It may not be the best of times for California card rooms, but it could soon be the worst of times. A recent Gardens Casino fine points to a precarious position for the non-tribal casinos.
Although the fine is unrelated to potential regulatory changes, it’s a sign that the Golden State isn’t afraid to levy hefty fines on card rooms. The lesson for card room operators is clear.
What led to the Gardens Casino fine being levied?
Hawaiian Gardens, the smallest city in Los Angeles County, is home to the second-largest card room in California. It’s also now involved in Golden State gambling history.
California and federal regulators hit the Gardens Casino with fines totaling nearly $6 million. The charges from the two sources are related but differ.
The state alleged that the card room attempted to deceive it for years. The allegation centers around a failure to disclose an ongoing federal Financial Crimes Enforcement Network investigation.
The same federal agency, FinCEN, accused the Gardens of noncompliance with federal laws requiring gambling providers to follow anti-money-laundering protocols. Among those are failures to report suspicious activity and transactions over a certain dollar amount.
The state’s $3.1 million fine is a California record. FinCEN’s penalty came to $2.8 million, adding to the cost of extra scrutiny the card room will have to deal with from California Attorney General Xavier Becerra’s office for a further two years.
Card room operators need to tread lightly right now
Becerra’s list is a bad place for any card room to find itself. If Becerra is able to follow through with his plan, this could be just the start of a rough time for such facilities in California.
Because of the state constitution and tribal gaming compacts, California card rooms could see their business model altered. At the very least, they will have to adapt if potential changes take place.
Although card rooms host gambling operations, they don’t act as the bank in any of the games. Third-party contractors do so and pay a fee to the card room operators.
It’s similar to how owners of retail spaces make money. It could be said that the players in each game pay “rent” to the card room operators.
That could all change soon, however. Under pressure from California’s tribal casinos, Becerra wants to enforce rules that would essentially end that business model.
Proposed changes to California card room
Under proposed rules, the role of the banker would have to change every two hands or the game would end. Currently, players can pass on their chance to be the banker, allowing the third-party proposition representative to stay in that role.
It’s uncertain right now if Becerra will be able to enforce those rules as planned. That agenda has met staunch resistance from not only card room operators but the cities they pay taxes to as well.
If Becerra is successful, his office might levy more fines like that which recently hit Gardens Casino. Those fines might be similarly high in order to encourage other operators to comply with the new rules.
Going forward, it’s imperative for California card rooms to do everything by the book. As far as pressure on such operations goes, Becerra may just be getting started.