Should California card rooms be able to exploit the dealer-rotation loophole?

California Tribes Get Their Hands Dirty, File Lawsuit Against Card Clubs

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California gaming tribes and the state’s licensed card rooms are embroiled in a longstanding feud over the so-called “California” versions of traditional house-banked card games like blackjack and pai gow poker.

At least two California tribes have finally had enough.

On Nov. 16, the Rincon Band of Luiseno Indians and the Santa Ynez of Chumash Mission Indians filed a lawsuit against several card rooms offering these games.

The action could finally lead to some closure in a conflict which dates back decades but has grown more contentious in recent years. In fact, this issue is one of the underlying reasons a compromise on online poker has been so elusive in California.

Non-poker games at California card rooms

Blackjack and other house-banked games have been a reality in California card rooms for 30 years.

Operators inventively skirt the law that restricts their offerings to non-house-banked games by turning them into player-dealt games. The deal rotates among the players as it does in poker, with the house taking a predetermined cut.

These games were branded “California” games and have been referenced in other state laws. You can take a deeper dive into the procedures here.

Not surprisingly, tribal casinos have cried foul.

As much as tribes believe they have exclusive rights to all casino gaming, it’s not so much the offering of these games that have the tribes upset. Rather, the complaint takes issue with the manner in which the deal is being rotated — or not rotated.

Questionable opinion escalates the matter

California games were already a contentious topic before a 2007 opinion from former regulator Rob Lytle lit the fuse on the powder keg.

Lytle’s opinion concluded that the deal didn’t need to be systematically rotated amongst the players. By simply offering the option, the house was doing enough to satisfy the law. His letter rubber stamped the use of third-party proposition players which act as de facto dealers when players decline.

Of note, Lytle submitted the letter ten days before he resigned to start a career as an industry consultant. Around the same time, he also acquired stakes in some of the same California card rooms that would benefit from his opinion.

You can read more about the third-party banking process in this old-but-relevant 2+2 post on the topic.

State regulators offer a light-touch fix

Tribes thought a decision might go their way in 2016, when the state’s Attorney General office said it was reviewing the matter:

“Effective immediately, the Bureau’s letter of December 20, 2007, is suspended pending review of the Bureau’s inspection and game approval process. By June 30, 2016, the Bureau will issue a notification of the revised enforcement and game approval practice relating to the rotation of the player-dealer position in a controlled game.”

But the end result was far less than the tribes had hoped for and did little to quell the animosity.

The new rules provide for the following:

  • No one person or entity may hold or otherwise be involved in the player-dealer position continuously for 60 minutes. The player-dealer position must rotate completely away from a person or entity within a 60-minute period, to a different person or entity from the one who occupied the position during the hand immediately preceding the rotation. The 60-minute period commences upon acceptance of the player-dealer position.
  • Upon failure of fulfillment of any of the requirements of play identified in paragraph 2, the game must end, and that a new game cannot begin for at least two minutes.
  • Immediate notification to all players that the game has ended, cards or tiles cannot be dealt, and wagers cannot be made. The dealer tray must be covered during this time to indicate the game has ended.
  • Shuffling of all cards or tiles upon the opening of a new game.

The new policies were reported as a win for the tribes, but it was far from the overwhelming victory they’d sought.

What will the courts say?

A lawsuit (something that has been hinted at for several years) is a last-ditch effort, as a tribal victory is far from a guarantee. In fact, it could be pretty damaging if they lose. Not only would it embolden card rooms, but the courts could even lessen current restrictions.

Here’s why this is such a difficult decision.

California games are the very definition of exploiting a loophole, but they’re also entrenched in the state. While operators have been offering them for decades, any increase in restrictions could make it impossible to do so profitably. As the California Gaming Association has noted, that could cost the state thousands of jobs and millions of dollars in revenue.

Bottom line: The lawsuit could go either way and involve several stages of appeal before an ultimate resolution.

- Steve covers nearly every angle of online poker in his job as a full-time freelance poker writer. His primary focus for OPR is the developing legal and legislative picture for regulated US online poker and gambling.
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