California Cardrooms Win Crucial Injunction, Can Continue Dealing Blackjack For Now
It's a good day for California blackjack players
California tribes seeking to put an end to cardroom blackjack have suffered their second major setback in less than a year, as a San Francisco Superior Court judge temporarily blocked the ban pending further proceedings.
The tribes had already tried a direct approach to fighting casino-style games in the cardrooms, twice. After losing a federal lawsuit in 2020, they persuaded the legislature to pass a bill granting them a one-time chance to sue in state court. That attempt also ended abruptly last October, as the court ruled that it had no authority over the matter, as it hinged on the federal laws laid out in the Indian Gaming Regulatory Act.
Attorney General Rob Bonta and the Bureau of Gambling Control then attempted to step in on the tribes’ behalf, changing the rules governing the cardrooms. These changes included a prohibition on blackjack and similar games, and established a stricter interpretation of the requirement that cardroom games be player-banked.
Judge Richard Darwin tentatively sided with the California Gaming Association’s argument that the changes were outside of the Bureau’s powers. He issued a preliminary injunction preventing the state from enforcing the new rules until the trial is completed.
The California Department of Justice had estimated that the changes would cost the cardroom industry roughly $400 million per year in revenue. The knock-on impact to cardrooms’ host communities would have been significant, in some cases up to 60% of the municipality’s general fund. Some, like Commerce and Bell Gardens, had already begun planning for new taxes to make up the shortfall.
This doesn’t mark the end of the case, however. The preliminary injunction can only last up to 45 days, while the next court hearing is scheduled for the end of June.
Tribes’ Struggles With Cardrooms Are Never-Ending
To grant a preliminary injunction, a judge must find that the party requesting the injunction is both likely to win the case and at risk of irreparable harm without one.
Judge Darwin’s decision to grant one, then, is a strong indicator that the case is not going to go the tribes’ way, even if the ruling is not yet final.
The Department of Justice estimates that tribal casinos would reap roughly half of whatever blackjack revenue is lost by the cardrooms, or around $200 million per year. So, there’s certainly a lot worth fighting over.
However, California has established itself as a state with a powerful status quo bias when it comes to gambling. Even as gambling expansion has swept much of the country over the past decade, and despite the size of the California market, very little has changed there.
The gaming tribes are a political and legal force to be reckoned with and have proven adept at striking down new challengers. The Sports Betting Alliance is still licking its wounds after its failed attempt to push through online sports betting legislation without the tribes’ blessing. Yet, as formidable as they are, they haven’t had the strength to uproot the cardrooms, as the latter have made themselves indispensable to the state’s local economies.
A Bargaining Chip is Needed to Break the Deadlock
If there’s any way all of this ends, the most likely way is through a compromise in which everyone ends up at least a little better off.
Connecticut serves as a useful example of how this works. For years, the Nutmeg State’s efforts to legalize sports betting were gridlocked because the Lottery opposed a tribal duopoly, while the tribes opposed sharing the proposed market with the Lottery.
What ended that standoff was the Governor, Ned Lamont, softening his stance on online casinos. The pandemic shutdown of 2020 convinced Lamont that an online option would provide the state with a budgetary safety net in the case of a repeat occurrence.
That allowed lawmakers to offer the tribes exclusive rights over iGaming in return for agreeing to share online sports betting with the Lottery.
Ten years ago, the bargaining chip would have been online poker, had the parties managed to come to an agreement. It would have been a logical new direction for the cardrooms, and at the time, perhaps promising enough to persuade them to accept some restrictions on blackjack. Now, that market probably looks too small to be appealing.
The most likely place to hash this out would be in a new attempt to pass sports betting legislation. In 2022, the tribes’ proposal included language that would have advanced their goal of hamstringing the cardrooms. Yet, at that time, their interest was less in actually passing a bill than in shutting down the Sports Betting Alliance’s proposal.
If the tribes and operators can see eye to eye and pull together on a sports betting effort they actually intend to have pass, the cardrooms would become a significant opponent. At that point, potentially, they could seek a lasting compromise on casino-like card games in exchange for dropping their objections.
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