California Indian tribes are again on the offensive against cardrooms.
Tribes are asking the state legislature for help in getting the courts to decide the legality of how cardrooms offer blackjack and other traditionally house-banked games.
Cardroom representatives look at it as the latest attempt by tribes to shut down games recognized and regulated by the state.
Several lawsuits filed by tribes were dismissed for lack of standing in recent years. A bill from Sen. Josh Newman seeks to get tribes past the “standing” issue so courts can decide their decade-long dispute against cardrooms.
“If this bill passes and becomes law, we’re hoping it will allow the appropriate platform to come to some kind of conclusion on this issue,” James Siva, executive director of the California Nations Indian Gaming Association (CNIGA), told PlayUSA. “Put tribes in a courtroom, acknowledge they have standing to bring this type of case, and hopefully the courts will rule on the merits.”
The Assembly Judiciary Committee will hear SB 549 Wednesday at 1:30 pm.
History of CA cardroom games at question
The California Constitution prohibits Nevada-style casinos, preventing California cardrooms from offering banked games.
Blackjack is typically a house-banked game. For years, cardrooms offered a variation of blackjack in which a regular player at the table served as the bank against other players. Cardrooms made money through collection fees paid by players to participate in each hand.
Eventually, outside companies developed third party proposition players (TPPP) for cardrooms. These players sit next to the dealer and operate as the bank at each table. Because odds in blackjack favor the house, they generate revenue these companies split with the cardrooms. But by not banking the games themselves, cardrooms found a workaround to state law.
California opted to register the TPPP vendors and regulate the games under the California Gambling Control Commission and Bureau of Gambling Control.
A controversial opinion letter issued by then-Bureau of Gambling Control head Robert Lytle in 2007 stated that the deal need not be continuously and systematically rotated as stated in Penal Code 330.11. It could just be offered to players at the table.
That led to the system today in which the player experience at cardroom blackjack tables differs little from the house-banked games offered at tribal casinos and that people know from Las Vegas.
Tribal attempts to stop cardroom games
Proposition 1A (2000) amended the state constitution to provide an exception for Indian tribes. By entering into compacts with the state, they could offer slot machines, banked and percentage games at casinos on tribal land.
As the only entities in the state approved to offer banked games, tribes have been trying to stop cardrooms from offering traditionally house-banked games such as blackjack and baccarat for more than a decade.
Tribes have filed several lawsuits on the matter. The most relevant to this legislation was Rincon v. Flynt. Tribes filed the suit directly against cardrooms.
A trial court and court of appeals agreed in 2021 that the tribes lacked standing to bring the case. Sovereign tribes generally can’t directly sue or be sued in state courts.
Tribes also tried to sway multiple state attorney generals to crack down on the cardroom games over the years. The Bureau of Gambling Control developed but never finalized rules requiring player bank rotation.
Last year tribes asked voters to intervene and give “any person or entity” the ability to sue anyone suspected of violating gambling laws in civil court. Prop 26 failed with 33% of the vote. But most voters likely cast their vote based on the ballot measure’s more prominent sports betting focus.
Details of new bill
The purpose and intent of SB 549, also known as the Tribal Declaratory Relief Act of 2023, is explained in the bill as:
“To authorize a limited declaratory and injunctive relief action before the California courts to determine whether certain controlled games operated by California card clubs are illegal banking card games or legal controlled games, thereby resolving a decade-long dispute between California tribes and California card clubs concerning the legality of those controlled games and whether they infringe upon exclusive tribal gaming rights.”
Key details of SB 549 include:
- Tribes must file the case in the Superior Court of California, County of Sacramento.
- If the bill passes this year, tribes must file their case no later than April 1.
- Consolidates multiple actions filed into one lawsuit.
- Does not permit any claims for money damages, penalties or attorney’s fees.
Arguments for and against SB 549
The Viejas Band of Kumeyaay Indians, located in San Diego County, leads the effort backed by 21 tribes and CNIGA.
Tuari Bigknife, attorney general for Viejas, made his argument for the bill to PlayUSA:
“This is a good vehicle because it doesn’t pick winners and losers. It just sends it to court. If you talk to a cardroom executive, they’ll tell you what they’re doing is legal. The court is the best place to interpret the law and tell us whether this is legal or not.”
Kyle Kirkland, president of the California Gaming Association, said he hoped lawmakers would not be swayed by the simplistic argument to let the courts decide.
“The problem is tribes just don’t like the rulings they’ve gotten and so they’re trying to find any kind of workaround,” Kirkland said. “I think the legislature giving up state sovereign immunity or just saying we don’t have confidence in a state agency is a horrible precedent.”
Keith Sharp, president of the California Cardroom Alliance, further explained the sovereign immunity issue in a letter provided to PlayUSA:
“Because the attorney general will be a necessary party to any suit, the legislature is being asked to waive the State of California’s right to assert sovereign immunity from suits from gaming tribes while gaming tribes can choose to ignore state environmental and labor laws, cannot be sued for those violations, and continue to play illegal games like craps and roulette which are not authorized under their gaming compacts or the state’s constitution.”
Tribes pitch this as a one-time vehicle for tribes to have standing for a lawsuit. Cardroom representatives don’t buy it.
“Any time a small subset of hyper-wealthy tribes doesn’t like something, they can just put through one of these bills,” Kirkland said. “Any time something doesn’t go their way or something upends their monopolistic goals, they’re going to pitch a tantrum and run to the legislature saying let’s have the courts decide.”
Bigknife countered that cardrooms should be excited about the legislation.
“We’ve been fighting about this for a decade. All they have to do is go in and prove that these games are legal, and tribes will try to prove they’re illegal. One of us is going to win. And they should be happy that it doesn’t subject them to any damages, attorney’s fees or other costs. From our perspective, things being legal is important and nobody should be fighting against the question of something being legally defined.”
Why now for tribal legislative effort
Bigknife said COVID had a lot to do with tribes wanting to pursue this avenue to get a legal decision. With cardrooms closed by the state during the pandemic, tribal casinos experienced a massive increase in revenue from table games.
“It brought focus to how much money is being taken away from tribes. After COVID, we’re confident to say it’s over $100 million that is being siphoned away from tribal governments every year. That’s a lot of money that could be going to our government programs because gaming is 100% of our lifeblood. Very few tribes up and down the state have any other revenue sources to fund their governments. So that money matters.”
Tribes waited to pass legislation reinstating the cardroom moratorium before going back on the offensive against games offered at cardrooms.
“I think this is the result of tribes both respecting having a clean moratorium bill but also still wanting to address the issue of illegal games that has been ongoing for a number of decades now and really has not reached a place of any kind of resolution or action.”
Path forward for SB 549
Newman, who chairs the Senate Committee on Education, started SB 549 as legislation relating to the Department of Education. That bill passed the Senate unanimously in May.
Newman substituted in the tribal language on June 19. The bill needs to advance through the Assembly Judiciary and Governmental Organization committees by July 14, when the legislature enters summer recess.
Once the legislature returns Aug. 14, the bill would have one month to get through the Assembly and back to the Senate. In the Senate, the bill would need to go through Governmental Organization before heading to the floor. The California legislative session adjourns Sept. 14.
If the bill passes, parties indicate it could take four to 10 years to get a final verdict on the legality of California cardroom games. The case would be certain to go to the California Supreme Court.
“I think tribes are pursuing options that give them some way to bring this issue hopefully to a close,” Siva said. “Ultimately, this is an enforcement issue. We’re not asking for any special application of the law. We’re simply asking for the law to be upheld as it is currently written.”