California card rooms celebrated a major legal win on Tuesday after a court ruled that the state’s Bureau of Gambling Control (BGC) had exceeded its authority with two extensive regulatory changes that took effect on April 1. The decision, issued by San Francisco Superior Court Judge Richard Darwin, upheld an earlier injunction that had prevented the enforcement of these regulations pending legal arguments. During a recent hearing, Darwin expressed skepticism towards the state’s position, which ultimately failed to convince him.
The regulations in question primarily targeted blackjack-like games and the use of player-dealers, limiting their operations significantly. The BGC's changes could have had severe repercussions for card room revenues and state tax income. The BGC is one of two regulatory bodies overseeing gaming in California, the other being the Gambling Control Commission, which operates independently and is involved in routine regulation and oversight. The Bureau, under the attorney general’s office, focuses more on enforcement and prosecution. The proposed rule changes were initiated by the BGC, and Judge Darwin agreed with card rooms that those changes were beyond its jurisdiction.
Judge Darwin stated, "I find that in issuing the subject regulations, the Bureau acted in excess of the authority granted to it by the legislature and the Gambling Control Act." A follow-up case management conference is scheduled for July 10 to address administrative matters regarding the case.
The attorney general’s office expressed disappointment with the ruling and stated it is reviewing its options for an appropriate response. The California Nations Indian Gaming Association did not provide a comment on the ruling.
Had the regulations been fully implemented, card rooms would have had to make significant alterations to their blackjack-style games, including eliminating a "bust" feature and the target point of 21. Additionally, the new rules would have required mandatory dealer rotations every 40 minutes and ensured the position was offered to all players before each hand. These changes would have been consequential for an industry that generated around $5 billion in economic impact as of 2019. The state recognized these potential impacts, estimating that card rooms could have lost nearly half of their existing blackjack revenue. Many establishments feared closure, prompting multiple host cities to consider fiscal measures like sales tax increases to counter the anticipated losses.
Kyle Kirkland, president of the California Gaming Association and owner of Club One Casino in Fresno, expressed relief post-hearing, saying, "The reaction from the industry and our members is relief. We felt like we were on the right side of the law and the argument, and we heard that back in May when we got the preliminary injunction. Today, this just cements it."
The case involves three primary factions: the card rooms, Attorney General Rob Bonta representing the state, and California’s influential gaming tribes. While the litigation currently only involves the first two parties, card rooms have often claimed that the state is acting under the influence of the tribes, which command significantly more revenue—over $12 billion according to recent figures—and exert substantial political pressure.
The tribes maintain exclusivity over Class III gaming in California and argue that blackjack-style games and player-dealers infringe on that exclusive right. However, state courts have disagreed on this matter; for instance, a similar lawsuit from the tribes filed under legislation (SB 549) was dismissed last year and remains unappealed.
As Attorney General Rob Bonta campaigns for re-election this November, he has become more involved in gaming issues, leading to tension with tribal opponents. His actions have included supporting litigation concerning prediction markets, removing gaming machines from Santa Anita racetrack, and declaring daily fantasy sports illegal within the state.
California’s court system, the largest in the United States, could see an extended timeline if the ruling is appealed. There’s no assurance that the state Supreme Court will take the case; for instance, from September 2024 through August 2025, the court received over 3,500 petitions for review, ultimately hearing arguments in just 52 cases and issuing only 45 written opinions.
A critical legal argument presented before Judge Darwin was not solely about the regulatory changes’ content but the authority of the BGC to issue them. Card room attorney Jeremy Kreisberg claimed that the Bureau's authority pertains to individual games rather than broad categorization. "The power to categorically prohibit games is not reasonably related to the Bureau's individual game approval authority, and that I think is the statutory problem with what the Bureau seeks to do here," he argued.
In counter, Deputy Attorney General Sharon O’Grady referenced penal codes and past cases to illustrate that the BGC had the authority to proceed with the rulemaking instead of the Gambling Control Commission, though she was ultimately unsuccessful. "Regulation is not purely policy – these regulations are implementing the details of implementation, they are not policies," she contended. "Penal Code Section 330 sets the broad policy. These are implementation regulations, not policy-setting regulations."
