Golden State showdown: A look inside the lawsuit between California tribes and cardrooms
Last November, the California legislature passed SB 549, also known as the Tribal Nations Access to Justice Act. The bill was unusual in that it was crafted as a means for state gaming tribes to sue cardrooms and third-party providers of proposition services, or TPPs. As sovereign nations without legal standing, such action was unavailable to tribes prior to the legislation.
A coalition of tribes subsequently sued a group of over 90 defendants made up of cardrooms and TPP providers in January. The case is being heard by the Sacramento Superior Court under case number 25CV000001, with its next hearing set for 8 August.
At issue is the years-long dispute over the legality of games offered by cardrooms and whether they constitute “house-banked” games, in which players wager and play against the house rather than other players. Tribes have had exclusivity over Class III gaming, which is another name for house-banked play, since 2000.
Per state law, cardrooms are permitted to offer certain table games as long as they are played and dealt among players, as in recreational or charitable settings. Over the years, however, cardrooms have enlisted TPPs to help facilitate gameplay, as most recreational players want Class III-style gameplay and don’t wish to serve as the house or dealer. TPPs partner with cardrooms to offer these services and are required to be financially independent from the rooms in which they operate.
Tribes have long contended that this crosses the line into banking games and therefore violates their exclusivity. The SB 549 suit is the culmination of several years of bad blood and its outcome could significantly alter the gambling landscape of America’s most populous state.
Tribes take issue with games
The most recent complaint filed by plaintiffs came on 23 April from the Rincon Band of Luiseno Mission Indians. Another was filed on 18 February by the Agua Caliente Band of Cahuilla Indians.
In the Rincon complaint, the tribe asked that the court find the cardrooms and TPP providers to be in violation of both the state constitution and state penal code for offering blackjack, baccarat and pai gow poker-style games in a manner that constitutes house banking.
“The TPP defendants maintain and operate a bank by maintaining and occupying the player dealer position in the blackjack-style games offered by the cardroom defendants,” the complaint reads. “Consistent with the type of banked games offered in Nevada and New Jersey casinos, in defendants’ blackjack-style games, the player or entity banking the game is not limited to winning or losing only a fixed and limited wager during the [play] of the game. Uncertainty over how much the [player] or entity banking the game will win or lose is typical of a banked game.”
Contracts, relationships in question
Additionally, the complaint also touches on the contractual relationship between cardrooms and TPP providers. As mentioned, the two sides are supposed to be fully independent, but analysis from Capitol Weekly has shown that those delineations are complicated and difficult to parse.
“TPP defendants enter into contracts with cardroom defendants wherein the TPP pays the card room for the right to occupy the player-dealer position in blackjack, baccarat, pai gow poker and analogous games,” the complaint reads. “The only source of revenue TPPs possess to pay the card rooms pursuant to those contracts is the TPPs’ winnings from occupying the player-dealer position in those games.
“Accordingly, cardroom defendants have an unlawful interest in the funds wagered, lost and won in the games they offer or operate where a TPP occupies the player-dealer position and banks the game.”
Cardrooms cite conflicts in state laws
The most recent rebuttal on behalf of cardrooms was filed on 2 May by Artichoke Joe’s, a facility in San Bruno.
Its attorneys highlighted the fact that tribes have tried multiple times to bring such a suit, but were unsuccessful before SB 549 was passed. A 2021 lawsuit was tossed due to insufficient standing from tribes and, in 2022, a provision was added to Proposition 26 that would have allowed “any person or entity” (ostensibly tribes or tribal members) to sue any cardroom over any game.
Prop 26 was, at its core, a retail sports betting amendment that ultimately failed by a wide margin. These defeats did not deter tribes, who sought to “rise like a a phoenix” and pursue the new legislation instead, per the motion. By doing that and not putting the matter to the voters, Indian Country “accomplished an end run around” its previous missteps.
The issue of Prop 64
The passage of SB 549 finally created the pathway for tribes to bring the matter before courts. But Artichoke Joe’s pointed to an existing state law from 2004 – Proposition 64 – that conflicts with the cardroom bill. That proposition says that any plaintiff must have individual standing in order to sue, or “an injury in fact in the form of lost money or property as a result of such illegal acts”.
Due to the fact that a group of tribes is suing a group of defendants, each must have standing for the other, the motion alleges. It cited examples of tribes and cardrooms in the suit that are on opposite ends of the state, arguing that the actions of one couldn’t directly harm the other. Further, the motion points to the fact that an initiative like Prop 64 can only be amended or repealed via voter approval.
“Because the purported amendment at issue here was not approved by the electorate, it is not legally enforceable and any action based on the invalid statute must be dismissed,” the motion reads. “Simply put, because SB 549 takes away the restrictions on such relief imposed by Proposition 64, the court must find SB 549 is void ab initio.”
Rulemaking process also ongoing
As the suit unfolds, the issue is further complicated by concurrent regulatory proposals from the state. Beginning in 2023, Attorney General Rob Bonta and the state’s Bureau of Gambling Control (BGC) set out to change regulations related to blackjack games and player-dealer requirements.
The proposals are extremely similar in nature to the suit itself, in that the new regulations would require cardrooms to change several aspects of blackjack-style games, including a non-21 target point and the removal of the “bust” feature. Additionally, they would implement stricter guidelines regarding the rotation of player-dealer duties and restrictions on TPPS procedures.
A string of public comment hearings were held in late May by the BGC and the majority of feedback came in support of cardrooms. The portal for public submissions is now closed as the BGC mulls the two proposals. In its own impact assessment from last August, the state acknowledged that the new rules would likely cost cardrooms hundred of millions in revenue and a large chunk of jobs.
Dozens of small cities around the state rely on the taxes generated by the rooms and, in some cities, this represents fully half of municipal funding. In this way, cardrooms and tribes share a remarkably similar desire to utilise their business to provide for their communities. Now, state officials will decide if both can continue doing so.