would be the basis of any regulations should the policy committee decide to move forward with a dual licensure proposal in California. The committee could also decide to ban dual licensure of cannabis and gaming businesses.

It remains unclear if the GPAC will present any proposal to the gaming control commission before the end of the year.

Sharp is a well-known gaming attorney in California, having represented The Gardens Casino, also known as Hawaiian Gardens, to settle a complaint brought by the state attorney general's office.

The complaint said the cardroom failed to mention a federal probe and a $2.8m AML penalty when applying to renew its license two years ago.

The cardroom agreed to pay California $3.15m and admitted misleading regulators as part of the settlement.

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