California gambling regulators pledge crackdown on card rooms, but tribes remain angry

October 29, 2018 4:11 AM
  • Dave Palermo
October 29, 2018 4:11 AM
  • Dave Palermo

California gambling regulators say they will crack down on card room operators that American Indian tribes claim are violating state laws and a constitutional guarantee that only tribal casinos can offer banking and percentage table games.

Story continues below

Stephanie Shimazu, director of the Bureau of Gambling Control (BGC), said in a Sept. 25 memo that her office “plans to rescind game rules approvals for games too similar to 21/blackjack that are prohibited by state law.”

“We will notify cardrooms and defer enforcement for a specified period of time to enable cardrooms to prepare for this action,” she said of the 74 card rooms operating statewide.

Stephanie Shimazu, director of the California Bureau of Gambling Control

Shimazu also pledged to promulgate regulations requiring rotation of the player-dealer position for what are known as “California” or “Asian” games, which are versions of blackjack and pai gow poker normally prohibited by state law.

In most California cardrooms the player-dealer position is occupied by employees of third-party proposition player firms, or TPPPs.  State-licensed TPPPs enable card rooms to bankroll high-stakes table games ostensibly without violating laws prohibiting house-banked gambling.

Shimazu’s memo is the latest development in a six-year dispute between the politically powerful tribal and card room gambling industries over game rules and the use of TPPPs.

The tribes – who operate 63 licensed casinos employing more than 50,000 workers and annually generating $9 billion in gross revenues – are threatening to sue state regulators and the card rooms, claiming violation of tribal-state compacts and a 2000 ballot initiative promising them exclusivity to operate casino-style gambling.

Tribes are not pleased with Shimazu’s promises.

“It’s a delaying tactic,” said Steve Stallings, chairman of the California Nations Indian Gaming Association. “At this point, we’re suing.”

The card rooms are also disturbed with Shimazu’s memo.

“The Bureau’s announcement to revoke game approvals for various versions of blackjack on a statewide basis is unprecedented,” said Austin Lee, executive director of Communities for California Cardrooms. “It would require cardrooms to significantly adjust operations.”

Lee said he questions why “such a drastic change” in bureau policy would be adopted without public and industry input.

City officials and card room operators contend a crackdown on California/Asian games would cripple an industry that employs more than 20,000 workers and generates up to $300 million in federal, state and local taxes.

Some municipalities depend on card rooms for 60 percent or more of their municipal taxes.

“We would immediately look at 25 percent cuts across the board,” City of Commerce City Manager Edgar Cisneros told CALmatters, a journalism website.

A potential $16 million slash in the city’s budget would impact libraries, sheriff’s services and parks, he said.

The dispute between the politically powerful tribes and card rooms has far-ranging implications for the future of legal gambling in California.

Aside from the threat of legal action against the politically bifurcated regulatory system – an adjudicatory Gambling Control Commission under Gov. Jerry Brown and a compliance and enforcement Bureau of Gambling Control under Attorney General Xavier Becerra – tribes also plan to file a separate lawsuit against the card rooms.

A legislative effort by Assemblyman Adam Gray to amend the state Constitution to allow sports betting appears to be at least temporarily scuttled over the failure of tribes and card rooms to agree on proposed bill language.

And tribes are planning to put their formidable political clout to work to defeat a ballot initiative petition for the November 2020 election that would amend the state Constitution to legalized sports betting.

The ballot initiative by Californians for Sports Betting would also permit “Nevada-style card games” in the card rooms.

“I don’t think the vast majority of tribes are going to want to see that ballot initiative proceed on its own without some counter proposal that protects the tribes’ interests,” Stallings said.

“Right now our position is we do not support expansion of gaming in California. We’ll wait to see how things develop.”

“This proposed measure would bring Vegas-style gaming to nearly 100 locations and urban areas throughout California,” Mark Macarro, chairman of the Pechanga Band of Luiseño Indians, told the Los Angeles Times.

“This is not in keeping with California’s longstanding policy of limited gaming, and we will vigorously oppose this measure.”