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California’s cardrooms dodged a serious threat last week. A judge stepped in to temporarily halt enforcement of new state rules targeting blackjack-style games and similar offerings.
San Francisco Superior Court Judge Richard Darwin sided with cardroom operators in the dispute.
The ruling came after the California Gaming Association challenged state regulators for overstepping their authority. Darwin found enough merit in the argument to grant a preliminary injunction. Enforcement has been on hold since.
A new tactic
While the case in question does not involve California Native American tribes, tribes strongly support the new cardroom rules. They have been seeking tighter restrictions on cardrooms for years and have faced repeated legal setbacks.
They lost a federal lawsuit in 2020, then gained another chance when state lawmakers allowed them to pursue the issue in state court. That case failed last October, when a judge ruled the dispute fell under the federal Indian Gaming Regulatory Act and therefore sat outside state court jurisdiction.
Earlier this year, California Attorney General Rob Bonta and the Bureau of Gambling Control tried a different approach. Rather than litigate, they changed the rules. The updated regulations banned blackjack outright and tightened the definition of what counts as a player-banked game.
The California Gaming Association viewed the move as an abuse of regulatory power and sued.
What the injunction means
To issue a preliminary injunction, a judge has to believe two things. First, that the party seeking one has a realistic chance of prevailing at trial. Second, that without the injunction, that party would suffer harm that cannot be undone later.
Darwin concluded both conditions were satisfied.
The decision does not guarantee a final victory for the cardrooms, but it sends a meaningful signal. The judge found their legal challenge serious enough to halt enforcement while the case moves forward.
The financial stakes help explain why the industry fought so hard for that outcome. State regulators had estimated the rule changes would cost cardrooms around $400 million a year. The potential damage would extend also well beyond just the cardroom operators.
Several California cities rely heavily on cardroom revenue, and the proposed restrictions threatened to gut their budgets. Commerce and Bell Gardens are already considering new taxes to offset the revenue they stand to lose. Some cities were also facing potential losses of up to 60% of their general funds.
Tribal casinos had reason to push just as hard on the other side. State estimates put the amount tribes stood to gain from shuttered cardrooms at roughly $200 million annually.
California stays put
The broader context here is that California has resisted almost every major shift in gaming policy over the past decade, including the addition of sports betting and online casinos. At the same time, most other states have legalized or expanded sports wagering, while eight others have also legalized online casinos.
California, like the next most populous US state – Texas – has stood its ground on gambling expansion.
Tribal gaming groups hold considerable influence in Sacramento and have used it effectively. The Sports Betting Alliance found this out recently when it tried to advance online sports betting without securing tribal backing. Voters swiftly voted that down, along with another plan that would have allowed tribes to offer online betting.
Despite their power in the Golden State, tribes have consistently failed to land a knockout blow against cardrooms. The establishments have become so embedded in local economies that municipalities have fought to protect them. That political reality has blunted every legal and legislative push so far.
Unfinished business
The preliminary injunction holds for up to only 45 days. A follow-up hearing is scheduled for June 30. At that point, the court will determine how the case continues.
If the trial ultimately goes the cardrooms’ way, the state’s proposed rule changes likely die. If regulators win, blackjack would all but disappear from the establishments.
Darwin’s preliminary ruling is encouraging for the industry, but it does not permanently resolve anything.
Is any deal possible?
Some observers think the only realistic path out of this dispute is a negotiated settlement. A court fight could drag on for years and produce results neither side controls.
Connecticut offers a case study in how bitter gaming standoffs sometimes end. For several years, the state could not pass sports betting legislation. Its tribal gaming operators and the state Lottery both wanted favorable terms, and neither would yield.
Gov. Ned Lamont eventually moved to legalize online casinos. That gave him something new to offer the tribes. They accepted online casino exclusivity in exchange for allowing the Connecticut Lottery into sports betting. Both sides left with something, but neither got all it sought.
Unfortunately, there’s nothing to give California cardrooms that wouldn’t negatively impact tribes. Online poker was once floated as a potential compromise tool, but that market has lost much of its appeal. Sports betting remains on the table as a future issue, and it could eventually provide an opening.
