If a bill currently under consideration by the California legislature passes, the state’s gaming tribes may get the opportunity they’ve been seeking to challenge cardrooms in court. California has allowed the tribes exclusivity over casino gaming, but they say some games available at cardrooms infringe on that. Past attempts by the tribes to test the games’ legality in court have been dismissed for lack of standing. The Tribal Declaratory Relief Act (TDRA) would explicitly grant them that right.
The most recent attempt by the tribes to sue the cardrooms, Rincon v. Flynt, ended in 2021. In upholding the trial court’s decision to dismiss, the California Fourth District Court of Appeal resisted attempts by the tribes to expand the case into a larger one about sovereign immunity and whether tribal entities have the right to file suit in state courts. Instead, it ruled narrowly that their arguments failed to allege any “actual breach or disruption” of the compact between the tribes and the state.
The TRDA, sponsored by Sen. Josh Newman, could mean there’s an end in sight for the years-long dispute. It would offer the tribes a limited window of time to file their suit, requiring them to initiate it before April 1, 2024.
Though the bill has been amended several times along the way, it passed in the Senate by a unanimous 37-0 vote on May 4. The ball is now in the Assembly’s court.
On July 5, the Assembly Judiciary Committee advanced the bill unanimously, with a 6-0 vote. However, lawmakers will now have to move swiftly, as there is only about a month left in the legislative session.
A Brief Background on Gaming in California
Non-lottery gaming was established in California in 1997 with the Gambling Control Act (GCA). The law established the California Gambling Control Commission (CGCC) and laid the framework for the state’s gambling licensing, operation, and oversight.
The law, however, does not allow for casino-style house-banked games, slots, or video poker. Instead, it allows player-banked cardrooms, where players play against each other rather than the house.
Cardrooms, in theory, act only as a facility and provides professional dealers to oversee the games. In return, cardrooms charge players a fee to use the space. But, over time, the cardrooms got creative and found loopholes to offer games like blackjack and baccarat by allowing players to take turns acting as the house.
They later expanded on this idea by extending the banking privileges to outside companies or “third-party proposition players (TPPP).” These TPPPs sit next to the dealer and act as the bank, paying part of their winnings to the cardroom in return.
Meanwhile, through Proposition 1A in 2000, California amended its constitution to allow Class III gaming by Indian tribes. Through a compact with the state, the tribes can offer house-banked games, slots, and other casino games on tribal lands.
The Indian Tribes Have Attempted To Stop Cardroom Games Multiple Times in the Past
California’s Indian Tribes have been fighting the legality of how cardrooms operate for over a decade, with Rincon v. Flynt being only the most recent example. They claim their compact with the state gives them an exclusive right to offer casino-style games. But according to the tribes, cardrooms are breaking the law.
Tribes Turned to Voters for Help In the November 2022 Elections but Failed
In 2022, the tribes tried another tack to earn the right to sue, piggybacking it on the effort to legalize sports betting. Proposition 26 would have allowed tribal casinos to offer retail sports betting and add other new games. At the same time, it included a provision to allow any person or entity to file a civil case against cardrooms for illegal gambling. This would have turned the question of the games’ legality from a regulatory issue into one for the courts to consider.
However, as California voters overwhelmingly rejected sports betting and all the accompanying provisions, this attempt failed.
Indian Tribes and Cardrooms Agreed to a Cardroom Moratorium Extention in a Rare Instance of Cooperation
In 1998, the California legislature created a 10-year moratorium to regulate the expansion of cardrooms. The moratorium was then extended multiple times. But as no extension was agreed upon in 2022, the moratorium expired at the end of the year.
But after negotiations between the state, cardrooms, and Indian tribes, California Governor Gavin Newsom signed a 20-year moratorium. It marked a rare occasion on which tribes and cardrooms worked together. Like the tribes, the existing cardrooms have a vested interest in not seeing any new competition appear.
As a result, no new cardrooms can open for the next 20 years. However, as a compromise, the law allows existing cardrooms with fewer than 20 tables to add additional tables over time.
The Bill Passed Assembly Judiciary Committee but Races Against Time To Pass
In advancing the bill, the Judiciary Committee expressed the hope that a lawsuit would resolve the issue and prevent it from becoming a perennial nuisance.
But that’s only one step in the process. The Judiciary Committee passed the measure to the Rules Committee, which was scheduled to meet on July 10. However, that meeting was adjourned, so the bill faces a race against time. On July 14, the California legislature enters summer recess.
It returns on Aug 14 and is in session until Sep 14, when the California legislative session adjourns. That means the bill must pass the Rules Committee and possibly the Government Organization Committee. Assuming it passes in the Assembly, SB 549 will return to the state Senate, where it would need to win approval a second time because of the changes made.
Even if the bill becomes law and leads to a lawsuit, it will likely take a long time to reach a final verdict. Because of how much money is at stake, it seems like a case destined for the state’s Supreme Court.
Cardroom lawyers argue against the bill that it does not allow cardroom countersuit and that California’s attorney general has approved the games.