Why California Card Rooms Oppose Prop 26 in CA Sports Betting Battle

California card rooms compete with tribal casinos for customers and for profit. So card room operators were quick to respond last year when a group of tribes succeeded in getting a California sports betting initiative — now known as Prop 26 — on the 2022 general election ballot.

Soon, card rooms were backing a rival sports betting initiative filed by mayors of San Jose, Inglewood, Colma, and Gardena that would have leveled the playing field for potential operators in a new California sports betting market, mostly in two ways: 

• Instead of in-person-only betting at tribal casinos and four horse racetracks under Prop 26, the card room plan would have allowed in-person and online sports betting to be offered by tribes, tracks, card rooms, and pro sports franchises.
• Card room operators would have been allowed to add more card and tile games — something now off limits under a state moratorium on card room gaming expansion set to expire this December. 

It wasn’t meant to be. Not enough petition signatures were collected by the April 18, 2022 deadline to get the initiative on the 2022 ballot.

So, instead, the card rooms focused on the only thing they can do right now: Try to defeat Prop 26. They’re doing this both in the courts and in media advertising campaigns.

REPORT: Prop 27 Would Generate $2.8 Billion in Annual California Online Sports Betting Revenue

California Card Rooms: 3 Main Issues With Prop 26

California card rooms appear to have three main issues with Prop 26. 

• Card rooms claim Prop 26 would give tribal casinos the right to offer more games — and potentially sports betting — than card rooms would be allowed to offer. 
• Card rooms also claim that Prop 26 would create “the right to file a stream of lawsuits against card rooms” through initiative provisions it fought in court earlier this year.
• Card rooms claim “special interests” in the California legislature are preventing card room operators from leveling the playing field with tribal casinos. 

California card rooms back the No on 26 campaign, which has raised $41.9 million as of Sept. 1.

More Games for Tribes, but Not for Card Rooms?

Although there used to be well over 100, California today has 59 card rooms operating in the state. They’re all licensed and generating federal, state, and local tax revenue that totals over $500 million annually, according to the California Gaming Association, or CGA. Among the cities benefiting from card room revenue are San Jose, Colma, Gardena, and Inglewood — the same four communities behind the card room-friendly initiative filed last year. 

California tribal casinos, on the other hand, are largely tax-exempt under federal and state law. 

Card rooms and cities benefiting from their revenue do not appear to challenge the autonomy of tribal governments or their tax-exempt status. But card rooms have challenged (in the media and in state court) the fact that gaming tribes would be allowed to offer more games — and, potentially, sports betting — should Prop 26 pass because of what card rooms call a “special carve-out” in the proposed law. 

The carve-out would allow tribal casinos and four private horse racetracks named in Prop 26 to offer roulette, dice games, and sports betting while keeping those offerings off-limits to licensed gaming establishments like card rooms, now limited to player-dealer games like poker and pai gow. 

It’s “a special carve-out for the tribal casinos … to offer those games,” the card rooms said in a March 7 press release. 

In the County of Fresno, cardrooms have created 764 total jobs 🎉 #EmpoweringCommunities pic.twitter.com/aFzuqOzfZE

— CA Gaming Association (@CACardRooms) August 24, 2022

The Card Rooms vs. Tribal Casinos Lawsuit Issue

In addition to sports betting and more table games, Prop 26 would give tribal casinos something else that card rooms don’t have, and won’t have, should the initiative pass: the ability to sue licensed, legal card rooms for any allegation of “illegal gaming.”

Deven Kumar with Hollywood Park Casino — one of two card rooms that unsuccessfully challenged Prop 26 in court earlier the year — called the initiative an attempt “to surreptitiously destroy competition with California’s cardrooms by granting more rights to Tribal casinos, including the right to file a stream of lawsuits against card rooms,” in a March 7 press release. 

At issue is the California Private Attorneys Generals Act, or PAGA, which card rooms reportedly say would be expanded under Prop 26. An article in The Los Cerritos News on May 27 said card rooms fear a PAGA expansion would allow tribes to undercut the role of the state’s Attorney General, potentially leading to devastating lawsuits against licensed card rooms. 

“This is not what the initiative process was designed to do, and certainly not what (Prop 26) is advertised to do,” Kumar said.

That position was shared by The Orange County Register in its Aug. 26 editorial, “Vote no on Proposition 26, a cynical effort to control sports betting in California.”

The newspaper called the initiative “an effort by tribes to give themselves virtual monopoly control of sports betting in what is likely to be the nation’s largest sports-betting market.”

“Tribes will have the tools to harass their long-time competitors, cardrooms, by filing lawsuits challenging the legality of the games they offer,” the paper said. “This is a raw money grab and has nothing to do with ‘self-reliance’ and ‘responsible gaming’. We strongly support legalizing sports betting, but not by letting tribes crush their old and new competitors alike. We urge a no vote on Prop. 26.”

PROP 26 vs. PROP 27: Here Are All the Groups That Support Prop 26 and Prop 27, and Why

California Card Rooms Claim There Are Special Interests Working Against Them

Card rooms also say there are “special interests” working with the California state legislature to give tribal casinos an edge over non-tribal gaming establishments. The claim was made this week by the trade association Communities for California Cardrooms (CCC), which vowed to “expose” those interests in an Aug. 29 press release.  

“It is time to uncover the truth and allow legal businesses to thrive in California under fair competition,” the press release stated. 

At issue is a 1995 moratorium on the expansion of card room games. Under Prop 26, the card rooms say, state law would give tribal casinos access to games and sports betting not available to non-tribal gaming establishments.

Card rooms say they have been working with state lawmakers on a new moratorium that would allow them to expand their table game offerings when the current moratorium expires this December. 

“Any conversation centered around extending the moratorium on the expansion of gambling needs to allow more flexibility for local governments so that they can amend their ordinances to add additional tables,” CCC President Clarke Rosa said in the press release. 

Rosa added: “A moratorium without reasonable table expansion, creates a great inequity among local governments who have active gaming ordinances. A continuation of the status quo is unacceptable. Local governments need the flexibility to amend their ordinances to add additional tables, as each table can generate a tremendous amount of living wage jobs and tax revenues.”

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Card Room Advocates Testify Against Prop 26

Card rooms are making good on their commitment to work with state lawmakers. 

Card room advocates testified against Prop 26 during an Aug. 10 joint hearing of the Senate Governmental Organization and Assembly Governmental Organization. One of the opponents was Shavon Moore-Cage, a member and former district council official of AFSCME (American Federation of State, County and Municipal Employees) who works in the City of Hawaiian Gardens. 

Moore-Cage said Hawaiian Gardens relies on its local card room (Hawaiian Gardens Casino) for at least 70% of its budget. Under Prop 26, she said, that revenue — and revenue of dozens of other California cities — would be threatened. 

“(Prop 26) attacks local card rooms and threatens over 32,000 jobs and $500 million in local tax revenue for minority communities that these card rooms serve,” Moore-Cage said. “If these local card rooms are closed, it is detrimental to the quality of life of the residents in minority communities that these card rooms serve.” 

Also testifying against Prop 26 was Juan Garza, executive director of the five-member California Cities for Self-Reliance Joint Power Authority. Garza said $1.6 billion in wages would be lost under Prop 26. He also claimed 10,000 jobs would be lost in Los Angeles County alone. 

“We as cities cannot take that risk,” Garza told lawmakers. “So it’s crucial that you and the public are aware of the effect that Prop 26 would have on our cities.” 

IF BOTH PROP 26 AND PROP 27 FAIL … What Would Come Next for California Sports Betting?