Prolonged dispute between card rooms and tribal casinos in California looks primed to endure several more years

New litigation challenging California law enforcement action related to operations of card rooms will keep a clear and permanent framework for land-based gaming in the state in the realm of the hypothetical.

New regulations, following the enshrinement of a statute that gave tribal casino operators new standing to take court action against card rooms in California, had some thinking there was a final resolution to the dispute over which businesses can offer what types of games within California’s borders. However, more litigation could prolong the process in new ways, keeping the status quo of endless uncertainty in place for years.

Three organizations have sued California Attorney General Rob Bonta in state court, alleging that Bonta’s new regulations for card rooms in the state are an unwarranted reversal of precedent. Regardless of how the court rules, appeals are likely and the situation is more complicated than just these proceedings.

New rules take aim at essential component of card room operations

The California Office of Administrative Law approved Bonta’s draft rules on Feb. 9, which marked the final regulatory action necessary to put them into effect. At this time, the rules will be enforceable from April 1, 2026, although Bonta has given card rooms through the end of May to submit plans for how they will alter their offerings to comply with the new regulations.

The most significant changes in the rules affect “player-banked” card games that card rooms in California have offered to players. Common games at these facilities that use the player-banking model include blackjack, pai gow, and poker variants.

The rules would ban blackjack at card rooms outright. However, there could be some leeway in the regulations for games that resemble blackjack but don’t fit the statutory definition of blackjack.

For many types of games, card rooms have contracted with third parties who act as the “banker-player” at these tables. That has allowed players in the games to avoid needing to take turns acting as the banker and the card rooms to legally offer the action.

The new rules would change the state’s position on that model, making the current common practice impermissible. That change has caused multiple organizations in California to take legal action.

Litigation seeks to block the implementation of the new rules

A joint press release on March 9 from the California Cardroom Alliance, California Gaming Association (CGA), and Communities 4 California Cardrooms announced the two lawsuits that the three entities jointly filed against Bonta. In the release, CGA President Kyle Kirkland stated that, “our industry repeatedly raised legal and economic concerns throughout the rulemaking process, but the Attorney General refused to engage with the communities and working families who will be harmed.”

In the complaints, the parties allege that Bonta overstepped his authority when he issued the new rules. They further argue that the implementation of the regulations would result in the closures of card rooms, losses of jobs, and revenue declines in the California cities that host the facilities as the regulations are too vague to adapt current game models to fit.

For those reasons, the lawsuits ask the court to issue an injunction preventing the state from enforcing the rules. The court has many options and a response from the California Dept. of Justice (DOJ) is still pending, although Sunni Khalid of KALW reports that the DOJ “is prepared to review the lawsuits and respond in court.”

Given the content of the rules, this litigation had to have been an expected outcome for the DOJ. A document from the DOJ suggests that these lawsuits were no surprises.

Impact assessment signals that controversy over new regulations was inevitable

The Standardized Regulatory Impact Assessment from the DOJ regarding these new cardroom rules estimates that one potential impact could be the “elimination of 50% of TPPPPS (third-party providers of proposition player services) revenue would represent a direct loss for cardrooms of $396M(million)” and the diversion of “25% of TPPPPS revenue from card rooms to tribal casinos.”

The assessment also states that “because both cardrooms and TPPPPS stand to lose revenue from the proposed regulations, both groups could be incentivized to respond by creatively applying the proposed regulations.” That language suggests the DOJ should have expected a lawsuit if they weren’t anticipating it.

The statement from the DOJ of expecting revenue to be diverted to tribal casinos would represent the fruition of exactly what tribal casinos have been pushing for over the course of decades. Tribal casinos are not party to these lawsuits, but they have been in court over the same issue.

Tribal complaint is in the appeals process

In September 2024, California enacted a law that granted tribes within the state’s borders who offer gaming via a compact with the state standing to sue card room operators. Tribal casino representatives have long argued that their gaming compacts give them exclusive rights to offer games like blackjack for real money in California.

A coalition of tribes followed through on that privilege shortly thereafter. However, the state judge granted the defendants’ motion for dismissal, writing that federal law preempts California’s statute and the tribes had no standing as sovereign nations.

That dismissal is on appeal, and tribes have brought action against the state in federal court in the past for what they alleged was California failing to enforce the terms of the compacts by allowing card rooms to offer player-banked card games. This dispute has spread to other forums throughout the years.

Federal lawsuits and ballot initiatives

Bonta’s DOJ isn’t the first in California to take enforcement actions against card rooms in California. In 2018, the California Bureau of Gambling Control announced that it “plans to rescind game rules approvals for games too similar to 21/blackjack that are prohibited by state law.” At that time, Xavier Becerra was attorney general in California.

While hearings were held on the proposed rules, those rules were never finalized. Shortly thereafter, three tribes sued California in federal court, arguing that the compacts between California, themselves, and the U.S. Dept. of the Interior compelled California to enforce tribal casino exclusivity over card games.

The trial court disagreed, however, as did the Ninth Circuit Court of Appeals in December 2020. That led to the initiation of two ballot measures, both of which failed in California in 2022.

One of those ballot measures strongly resembled the statute giving tribal bodies standing to sue card rooms that California enacted in 2024. While appeals in both the tribes vs. card rooms lawsuit and the card rooms vs. California lawsuits play out, the legislature may be where parties on both sides re-direct their attention.

Sacramento could be final stage for disputes

The California Supreme Court figures to be the final destination for all of these lawsuits. The parties may not wait for the appeals process to play out, though.

The 2024 law giving tribes special standing to sue card rooms is just the latest example of this conflict making its way into California’s legislature. Both card rooms and tribal casinos have been active in the capitol.

For example, card rooms spent heavily to oppose the reelection of California Assembly members who supported the 2024 law. Tribes have also spent to support candidates who have voted their way.

New statutes could influence the California Supreme Court’s decision on any of the related cases that escalate to its chambers. For example, the legislature could codify the rules that Bonta has put forward, giving them the weight of law vs. administrative rules.

Alternatively, the legislature could enshrine protections for card rooms. Either of those possibilities seem unlikely given the diverse interests funding lawmakers’ campaigns.

Card rooms and tribal casinos have enough legislators in their corners to potentially offset measures that would tilt the balance heavily in favor of one or the other. The defeat of three former members of the Assembly due to card room campaigns sent a message to the bodies that such balance is integral to lawmakers’ extended careers.

That steers the end of these disputes back to the California Supreme Court. As the DOJ asserted, though, even those decisions could just become cause for card room operators to get creative.

Supreme court decisions could be prelude to game modifications

If the history of gaming law in the United States has proven anything, it’s that operators are endlessly creative when it comes to inventing ways to continue to provide their amusements in ways that technically comply with legal standards but may defy the spirit of the law. The “cat and mouse game” could play out in California following decisions from the California Supreme Court in all three of these cases.

At this time, the possibilities for those decisions are numerous, and could conflict with each other as far as the card rooms’ interests are concerned. For example, the court could uphold the dismissal of the tribes’ lawsuit against the card rooms but similarly rule to protect the new regulations.

In that event, the DOJ has already identified some ways in which the card rooms could continue to offer games in ways that comply with the rules. One is that “the cardroom could contract with multiple TPPPPS to alternate the role of playerdealer in some agreed rotation from one TPPPPS to another, consistent with the regulation.”

The DOJ also states that, “the proposed player-dealer rotation regulation requires that the player-dealer position rotate to two players, other than the TPPPPS, within a 40-minute period and then, if no rotation occurs, the game must stop. However, it is possible that a new, different game could immediately commence at that same table. Therefore, cardrooms could offer two different games at each table. This would allow TPPPPS players to remain in the playerdealer position for every hand while potentially complying with the regulation, although the game would have to change every 40 minutes.”

The assessment asserted that the rules have been intended to “identify the elements of a permissible alternative to Blackjack that will differentiate the game such that the game does not fall within the prohibition.” However, there is no concrete description of what such a game may and may not entail.

Such adjustments might not satisfy tribal casino operators’ wishes, which is to see card players take their action to their properties. As a result, the dispute might continue, with some of the details changed.

At this point, the future of gaming in California is as unclear as it has ever been. Real clarity might still be years away and only temporary. What’s certain is that card room operators and tribal casinos are going to exhaust all levers at their disposal to sway the proceedings in their favor.

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