Behind the Scenes of California’s Soon-to-Expire Moratorium on Cardroom Expansion

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The 2022 midterm elections have come and gone. They take with them the latest – and most expensive – failed attempt to bring legalized sports betting to California.

Voters in the Golden State had potential options. Despite roughly half a billion dollars in advertising, they rejected both emphatically. Unofficial voting results show that Prop 26, which would have allowed sports wagering on tribal lands, garnered less than a third of the vote. Prop 27, for full online sports wagering, received the support of just 16.8% of voters.

However, that’s not the end of the drama in 2022 for legal gambling in California. The cardroom moratorium has been allowed to lapse by a legislative committee’s deadlocked vote on its extension. That will open a whole new can of worms.

The Quirky Landscape of California Gambling

The foundation for legal non-lottery gambling in California was laid by the Gambling Control Act (GCA) of 1997. That law allows any city or county that had a gaming room before 1984 to open new gambling establishments. It empowers local governments to regulate many aspects of those businesses, including their locations, betting limits and hours of operation.

However, it doesn’t allow for full-featured casinos. Instead, it only authorizes what it calls cardrooms. They can’t offer slots, video poker or any house-banked games. In principle, they only offer player-versus-player card games with a skill component, for which the house collects a rake. Traditionally, this would mean poker and its offshoots.

In 1998, the legislature amended the Act to create a 10-year moratorium on the expansion of cardrooms. That included both the issuance of new licenses and the addition of extra tables at existing cardrooms. The stated objective of the moratorium was to curb the expansion of gaming in the state outside of tribal lands. It set the stage for the introduction of tribal casinos. The first of these came in 2000, and there are now 66 such properties in the state.

By that point, California was home to 150 licensed cardrooms, most of these being tiny legacy operations. That number fell dramatically over the following decade to 91 active licenses by 2008. Today there are about 70 rooms still operating, with a total of almost 1,800 tables, plus more than a dozen dormant licenses.

Though the original moratorium would have lapsed in 2009, the legislature has extended it four times. This year, it was set to do so again.

However, the California Senate’s Governmental Organization Committee deadlocked 3-3 in an early September vote to advance the bill to the floor. As a result, the moratorium looks set to expire on January 1, 2023.

Who Does the Cardroom Moratorium Help or Hurt?

For much of its existence, support for the moratorium created some strange bedfellows.

Firstly, the anti-gambling crowd loved it for obvious reasons. The tribes were another fairly obvious group of supporters since their casinos operate under compacts negotiated with the Governor on behalf of the state. These aren’t part of the GCA and therefore aren’t affected by the moratorium.

However, many existing cardrooms also initially supported the moratorium. Although the GCA had benefitted them, a halt to further expansion allowed them to operate without facing additional competition.

Along the way, however, the worm turned for some cardroom operators.

Pushing the Envelope

Cardrooms eventually branched out from poker. Despite the need for their games to be player-banked, they began to find creative ways to offer more casino-like games.

They began to agitate for more capacity as they developed their own versions of games like blackjack, 3-card poker and Pai Gow poker. The tribes strongly opposed the addition of more gaming locations and tables while also questioning the legality of the new games. In fact, they’d pushed for language in Prop 26 that would have given them the ability to sue the cardrooms over the issue.

In 2018, while agreeing reluctantly to extend the moratorium for three more years, the legislature demanded that cardrooms and tribal casinos work out some compromise.

The committee proposed that the moratorium on new cardrooms would stay in place, but each existing room would be allowed to increase its table count by two per year for five years. The Senate passed that bill by a vote of 30-2. However, tribal opposition kept the bill from ever getting a hearing in the Assembly.

Does Saying ‘No to No’ Mean Yes?

The fact that the Governmental Organization Committee has prevented the new extension bill from getting a vote will surely anger the tribes. In fact, it probably means that they’ll oppose any future gambling expansion until the legislature makes amends.

The tension between the tribal and commercial gaming sectors sank Props 26 and 27. It has similarly killed multiple attempts to legalize online poker over the past decade. It will be the same story if there is ever a push for online casinos.

California is often described as a “quagmire” due to its inability to say “yes” to anything. There’s a profound irony here in that some form of expansion for the cardrooms may come in 2023, but only because a Committee refused to say “yes” to “no.”

About the Author

Emile Avanessian

Emile is a one-time banker turned freelance writer. He previously worked in equity research and as a member of the Financial Sponsors Group with Goldman Sachs, where he worked on numerous casino- and gaming-related projects. His written work has focused largely on sports (NBA basketball and European soccer) and sports betting. Emile currently also writes for Squawka and Urban Pitch. His work has also been published in The Los Angeles Times, The Blizzard, Yahoo Sports, SI.com, and ESPN.

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