Capitol Alert

Deal or no deal – California card rooms, tribal casinos battle over new rule

David Le, from left, Chris Penfield and Jake Rosenstiel wait to place bets during a game of Texas Hold’em Poker at the Stones Gambling Hall in Citrus Heights, California on July 14, 2016. Texas Hold’em is not subject to a new rule dictating rotation of the dealer. Games like Pai Gow and Blackjack would be subject to the new rule.
David Le, from left, Chris Penfield and Jake Rosenstiel wait to place bets during a game of Texas Hold’em Poker at the Stones Gambling Hall in Citrus Heights, California on July 14, 2016. Texas Hold’em is not subject to a new rule dictating rotation of the dealer. Games like Pai Gow and Blackjack would be subject to the new rule.

It’s a little past seven in the evening on a Thursday at Stones Gambling Hall in Citrus Heights, where Matt Stevenson is one of about two dozen gamblers spread out over tables offering games with names such as Fortune Pai Gow, Spanish 21 and EZ Baccarat.

Stevenson, 44, said he used to play at tribal casinos. He considers the card room, which opened in July 2014 just off Highway 80, “tenfold” better, in part because it doesn’t allow smoking and offers more attractive betting options.

Stevenson, a Sacramento resident who said he ventures out to gamble once or twice a week, is an example of the kind of player both the card rooms and tribal casinos are competing fiercely for in order to attract gambling dollars in California.

Now a change in an obscure rule governing rotation of the bank for some card room games has inflamed the long-running competition. Members of the card room industry worry the new policy will hurt their business. Tribes, who are losing clients such as Stevenson, argue the rule isn’t tough enough and doesn’t come close to enforcing the law.

“It’s about money. That’s what it all boils down to,” said Lloyd Levine, a former state assemblyman who worked on gambling issues. “The money is in Vegas-style gaming. The closer you can get to that without crossing the line, the more money you are going to make.”

The latest dispute centers on California law that prevents Las Vegas-style or “banked” card games except on tribal lands. A banked card game exists when the players are betting against the house, or bank (think Vegas blackjack), rather than against each other.

Nonbanked card games, where a player acts as the bank instead of the casino, are permitted in the more than 70 active card rooms in California. To prevent the operation of a bank, a 2002 law says this “player-dealer” position must be “continuously and systematically rotated amongst each of the participants during the play of the game.”

On June 30, the state Bureau of Gambling Control sent a notice to card rooms that they would need to change the rule for rotating the player-dealer position featured in games such as blackjack and pai gow.

Card rooms now have to offer the position to all the players every two hands. The new rule, beginning as early as this fall, would require a two-minute break after a player has held the position for 60 consecutive minutes.

The change may seem small, but the stakes are huge. Players rarely accept the bank position, and card rooms say the two-minute break could cost them millions. Tribes say the new rule doesn’t go far enough to prevent the games from being illegal.

“The Oxford English Dictionary defines the word ‘continuously’ as: ‘In a continuous manner; uninterruptedly, without break; continually, constantly,’ ” the tribes wrote in an April letter to the bureau. “As we explained at the March 21 meeting, we think this definition leaves room for only one interpretation – the banker position must rotate every hand.”

Kyle Kirkland, president of the California Gaming Association, which represents card rooms, has his own interpretation of the law.

“Halley’s comet moves in a continuous and systematic fashion,” he said, referring to the comet that is visible from Earth every 75 years.

The existing rules are the legacy of Robert Lytle, the former chief of the Bureau of Gambling Control. In 2007, in a letter to card rooms, Lytle said that as long as the deal was offered on every second consecutive hand, the game would not be considered an illegal banked game even if all the other players refused the dealer position.

Lytle left the bureau shortly after to work as a card room owner and consultant. In May this year, Lytle settled a complaint from Attorney General Kamala Harris that alleged he received confidential information about investigations into his clients from another agent in the bureau. Lytle will give up his gambling licenses and ownership of two card rooms as part of the settlement, according to the San Diego Union-Tribune.

Nearly a decade after Lytle’s departure from the government, on Feb. 19 of this year, the bureau rescinded the “Lytle letter.”

Kirkland said that current practice, in keeping with the Lytle letter, is to offer the player-dealer position to all the players every two hands. At Stones Gambling Hall, this is done by passing a small token every two hands.

If none of the players accept the bank, Kirkland said, a more experienced player, licensed by the Bureau of Gambling Control and under contract with the card room, will “serve as the player-dealer of last resort.” Because they end up acting as the bank continually as players reject the offer, the tribes believe these games are house-banked in all but name.

In the letter to Bureau Chief Wayne J. Quint Jr. on April 15, several Indian tribes argued that the bank should be rotated on every hand, though they were willing to accept an enforced two-hand rotation. The letter said the tribes have been complaining about the conduct for four years – since April 12, 2012.

“We haven’t let up on this in four years, and we don’t plan on letting up anytime soon,” said Ray Patterson, executive director of the Tribal Gaming Agency of the Yocha Dehe Wintun Nation, one of the tribes that signed the letter. “We in no way feel that 60 minutes comes close to continuous.”

Kirkland, a card room owner himself, estimates that the card room industry generates $1.5 billion in revenue annually, 70 percent of which is from games such as blackjack and pai gow poker that will be affected by the new rules. He said the industry isn’t certain how customers will respond to the two-minute break.

“If I’m a movie theater, and I have to turn on the lights every hour, what impact is that going to have?” he said.

Kirkland said that he can foresee the new rule causing games to “break,” which would cut into a card room’s revenue.

“It may not seem like a big deal, but two minutes is a long time when you’re dealing with continuous activity,” Kirkland said.

Because the card rooms take a collection fee per hand, Jarhett Blonien, an attorney with Communities for California Cardrooms, said the two-minute break, during which several hands could be played, will mean lost money – probably about $5 per hour per table. For a card room with 17 tables operating 24 hours a day, Blonien said, that would lead to a loss of about $750,000 annually. He said the card rooms may also have to waive fees or provide other incentives for players to act as the bank so games won’t have to break for two minutes.

“Basically, we think that what has occurred the past 15 years is legal and fine and defensible,” Blonien said. “We don’t feel that the new regulations are going to totally shut us down, but they’re definitely going to be a hindrance for the businesses.”

Art Van Loon, the general manager of Stones Gambling Hall, said his card room will respond to the changes by emphasizing the benefits of the player-dealer position to encourage more players to act as the bank. The card rooms are required to submit the modified game rules to the bureau by Sept. 30.

“We’re going to try to handle it in a positive way,” he said.

Stevenson is unconcerned.

“We have a good time,” he said. “Two minutes would be a nice break.”

Anshu Siripurapu: 916-321-1060, @AnshuSiripurapu

What’s the deal?

A new rule that would change the way some games are played at card rooms has card room proprietors and their competitors at tribal casinos unhappy.

Current rule: For card room games such as blackjack and pai gow, the opportunity to act as the bank for the game must be offered to a new player every two hands. It’s seldom accepted. Card rooms typically employ a permanent player-dealer for that role.

New rule: No single person can deal for more than 60 consecutive minutes unless there is a two-minute break in the game.

What card rooms say: Card room operators believe the breaks will cost them a significant amount of money because fewer hands will be played (the card room gets a cut of each hand).

What tribal gambling casinos say: As the only entities allowed by law to operate games banked by the house, tribal casinos believe the new rule does not go far enough to restrict card rooms from operating what they believe are illegal house-banked games.