California court rules in favour of state card rooms, strikes down regulations on blackjack and player-dealers

California card rooms secured a significant legal victory on Tuesday, as the state’s Bureau of Gambling Control was deemed to have overstepped its authority in promulgating two sweeping sets of regulatory changes that had gone into effect on 1 April.

The ruling, handed down by San Francisco Superior Court Judge Richard Darwin, affirmed a preliminary injunction in May that barred the regulations from being enforced while arguments were presented. Darwin indicated at that hearing and again on Tuesday that the state faced an uphill climb in swaying his sentiment and ultimately failed to do so.

At issue are blackjack-style games and the use of player-dealers, as the new regulations significantly curtailed both, which would have been devastating to card room revenue and tax generation. The BGC is one of two gaming regulatory bodies in California, along with the state’s Gambling Control Commission.

The commission is independent and focuses on day-to-day regulation and oversight, whereas the BGC is under the attorney general’s office and deals mostly with enforcement and prosecution. In this case, the rule changes were spearheaded by the BGC, which card rooms asserted was beyond its scope, and Darwin concurred.

“I find that in issuing the subject regulations, the Bureau acted in excess of the authority granted to it by the legislature and the Gambling Control Act,” Darwin said after oral arguments were presented by both sides. A follow-up case management conference to hash out administrative details was set for 10 July.

The attorney general’s office told iGB it is “disappointed in today’s ruling” but is reviewing its options and “will respond appropriately”. The California Nations Indian Gaming Association did not respond to a request for comment.

Card rooms relieved by ruling

Under the new regulations, card rooms would have had to make drastic changes to blackjack-style games, including the removal of a “bust” feature and a target point of 21. The rule changes regarding player-dealers included mandatory dealer rotations every 40 minutes and a requirement for the position to be offered to all players before every hand, among others.

Taken together, these changes would have been significant for an industry that, as of 2019, generates some $5 billion in annual economic impact. The state acknowledged these impacts in its internal analysis, predicting that card rooms would lose approximately 50% of existing blackjack revenue. Several card rooms had feared potential closure and multiple host cities were scrambling to enact fiscal measures like sales tax increases to offset the potential losses.

Kyle Kirkland, president of the California Gaming Association and owner of Club One Casino in Fresno, told iGB after the hearing that card rooms felt vindicated by the ruling.

“The reaction from the industry and our members is relief,” Kirkland said. “We felt like we were on the right side of the law and the argument, and we heard that back in May when we got the preliminary injunction. Today, this just cements it.”

Duelling factions

This case involves three main factions: card rooms, Attorney General Rob Bonta on behalf of the state and California’s powerful gaming tribes. The litigation only involved the first two, but card rooms asserted from the beginning that the state was acting at the behest of tribes, which dwarf card rooms in terms of revenue (over $12 billion according to most recent figures ) and political influence.

Tribes hold exclusivity for Class III gaming in California and have long asserted that blackjack-style games and player-dealers infringe on that exclusivity. But state courts have disagreed thus far – another, similar lawsuit filed by tribes and enabled via legislation ( SB 549 ) was dismissed last year and has yet to be appealed.

As Bonta campaigns for re-election this November, he has become increasingly active in gaming matters, and this has primarily hurt tribal opponents. In addition to the card room chang