There is certainly no love lost between tribal casinos and California’s card rooms, but things seem to be coming to a head, and interestingly it has nothing to do with online gambling.
Tribal casinos in California have been highly critical of the state’s card rooms of late, accusing them of offering house-banked card games which would violate California laws which prohibit card rooms from having a stake in the games they offer. In other words, California card rooms are not allowed to serve as the house, they may only collect a fee/rake from each hand.
Card rooms have disputed this, saying they are operating in accordance with the law and regulations governing them.
History of card rooms and non-poker card games
Despite this prohibition on house-banked games Card rooms began offering blackjack and other traditionally house-banked games 30 years ago by developing a variation of these games that allows any player to act as the house. Under this variation, each player is offered to act as the dealer in turn, with the house taking a small percentage from each bet made, win or lose, or imposing a collection fee on the bank for each hand played, not on profit or loss.
California Gambling Association President Kyle Kirkland explained the process thusly:
“If someone elects to serve as the bank, that player plays the dealer’s hand and all other table action is judged against his hand. For example, if I’m offered the bank at a Spanish 21 table and elect to take it, I play as if I’m the dealer (his hand counts as mine) and wins or losses by other players (their hand against my “dealer” hand) are paid from my funds.”
What the tribes are complaining about is what happens when the players at the table decline to play as the dealer. Kirkland explained that in these situations, “most card rooms have contracted with a third party proposition player who defaults to the role.”
And it’s these third-party players that have come under fire.
Obviously playing as the dealer is extremely advantageous, but many players still prefer to only play blackjack against the dealer for a variety of reasons, ranging from risk to the vig to comfort.
“This so-called player-dealer position has favorable economic advantages compared to the traditional player position,” Kirkland noted. “But many recreational players decline the option because they don’t understand it, don’t want added risk or simply just want to play the games in the manner to which they’ve become accustomed in other jurisdictions.”
What happened was savvy players realized they could maximize their potential profit by banking hired players who would always accept the dealer position and cover all wagers not covered by the players in the game. As Fried explained:
“At first, the Attorney General opposed these businesses. But following a successful court ruling for the companies, the Legislature adopted a law to regulate these third party players. These third party players are now common and contracts between the card rooms and third party players have to be approved by regulators.”
“… the Legislature required a systematic and continuous rotation, without defining those terms, and with the Attorney General’s office to review each set of game rules for compliance. There are many different ways to “continuously and systematically rotate” the player-dealer position.
“The Attorney General issued a letter December 20, 2007 specifying acceptable game procedures. Tribal advocates want to attack this letter by noting that Bob Lytle signed it, but the fact is Mr. Lytle was not a lawyer and would not write a letter of this kind. Such a letter would have been written by the Attorney General’s legal staff and signed by Mr. Lytle is his capacity as Bureau chief. The legal reasoning in the letter is sound and consistent with the laws and court decisions.”
For a lengthier description of the third-party bank process you can read this older, but excellent 2+2 post on the topic – the thread is from 2009, but picks up once again in 2012 and 2014, offering a more current view of the third-party banks at California card rooms.
Any truth to the accusations?
Gaming attorney David Fried notes that the “player dealer games have been approved by the Legislature and in several Court of Appeal decisions,” and that the California Bureau “has approved specific player-dealer game rules for Blackjack, Three Card Poker, Pai Gow, Baccarat and other table games.”
According to Dave Palermo of Global Gaming Business Magazine, “Tribes contend card rooms are advertising blackjack and baccarat, games prohibited by law, and using TPPPs to skirt regulations requiring that games be banked by players and not the club.”
Essentially, tribes are complaining that high stakes table games couldn’t run without these third-party banks.
However, a third party bank must be licensed in California, making it very difficult to near impossible for a casino to secretly bank its own games. While a card room cannot back its own games, it’s my understanding that card rooms are able to act as the bank in other card rooms, and in higher stakes games, particularly with bonus bets, it would be extremely unlikely for any individual player to have enough money to act as the bank, which makes the contracted third-party bank the de facto house.
What is left unsaid in the tribal accusations is that some tribes are of the opinion that card rooms are perhaps supplying the capitol (or swapping action with other card rooms) for these third-party banks.
The most overt accusation of this kind was made by the the Yocha Dehe Wintun Nation said in an October letter to the commission and bureau, according to Palermo: “Not only are the card rooms playing illegal banked games, they are effectively house-banked games.”
This will likely continue to be a point of contention as tribes try to protect their table game monopoly and card rooms look for new revenue streams in order to compete with the larger tribal casinos.
That being said, these allegations seem to be somewhat baseless, and because of the strict regulations on third-party banks (which includes licensing) it’s unlikely these accusations will ever materialize into actual charges or present the proverbial smoking gun that card rooms are banking their own games – which by all indications they are not.