California’s ‘Cemetery City’ Says Banned Game Could Cost Up to 15% of Operating Budget in Statement of Support for Cardrooms
Credit: Dick Lyon via Wikimedia Commons
California cardrooms are seeking a preliminary injunction against the Bureau of Gaming Control, which they say overstepped its authority in banning blackjack-style games.
Formal declarations of support for the injunction include city managers from a variety of cardroom host communities. Some say that reduced business at the local cardrooms could lead to as much as a 15% reduction in their municipal governments’ operating budgets.
Colma had a living population of just 1,507 in the 2020 census, although it boasts that 1,000 times that many people are buried in its famous cemeteries. As the dead do not pay taxes, Colma stands out as one of the smaller communities hosting a cardroom, economically speaking. That makes it likely to be the hardest hit. However, even larger municipalities have said they will feel the pinch. Commerce and Bell Gardens, both located in Los Angeles County, will each ask voters to approve a 0.25% sales tax in November to compensate for the lost revenue.
The Bureau finalized its new rules in February. It made two important changes aimed at settling longstanding grievances from tribal casinos, which believe the cardrooms infringe on their exclusivity over casino gambling.
One change impacts how the cardrooms implement the mandatory “player-dealer” position. This is necessary to satisfy the requirement that the games not be house-banked. Cardrooms had been using paid, third-party “prop” players to take on the role, but will now need regular, uncompensated players to volunteer.
However, the current lawsuit involves the other change, which is a ban on blackjack, twenty-one, and similar games. The California Gaming Association (CGA), which represents the cardrooms, argues that the Bureau was never actually given the authority to ban specific games, least of all ones with a long history of being allowed in the cardrooms.
Injunction Motion Accompanied by 25 Declarations of Support
The preliminary injunction, if granted, would stop the Bureau from enforcing the new rules until the legal challenge is complete. Receiving such an injunction requires the plaintiff to show both that they’re reasonably likely to win the case and that there would be irreparable harm done in the meantime if the defendant were allowed to persist in their planned course of action.
Over two dozen third parties offered formal declarations of support for the CGA, including nine city managers. None of those contacted by Gaming America for comment responded.
The motion for preliminary injunction pleads with the court:
“This Court must not allow the Bureau’s unlawful regulations to take effect before judicial review. The Bureau itself projects that cardrooms will lose half of their patrons as a result of the Regulations. Those patrons will take their business to establishments not subject to the Bureau’s rules—including Tribal casinos and underground gambling dens—and will not return. Some businesses will not survive that devastating consequence. Others will survive but only after incurring painful cuts, including the destruction of workforces with specialized skills that they have invested in training and assembling. Local communities will suffer not only from the loss of living-wage jobs, but also from sharp reductions in municipal tax revenue, putting vital services at risk. None of those harms can be easily reversed, and none can be remedied through monetary damages from the State, which is protected from such damages by sovereign immunity.”
Expected Financial Impact by the Numbers
Dan Barros, the city manager for Colma, wrote that the blackjack ban could reduce his town’s operating budget by 15%.
Colma, located near the San Francisco Airport, is less populated than surrounding communities because much of its land area is taken up by its cemeteries. Because of the limited economic activity in the area, the town’s operating budget is a modest $20 million, and Lucky Chances Casino contributes a significant portion of that.
All cardrooms depend heavily on blackjack, but the degree can vary. Barros estimates that the loss of blackjack could cut Lucky Chances’ revenue by 70%, even higher than the industry-wide 50% estimated by the CGA.
Barros contextualizes the loss by saying it would be “equivalent to losing our entire Public Works & Planning department, one third of our Town’s Public Safety Department, or one half of the Town’s general government.”
The other communities that weighed in are Inglewood, Hawaiian Gardens, San Jose, Gardena, Commerce, Citrus Heights, Chula Vista, and Bell Gardens. Some made more general claims about the hardships they’d experience, while others offered specifics similar to Colma’s.
Bell Gardens says The Bicycle accounts for 38% of its general fund, while Commerce says its eponymous casino contributes 40%. Both of these are popular poker destinations, however, so the share of revenue from blackjack may be smaller and isn’t mentioned in the declarations. Gardena puts the number at 8%, and Hawaiian Gardens at a whopping 60%.
San José, home to Bay 101 and M8trix, doesn’t mention a percentage. However, it estimates that the change could cost $25 million in annual revenue, compounding its existing shortfall of $56 million.
By What Authority?
In explaining its new rules, the Bureau points to an archaic California law banning “twenty-one.”
However, the CGA argues that the prohibition in question refers only to an earlier version of the game in which both sides of a hand have free choice whether to hit or stand. By its logic, “blackjack” is a different game, referring to the contemporary version where the player with free choice competes against a dealer position that is forced to play algorithmically.
It also asserts that neither the Bureau nor the tribes had any objection to the cardroom version of blackjack prior to 2000, when the tribes and cardrooms operated under identical regulations. It is only since winning the exclusive right to offer house-banked casino games through a gaming compact that they have begun to argue that cardroom blackjack is illegal under state law.
However, the CGA also disputes whether the Bureau has the authority to ban a game at all. The motion for preliminary injuction states:
“Under the [Gaming Control] Act’s divided structure, the Commission holds the authority to prohibit or restrict the manner of gameplay, following specific procedures outlined by the Act.
The Act conversely withholds from the Bureau any such authority. The Bureau’s duties are limited to vetting applicants for gaming licenses, monitoring the conduct of licensees, investigating illegal activity, initiating disciplinary actions before the Commission, and approving individual game applications.”
According to the CGA’s reading of the law, to ban a game the Bureau would need to demonstrate to the California Gaming Commission why the game violates state, federal, or local law.
Image Credit: Dick Lyon via Wikimedia Commons (license)
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