Why Are Prop 26 and California Card Rooms at War? Blackjack

By now, you’ve probably heard that California card rooms are universally opposed to Prop 26.

The main reason they’ve given is a provision in the in-person CA sports betting ballot measure that would allow tribal casinos to directly sue card rooms for what the card rooms deem frivolous lawsuits that could put them out of business.

Now, almost four weeks until the Nov. 8 election day, Prop 26 is taking aim at card rooms in a new ad campaign. A commercial released this week claims card rooms have links to organized crime racketeering, drug trafficking, loan sharking, and other illegal activities.

So, yeah. Sportsbooks and California tribal casinos aren’t the only two sides at war right now.

But … why are the card rooms scared of lawsuits? Why do the Indian casinos want it to be easier to sue card rooms?

What rules are the casinos claiming the card rooms are breaking?

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The Real Issue Is Blackjack

When you peel back the accusations and provocative barbs in the ads, the heart of the matter is blackjack.

Kathy Fairbanks, the Yes on 26 and No on 27 spokesperson, said so during a Sept. 7 debate with Yes on 27 spokesperson Nathan Click at the Sacramento Press Club.

“I know that the card rooms have focused a lot on this (provision),” Fairbanks said at the time. “This is a very narrow provision crafted to settle the house-banked games law that governs card rooms. It was carefully written to ensure that it wouldn’t result in frivolous lawsuits against card rooms.”

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Card rooms are direct competitors to tribal casinos as both offer popular table games. Prop 26’s biggest backers include many tribes in the state, led in spending by the San Manuel Band of Mission Indians, a Yes on 26 member that has contributed nearly $105 million to oppose Prop 27, which would legalize online sports betting.

Currently, there are 84 licensed card rooms in the state with 1,763 tables, although only 59 are active. Under state law, they are not allowed to offer house-banked games. A house-banked game is one in which winning hands are paid by the dealer, like you see in Las Vegas casinos and California Indian casinos.

However, for blackjack at card rooms, third-party vendors function as the house, and players place bets on the dealer’s hand against other players. The players can also take turns being the dealer.

The California Gambling Control Commission, which regulates card rooms and the third-party companies, has not made any moves to impede this twist on blackjack, giving it tacit approval.

What Does the Prop 26 Provision Say?

However, a clause in Prop 26 threatens this unique structure, and card rooms are unhappy about it. Tribes have tried many times to sue the state to halt card room blackjack games with no success. If Prop 26 passes, tribes would be able to sue card rooms directly.

The exact wording from the state’s voter information guide sent to voters in September:

Adds New Enforcement Method. Proposition 26 adds a new way to enforce certain state gambling laws, such as laws banning certain types of card games. Specifically, it allows people or entities that believe someone is breaking these laws to file a civil lawsuit in state trial courts. This lawsuit can ask for penalties of up to $10,000 per violation. It can also ask for the court to stop the behavior. These civil lawsuits would be allowed only if the person or entity filing it first asks DOJ to act and either (1) DOJ does not file a court case within 90 days or (2) a court rejects the case filed by DOJ and does not prohibit it from being filed again. Penalties collected would go into the CSWF for the purposes laid out above.

Legal Challenges to House-Banked Game Rules

While Prop 26 supporters argue that card rooms would only be at risk if they violated state laws, Fairbanks said at the Sept. 7 debate the rationale relates to blackjack directly and the card rooms’ workaround to avoid hosting a house-banked game.

“It’s in there because there’s disagreement on the house-banked game rules,” Fairbanks said. “It’s very insider baseball as it relates to card rooms, but it’s something that has never been resolved and the tribes don’t have standing to challenge it in court. They want to take this case to court and get a ruling.”

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Municipal Governments Want to Keep Card Room Revenue

Card rooms aren’t the only ones worried about the proposed enforcement clause.

Municipalities that receive revenue are also concerned. According to the state, card rooms pay about $100 million yearly to the cities where they are located. They also provide over 23,000 jobs. As a result, about 20 local governments and dozens of local officials joined the card room-sponsored No on 26 campaign because they don’t want to lose the card room revenue.

“Proposition 26 was written to benefit certain wealthy tribal casinos at the expense of their competitors,” San Jose Councilmember Raul Peralez said in a statement to the Mercury News.

He added that the clause is a “poison pill” that would lead to job losses and millions in tax revenue.

Given the recent poll from UC Berkeley result that indicated voters are sour on Prop 26 and Prop 27, a measure that would allow online sports betting, card rooms may be able to breathe a sigh of relief when the Nov. 8 ballots are tallied.

However, given the ongoing fight by tribes to be able to sue card rooms, the battle for their existence as an alternative to tribal casino table games will most likely continue.