In 2023, California Attorney General Rob Bonta and the Bureau of Gambling Control initiated efforts to revise regulations for the state's cardrooms, focusing on blackjack rules and player-dealer operations. Initial proposals were introduced in early February, only to be withdrawn for additional public feedback. A revised set was published on April 11, closing the comment period by 5 PM on Thursday.
This week, two public hearings were conducted by the BGC, primarily receiving feedback from supporters of the cardrooms. Many opposed the proposed changes, which they argue would effectively dismantle blackjack as it is currently known, along with imposing new requirements for player-dealers. The implications of these regulations would be severe, with the state’s own assessment predicting a potential loss of hundreds of millions in revenue and significant job cuts. Many small California towns depend on the tax income generated by cardrooms for essential services like fire and police departments.
Hundreds of residents, workers, and city officials have voiced their opposition to AG Bonta's regulations, arguing they could cut jobs and revenue by 50%.
In the backdrop of this regulatory shake-up, cardrooms are embroiled in a significant lawsuit initiated by state gaming tribes. Typically, tribes cannot pursue legal action due to their sovereign status; however, the passing of SB 549 in November 2022 allowed a unique opportunity for such a lawsuit. The coalition of tribes filed the suit in January against all state cardrooms, which is now being considered by the Sacramento County Superior Court, with a next hearing scheduled for August 8. This lawsuit addresses issues tied to the BGC’s proposed rule changes, though the relationship between the two remains unclear. Given the complexities of the case, involving numerous plaintiffs and defendants, it seems likely to extend for years.
The rulemaking process began prior to the lawsuit and is not directly influenced by it. California grants tribes exclusive rights to Class III casino gaming, prohibiting commercial casinos from offering house-banked games. According to the National Indian Gaming Association, California tribal gaming reported $12 billion in gross revenue for FY23, the highest of any region tracked.
Despite a lack of commercial casinos, numerous legal cardrooms exist, facilitating player-versus-player games. In recent years, cardrooms have started employing third-party providers of proposition player services (TPPPS), independent contractors licensed to offer player-dealer services. Many players prefer Class III gameplay without taking on the dealer role, and TPPPS step in to fill this gap, often acting as the dealer throughout the game.
Tribes argue that TPPPS effectively undermine their gaming exclusivity and violate state law. Although the entities are intended to operate independently of cardrooms, their relationships have grown increasingly intertwined over the years, culminating in the January lawsuit after nearly two decades of tensions.
The tribes' lawsuit claims that cardrooms and their TPPPS partners have "ignored the law and refused to recognize tribes’ exclusive rights," resulting in their alleged illegal financial advantages. Conversely, cardrooms assert that TPPPS operations are state-legal and fully licensed. Kyle Kirkland, president of the California Gaming Association, expressed confidence in the legal system's ability to protect jobs tied to cardrooms and the communities dependent on the economic activity and tax contributions of these venues.
Bonta’s proposed blackjack regulations would radically alter the game. If implemented, all existing blackjack formats would be banned, requiring cardrooms to adjust their offerings and resubmit them for reapproval. Significant alterations include eliminating the "bust" feature, which currently leads to automatic losses for exceeding 21. Wins and losses would be determined solely by a player’s total points versus the player-dealer's points, with the target maximum not set at 21. Ties would favor players instead of resulting in no action. The terms "21" and "blackjack" would also be prohibited within the games.
Changes to the player-dealer rules propose extensive modifications paralleling tribal concerns. The player-dealer must remain seated at the table and must be offered to all players before every hand, with visibility required for surveillance. Notices would be posted at each table to inform players of the role's availability and limitations. Moreover, each table must rotate the player-dealer position to at least two different players every 40 minutes, establishing strict regulations on TPPPS' roles at the tables.
California's gaming framework is clearly at a pivotal moment. Tribes are gaining strength, following victories such as the passage of SB 549 and successfully thwarting commercial sportsbooks' efforts to legalize sports betting during the 2022 election. In contrast, cardrooms seem to be losing ground, raising concern among local officials regarding their role as a key source of tax revenue. Hawaiian Gardens Mayor Dandy de Paula emphasized the importance of the local cardroom to the city’s economy, stating, "We rely on our cardroom not only to provide high-quality jobs but for the tax revenue generated that makes up over 60% of our city’s general fund. We strongly call on the attorney general to not move forward with these punitive and needless regulations."
Cardrooms retain substantial influence, as evidenced by $3 million spent on lobbying against four lawmakers who supported SB 549, resulting in three of them losing their elections, according to CalMatters. Keith Sharp, a lawyer for Hawaiian Gardens, remarked on the industry's desire for respect, saying, "We really don’t want to be the sort of, you know, the Rodney Dangerfield of industries. We want to be respected."
