Tribal Lawsuits Could Impose Additional Regulations on California Cardrooms

### Regulatory Changes in California Cardrooms

Beginning in 2023, California Attorney General Rob Bonta, along with the state’s Bureau of Gambling Control, initiated a review and subsequent updates to the regulations impacting the state’s cardrooms. These updates focus primarily on blackjack rules and the role of player-dealers.

The initial set of proposed regulations was released in early February. However, it was retracted to extend the period for public comments. A revised proposal was then issued on April 11, with the public commentary period concluding last Thursday at 5 pm.

This week, the Bureau of Gambling Control conducted two public hearings concerning these proposals. Reportedly, the majority of the feedback originated from cardroom advocates who are opposed to the regulatory changes. These changes could drastically alter the gameplay of blackjack and introduce new requirements for player-dealers.

The impact of enforcing these new rules could be significant. An impact assessment conducted by the state in the previous August suggested potential revenue losses in the hundreds of millions and substantial job reductions in the cardroom sector. Numerous small Californian towns that rely heavily on tax income from cardrooms for essential public services such as fire and police could feel significant effects.

In response to these proposed regulations, hundreds of residents, employees, and city officials have come together to voice their concerns, stating that these changes could potentially cut jobs and revenue by 50%.

### Ongoing Legal Battles

Amid the regulatory updates, cardrooms are also at the heart of a major lawsuit initiated by state gaming tribes. The tribes, usually unable to pursue legal action due to their sovereign status, were granted the ability to do so through SB 549—passed by state lawmakers last November. This law is currently awaiting the signature of Governor Newsom.

The lawsuit, initiated in January by a coalition of tribes against all state cardrooms, is being processed by the Sacramento County Superior Court, with proceedings continuing on August 8.

The challenges raised within this lawsuit are closely linked to the changes proposed by the Bureau of Gambling Control, although it’s unclear how the lawsuit and rule changes might affect each other. Given the large number of plaintiffs and defendants, the case is expected to continue for an extended period.

### Background Context

California tribes hold exclusive rights to Class III casino gaming, meaning that no commercial casinos can offer house-banked games. Despite this, the state allows numerous cardrooms where gameplay is player-to-player, complying with state laws. In recent years, these cardrooms have started using third-party providers of proposition player services (TPPPS), which are independent contractors licensed by the state. This setup allows recreational players to enjoy Class III-style gameplay without directly acting as dealers. Over time, the relationship between TPPPS and cardrooms has become deeply intertwined.

For nearly two decades, tribes have argued that the utilization of TPPPS by cardrooms circumvents state laws and infringes on their exclusivity. The ongoing lawsuit is the culmination of these longstanding disputes.

### Dueling Perspectives

In their legal challenge, tribes have accused cardrooms and their TPPPS partners of ignoring the law and infringing upon the tribes’ exclusive rights, thus reaping “illegal windfalls.”

Conversely, cardrooms maintain that their operations, as well as their partnership with TPPPS, are lawful and have been approved by the California Department of Justice. Kyle Kirkland, president of the California Gaming Association, recently expressed confidence that the legal proceedings will uphold the longstanding practices vital for the livelihood of thousands of Californian families and for sustaining local economies through tax revenues.

### The Future of Blackjack

Attorney General Bonta’s proposed changes to blackjack could make the game unrecognizable. If implemented, all current forms of blackjack would be prohibited, necessitating the reapproval of modified game versions. These adjustments could include the removal of the “bust” feature, where a player or dealer automatically loses if their card content exceeds a certain total.