Larry Flynt Gains New Life In Fight Against California Gambling Restriction Law

Posted on January 27, 2021

For more than five years, controversial porn mogul and casino owner Larry Flynt has been engaged in a legal battle against the state of California.

Flynt believes a state law unfairly restricts his ability to pursue investment opportunities. Since 2016, the founder of Hustler magazine has been in court fighting to have the law declared unconstitutional and the restriction lifted.

Last week in a Sacramento court, Flynt won a victory in his effort when US District Judge John Mendez ruled against the state’s effort to dismiss the case. While the ruling does not mean Flynt will win his case, it at least means his argument will continue to receive consideration from the California courts.

Law targeting mob influence no longer applicable, argues Flynt

The case concerns a 1986 state law commonly known as the Gambling Registration Act. The law prohibits California residents who hold gambling licenses from owning more than 1% of a casino in another state. The law applies in the other direction as well, preventing out-of-state casino owners from investing in California properties.

Flynt owns two Gardena casinos: the Hustler Casino and the Lucky Lady Casino. He argues the law has prevented him from pursuing investment opportunities in casinos outside of California. Therefore, in 2016, Flynt joined two fellow casino owners Haig Kelegian Sr. and Haig Kelegian Jr. in a lawsuit against the state challenging the ruling.

That original filing listed Kamala Harris, then the Attorney General of California, foremost among the defendants. Harris would soon step away from that role to represent the state as a US Senator starting in 2017, and on Wednesday became the newest US Vice President.

The Kelegians have had ownership interest in several California properties over the years, including in Flynt’s casinos.

Why did they sue California?

The trio chose to sue the state after California fined Kelegian Jr. for owning part of an out-of-state casino. Kelegian Jr. was also forced to sell that interest before being able to renew his California licenses.

The law originally passed as part of an effort to reduce the influence of organized crime on the state’s casino industry. Specifically, the law was designed to dissuade out-of-state owners with possible mob ties from attempting to invest in California casinos.

However, Flynt and the Kelegians argue that influence is no longer at issue. According to the plaintiffs, the law is both unnecessarily restrictive and “archaic.”

A favorable turn in a bumpy judicial road for Flynt

As Courthouse News Service reported, Judge Mendez denied the state’s motion to have the case dismissed. In doing so, Mendez favored the plaintiffs’ argument that the law amounted to an unfair restriction on interstate commerce.

In his 12-page ruling, Mendez acknowledged the arguments presented by Flynt and the Kelegians as worthy of further examination.

As Mendez explains, the law “could, theoretically, prohibit a licensee from forming a business partnership, unrelated to gambling, with a person who has interests in a casino.”

The ruling is the latest turn in what has been a decidedly less-than-straightforward path for the case.

Winding road for Flynt case continues

In 2017, the same Judge Mendez dismissed the lawsuit on a technicality. He ruled it had been filed outside of the applicable statute of limitations. However, Flynt and the Kelegians appealed. And in 2019 the Ninth Circuit Court of Appeals voted 2-1 in their favor, thereby allowing the case to proceed.

In June 2020, Mendez denied an earlier attempt by the state to have the lawsuit dismissed as well.

Others with interests in the California casino industry are no doubt watching the case closely.

After all, in 2016, lawmakers attempted to pass a bill that would have exempted the owners of Hollywood Park Casino in Inglewood from the law. Then-Gov. Jerry Brown vetoed the bill, although at the time did recommend lawmakers reexamine current laws “and amend them so that all participants in the industry receive the same benefits and opportunities.”

Photo by AP / Gary He
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