Why California Tribes Are Revolting Against Card Rooms

California Indian tribes engaged in the gambling industry are actively backing a bill aimed at enhancing their operations. However, representatives from state casinos and card rooms caution that the passage of SB 549 could lead to layoffs and financial difficulties for some cities in California.

SB 549 would provide California tribes with a one-time chance to file a lawsuit against card rooms. This legislation, which has garnered support from tribes in competitive regions, successfully completed its second reading in the state House on August 20. A prior version of the bill had already passed in the Senate in May 2023, but it has since undergone amendments. The current House version must return to the Senate for consideration before the General Assembly adjourns at the end of August, leaving only four days for approval in both chambers.

Tuari Bigknife, Attorney General for the Viejas Band of Kumeyaay Indians, stated that this bill would reinforce the rights granted to tribes by the state. For over a decade, the tribes have sought to secure these rights through the Attorney General's Office and the California Gaming Control Commission (CGCC), but progress has been repeatedly stalled.

Bigknife noted that during the August 28 "New Normal" webinar, there were discussions, recommendations, and hearings, yet no concrete actions have been taken. “We were dismissed from court under the dubious premise that tribes possess rights but lack the means to defend them legally,” he remarked.

Bank Games and Third Party Providers

The controversy revolves around the operation of player-banked games, like blackjack and baccarat, in California card rooms. Under state law, such card games are exclusively permitted in tribal casinos. While card rooms can offer these games, they must do so exclusively through a player bank arrangement, with players selecting who will serve as the bank. However, in 2007, card rooms shifted to a new approach by engaging third-party providers (TPPs) to manage the banking functions.

Card rooms claim that abandoning this model would lead to their financial ruin. The situation has become increasingly politicised, with protests, rallies, and lobbying efforts taking place in Sacramento as the bill progresses through the legislature. Card rooms have invested millions to oppose the bill. "If you’re going to come at us and try to take away what we’ve had for decades, we’re going to fight back," said Keith Sharp, the general counsel for the card rooms, in a statement to Cal Matters. "This is about business survival at this point, and we’ll spend whatever it takes."

Tribes lose $100 million

Bigknife, a spokesperson for the Indian tribes, dismisses the performative aspects of the situation. "We don't care that they're not exploring innovative solutions for revenue generation," he stated. "Cardrooms have existed for over a century, and illegal gambling only began in 2007. There’s no reason for cardrooms not to return to their original state instead of doing so at the expense of the tribes." The onset of the coronavirus pandemic and the ensuing restrictions in 2020 created an opportunity for California tribes, as state-run cardrooms remained closed for more than a year. The tribes, which have self-governing authority, managed to reopen under certain restrictions. Bigknife noted that during this period, revenue from tribal casinos has risen. He pointed out that the current pot-and-gamble card games are costing Indian Country an estimated $100 million annually.

Does the current issue affect the legalisation of gambling?

The proposal for a law that would enable lawsuits is not a novel concept. In fact, the language found in SB 549 was also part of Proposition 26, a retail sports betting initiative from 2022 that ultimately failed due to conflicts between commercial operators and tribal interests. The next time Indian Country presents a gaming initiative to voters, it will likely aim to be as straightforward and unencumbered as possible.

It's important to note that there is a weak connection between the current issues involving cardrooms and legal sports betting. While tribal casinos operate largely independently, cardrooms fall under the regulation of the California Gambling Control Commission (CGCC), which also collects various fees from tribal operations.

During a recent webinar, host Victor Rocha and the Bignay family posed a thought-provoking question: “How can we address sports betting in California if we don’t even regulate poker rooms, and if we allow practices like money laundering?” Although somewhat rhetorical, this question brings to light another consideration: Will tribes pursue a gambling initiative if the cardroom issue isn't resolved? Major gaming tribes in California, especially those not directly impacted by cardrooms, might favour a separate wagering initiative.

If the Legislature does not approve SB 549, Bigknife indicated that tribes would continually return to the Legislature seeking a resolution. He has not dismissed the option of taking the matter to voters in the future.

Finding Consensus: Tribes vs Poker Rooms

California Indian Country encompasses more than just areas where Indigenous peoples reside; it consists of a network of sometimes distantly located reservations that are home to diverse tribes, each with their own unique cultures, sizes, and economies. Bigknife notes that a significant hurdle in advancing SB 549 was the political challenge of securing agreement from a majority of these tribes. This issue reflects a broader struggle within Indian Country regarding legal sports betting as well.

“What has genuinely surprised me is the civics lesson I've learned about California politics,” Bigknife remarks. “It’s all about strategy and timing, as well as facing unexpected challenges. When multiple tribes are seeking a common goal—no matter how just—it seems essential to unify all tribes. Therefore, we invested a lot of effort to ensure collective agreement. The Legislature wants assurance that all tribes are on board, as this matter holds great importance for us all.”