California Gov. Gavin Newsom has signed a new bill into law that effectively bans new cardroom expansion in California.
California State Assembly member James C. Ramos, who introduced the bill, said in a press release that the law would ensure “measured cardroom growth without over-expansion over the next 20 years.” A previous cardoom moratorium had expired on Jan. 1, 2023.
So what does the new ban mean for existing cardrooms? Let’s take a look.
Impact on existing California cardrooms
California cardrooms are essentially poker rooms, and there are currently 55 active cardrooms in the state and 27 inactive licenses.
The new moratorium, AB 341, does not mean that some existing cardrooms can’t expand. It allows for some growth.
Specifically, small cardrooms with fewer than 20 tables can add a maximum of 10 new tables over the next 20 years.
“This new law will provide smaller card rooms and their communities the opportunity to grow over time and create new jobs and local economic benefits without oversaturating the gaming market,” Keith Sharp, President of the California Cardroom Alliance, said in a press release.
For larger cardrooms that had expansion plans, the reinstated moratorium is not good news.
In San Jose, the city’s two cardroom casinos, Bay 101 and Casino M8trix, expected to benefit from a local measure approved in 2022 that would allow them to add more tables. Measure H stipulated that the tax rate for the casinos would increase by 16.5%, which would add $15 million annually to the city’s coffers. Each casino has 49 tables.
However, on two occasions, the California Gambling Control Commission prevented the two casinos from expanding. Bay 101 filed a lawsuit against the commission in protest.
Meanwhile, the casinos were still under obligation to pay the higher tax rate. Derrick Seaver, the head of the San Jose Chamber of Commerce, told San José Spotlight that the city should not collect those taxes since the casinos are not able to expand.
“It should be one or the other,” Seaver said. “If the position is the state moratorium is going to prevent them from expanding, then the city should stop collecting the taxes. It keeps things in good faith and fair.”
He added that while Measure H may only affect the local casinos, the situation sends a bad message to businesses.
“This potentially sends a message that in certain areas, consistency is not there, and that will have a chilling effect on business,” he said.
Will this lead to more underground gambling?
Another potential downside of the cardroom ban is crime. While the number of cardrooms in the state plateaus, underground gambling dens that host table games and other gambling activities are on the rise.
In the past year, law enforcement officials busted several illegal casinos in California that were also crime lairs. Officers confiscated guns, narcotics, gambling machines and even stolen US mail.
In addition, some underground gambling parlors have been connected to homicides.
Support for the new ban from tribes and cardrooms
The new moratorium came into effect with support of existing commercial cardrooms and casino-owning Native American tribes in California. The two groups are often at odds over other issues.
“I am happy to have brought the tribes and cardrooms together in a historic consensus that has resulted in the bipartisan AB 341 becoming law,” Ramos said about the coalition in support of the bill.
James Siva, Chairman of the California Nations Indian Gaming Association (CNIGA), praised the success of AB 341. In a statement, Ramos said:
“We are pleased that CNIGA-backed AB 341 is now law, stopping a potentially reckless and devastating expansion of commercial gambling in California. This legislation was the result of hard-won compromise between stakeholders and speaks to the power of negotiation and cooperation.”
However, CNIGA also made it clear that it still opposed the existence of commercial cardrooms as it insists the gambling establishments only exist due to exploiting a loophole in the state’s ban on house-banked games.
“CNIGA’s backing of this legislation is not a tacit endorsement of illegal games being offered at the state’s commercial card rooms,” Siva said. “We have not wavered from our firmly held position that commercial card rooms offering house-banked card games are in clear violation of the California Constitution. Just as tribes acted in good faith to negotiate this law, we call on the state to justify our good faith by cracking down on illegal activity at the state’s commercial card rooms.”
Commercial cardrooms skirt state law by using third-party companies to serve as the house. One of the failed propositions that would have legalized California sports betting in the 2022 election would have made it possible for the tribes to sue cardrooms for offering blackjack, a traditionally house-banked game.