California cardrooms win temporary halt to blackjack and player-dealer rules, but legal battle continues

(AsiaGameHub) –   California card rooms got a small reprieve on Thursday after winning a preliminary injunction in two lawsuits filed against the state attorney general’s office, which will temporarily put two new sets of regulations covering blackjack-style games and player-dealer practices on hold while the legal cases proceed.

The 45-day injunction was issued by San Francisco Superior Court Judge Richard Darwin. At the start of the hearing, Darwin issued a tentative ruling in favor of the card rooms, a decision he later confirmed after both sides presented their arguments. The next hearing is set for June 30.

“I find that the petitioners are highly likely to succeed on their claim that the Bureau of Gambling Control exceeded its legal authority when issuing the new regulations,” Darwin said. “California law is unambiguous: an agency like the Bureau only holds the powers explicitly granted to it by state statute. Any action taken by an agency that is not authorized by relevant enabling legislation falls outside its jurisdiction and is invalid.”

The new rules rolled out by the BGC, which operates under the AG’s office and is independent of the California Gambling Control Commission, are part of an extremely complicated, long-running legal and regulatory conflict between card rooms and the state’s tribal gaming operators.

Tribes hold exclusive rights to Class III gaming in California, and have long argued that card rooms are unlawfully offering banked games, rather than operating within the parimutuel framework they are permitted to use. Card rooms, for their part, counter that blackjack-style games and player-dealer models had been approved and overseen by state regulators for years before the new rules were introduced.

The AG’s office told iGB it is aware of the injunction and “will respond appropriately through court proceedings”. The California Nations Indian Gaming Association did not reply to requests for comment on the ruling.

Card rooms welcome ruling but hurdles remain

Kyle Kirkland, president of the California Gaming Association and owner of Club One Casino in Fresno, told iGB on Thursday that the CGA is “happy with the ruling”, but the industry remains on high alert.

“This confirms what we have said from the very beginning: the Bureau of Gambling Control is overstepping its authority, and these regulations would cause irreversible harm to the communities we serve,” Kirkland said.

Kirkland bought Club One in 2008 and took on the role of CGA president in 2013. He noted that these rule changes and the associated legal battle are “the most critical issue the card room industry has faced” since he joined the sector, and there is still a long path ahead before the matter is settled. For now, card rooms are largely in a state of uncertainty, having to run operations as if the changes will take effect while simultaneously contesting them in court.

“We are very grateful to the judge, but we also have to consider what our backup plan is if our arguments do not gain support for some reason,” Kirkland said.

State confirms rules will cause substantial harm

The two sets of rule changes were approved by the state on February 9 and went into effect on April 1. Before this ruling, card rooms faced a May 31 deadline to submit new compliance plans. Both parties agreed on Thursday that if the state ultimately prevails, card rooms will be given extra time to meet compliance requirements to make up for the time lost during the injunction. The rulemaking process first launched last spring, with two public hearings held and more than 1,700 public comments submitted.

For blackjack-style games, the new rules would drastically alter gameplay by removing the “bust” feature and the 21-point target, among other adjustments. Additionally, the player-dealer changes would strengthen existing rules to mandate regular rotation of the dealer position to keep games active, along with other requirements.

As card rooms argued in their lawsuits, the state has been straightforward in its analysis of the rule changes. The Department of Justice stated in its rulemaking proposal last year that card rooms “would be directly impacted by the proposed regulations”, and estimated that 50% of current blackjack revenue would be lost. The DOJ added that the changes were mostly clarifying in nature, designed to “ensure that the public does not participate in, and regulated industries do not offer, gambling games that are prohibited” under state law.

At this week’s hearing, state attorneys argued that the BGC and DOJ hold exclusive authority to implement these kinds of changes, not the Gambling Control Commission, which handles most day-to-day regulatory oversight duties.

“We are the body that defines what constitutes a controlled game, and our regulations allow us to carry out our legally mandated role,” argued Deputy Attorney General Sharon O’Grady.

Tribes defend sovereignty and exclusive gaming rights

This position is somewhat unexpected from the state, given its admission that the rules will ultimately reduce local tax revenue for multiple cities across California. While tribal casinos do have specific financial obligations under their gaming compacts and employ many non-tribal residents, several card rooms contribute a large share of their host cities’ municipal budgets.

Two cities, Commerce and Bell Gardens, declared fiscal emergencies after the new rules were announced. The cities are home to the largest and third-largest card rooms in the state, respectively, and both have added sales tax increase measures to the June ballot to offset projected revenue shortfalls. Tax revenue from one card room, Parkwest Bicycle Casino, makes up roughly 40% of Bell Gardens’ general fund. Kirkland, meanwhile, said he was unsure of the status of those ballot measures following the injunction.

Card rooms claim that Attorney General Rob Bonta, who is running for reelection this year, is simply advancing the tribal gaming agenda by pushing these rules. Tribes, in response, have maintained that the state is fulfilling its duty by stepping up enforcement and upholding their exclusive gaming rights. Both sectors are highly politically active and have donated to Bonta’s campaigns on multiple occasions.

“We were excited when the rules were first approved. This is an outcome tribes have been advocating for over the past 10 years,” CNIGA Chairman James Siva told iGB in April. “We firmly believe that the games card rooms offer are illegal house-banked games, which violate our exclusivity and our tribal sovereignty.”