Proposed California Card Room Changes Aren’t Sitting Well With The Cities

Posted on June 18, 2019

If California Attorney General Xavier Becerra gets his way, card rooms in the state are about to see new regulations that could dramatically impact their operations.

Becerra, who won election to his post in November 2018, runs the office that oversees the California Bureau of Gambling Control. That body is responsible for investigating potential crimes and enforcing penalties on gaming operators in the state.

Since he was appointed attorney general by then-California Gov. Jerry Brown in December of 2016, Becerra’s choices for staffing the bureau have taken an active role in the regulation of gaming in the state, drawing criticism from many.

3 potential card room changes

The crux of the rule changes involves the use of third-party bankers in table games, the ability of dealers to work uninterrupted and the disallowing of certain 21/blackjack games.

Under the status quo, California card rooms are currently free to take extra revenue from hands in games like blackjack despite the fact that the house is not directly involved in the wagering on the games. Card rooms contract with third parties that act as the banker in the games.

Card rooms collect a fee per hand from all players based on the amount wagered in the current system. If the new rules take effect, the card rooms would no longer be able to use the third parties and would have to act as the banker in the games themselves.

The new rules also mandate breaks when dealers in card games change tables. Dealer rotations currently happen without interruption to the ongoing games.

There are also no currently enforced rules that would bar card rooms from offering any variants of blackjack. That has been the case since 2001 when the state legislature repealed a law limiting those games to facilities operated on Native American tribal lands.

Critics say the rule changes would cause revenue to decline if allowed to take effect, and the result of diminishing returns would be seen in other ways.

Criticism of gaming bureau

A primary criticism revolves around whether the bureau has the authority to issue such changes. Jimmy Gutierrez, an attorney for the California Cities for Self Reliance Joint Powers Authoritystated the argument for the Los Cerritos News.

Gutierrez said:

“That is the crux of our argument and the Achilles’ heel of the BGC. These are not questions for administrative bodies or state officials to consider, it is up to the courts to determine if these games are illegal.”

Card room employees and operators have also spoken out. Protests were organized at workshops put on by the bureau. Card room operators argued the changes in the rules will force them to cut jobs if not cease operations altogether.

CA cities also decrying proposed changes

Cities that collect taxes from the card rooms have also joined the chorus of dissent. Among them are Commerce, located in Los Angeles County.

Commerce City Manager Edgar Cisneros said a reduction in tax revenue could cost the city’s general fund a quarter of its revenue. Other municipalities have argued they could lose as much as half of their budgeted revenue.

Operators of the state’s casinos operated on Native American tribal lands haven’t been part of the crowd in disagreement with the bureau’s proposals. It’s not difficult to ascertain why.

Native American casinos stand to benefit

The simple economics of the situation is that less competition means a bigger piece of the pie for the remaining players. If card rooms are negatively affected by the rule changes to the extent they are suggesting, that could greatly enhance revenue for the gaming facilities operated on tribal lands.

Facilities paid for that win. Records compiled by Follow the Money show that Becerra’s election campaign received nearly $300,000 from American Indian casinos.

This has been an ongoing battle for tribal casinos. Five of them filed two lawsuits in November 2018 and January 2019. Both suits allege that the state is failing to enforce laws that would compel card rooms to operate under the same regulations the bureau is looking to impose.

Becerra has taken heat because of his financial connections to tribal casinos. He isn’t the first California attorney general to attempt to do so, either.

Kamala Harris attempted a similar change

Before representing California in the US Senate, Kamala Harris was the state’s attorney general. In June 2016, her office issued a letter to all gaming establishments in the state notifying them of similar intentions.

The letter stated that in the opinion of her office, breaks during a dealer change were mandatory. The letter asked the facilities to submit rule changes for impacted games for approval.

Harris’ letter did not mention disallowing 21/blackjack games or changing policy on third-party banker games, however. Those proposals are new to Becerra’s time as attorney general.

Expect a litany of court challenges if the bureau attempts to enforce its new rules. Those challenges are likely to come from card rooms and the cities impacted the most. It may be months if not years before the matter is ultimately decided.

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Derek Helling

Derek Helling is a freelance journalist who resides in Kansas City, Mo. He is a 2013 graduate of the University of Iowa and covers the intersections of sports with business and the law.

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