Local card clubs fear a regulatory reshuffle
Stakes high as state weighs rules for non-tribal casinos
A single mother, Carolyn Uzeta worked her way up over 18 years from cocktail waitress at Gardens Casino in Hawaiian Gardens to the card club’s manager of training and development.
“I saw gaming as something I could be good at,” Uzeta said as she dealt cards for blackjack poker, a variation on the traditional game of 21. “So, I practiced and I practiced and I practiced.”
But Uzeta and card club workers across the state may have to practice something different or even find new work if California gambling regulators adopt new restrictions on some of the clubs’ most popular table games.
The state Bureau of Gambling Control is holding public workshops on new card club regulations but has provided no details on what changes might be under consideration or what sparked the need to consider new rules.
That has caused an uproar among operators of the state’s 66 card clubs, which have 23,000 employees and generate an estimated $300 million in local, state and federal taxes annu-
ally. The operators say they fear that if the new regulations are too tough they could put an end to games that represent up to 70% of their business.
“I’m more than positive that they’re all worried,” Ron Sarabi, general manager of Gardens Casino, said of his fellow card club operators.
What makes card club managers most anxious is that they don’t know what changes state gaming regulators are considering, except that they are looking at adopting new rules for the third-party businesses that act as the “banks” in card games.
Bureau of Gambling Control Director Stephanie Shimazu said the agency is still merely gathering information. The hearings continue through March.
“We are in the very early stages,” Shimazu said after a November workshop at a hotel near Los Angeles International Airport. “We haven’t drafted anything.”
In traditional casinos in Las Vegas and on Indian lands, players at a card table try to win money from the casino, which is represented by the dealer. The dealer takes the bets and deals the cards, then rewards the winners and collects from the losers.
In California, state law prohibits card clubs from having any financial stake in the outcome of the card games that take place in their establishments. Only Indian casinos are allowed to do that in the state.
To abide by the law, many card clubs in the state invite into their casinos thirdparty businesses that employ people to act as “bankers” for each table. These businesses are called “third-party providers of proposition players” and they are licensed by the state.
Although the dealer still deals the cards at card clubs, the players bet against the third-party banker, who also sits at the table behind a rack of chips. The banker, not the casino, pays winners and collects from losers.
Card clubs generate revenue by collecting a fee from each player during each hand. The fee is based on the bet limit at each table.
The Bureau of Gambling Control has accepted the use of third-party bankers as long as the banking role is offered to other players at each table after two hands are dealt — and then again two hands later on a continuing basis. (The offer is more elaborate theater than business opportunity; the players, who are mainly interested in gambling rather than banking, are unlikely to accept.)
Card club operators say they fear that the bureau may put an end to that agreement, and they suspect state regulators are acting under pressure from Indian tribes, which have long argued that only the tribes have the legal right to operate casino-type games in the state.
At Gardens Casino, about 40% of its revenue comes from games involving a third-party banker, such as blackjack poker, pai gow poker, baccarat and Ultimate Texas Hold ’Em. In other card clubs, as much as 70% of operations involve games that rely on thirdparty bankers.
Card clubs also offer traditional poker, in which the players bet against one another, and clubs charge a fee for overhead costs.
The turmoil comes as gambling businesses find themselves on a roll with the help of a robust national economy.
California leads the nation with 63 tribes that run gambling operations. Revenue from those operations in 2015 — a record $7.9 billion — represented the sixth straight year of growth, according to a report by Alan Meister, an economist with Nathan Associates Inc.
Indian casinos and card clubs have been investing their profits in expansion, adding facilities including hotels, restaurants and spas.
In Bell Gardens, the Bicycle Casino opened a $50-million hotel in 2015 that included a fitness center, an outdoor pool deck, a spa and sauna, plus 9,000 square feet of meeting space for conventions and banquets.
Near Highland in San Bernardino County, the San Manuel Band of Mission Indians broke ground in July on a $550-million hotel adjacent to its San Manuel Casino. The hotel project follows an extensive casino overhaul.
Kyle Kirkland, president of the California Gaming Assn., which represents the state’s card clubs, said that if new regulations eliminate the ability of the card clubs to operate banked games, that could kill off a huge source of revenue and put many card club employees out of work.
“It’s pretty scary stuff,” he said, adding that revenue from card clubs helps boost the general funds of several working-class cities where the clubs are located.
In November, the Rincon Band of Luiseno Indians and the Santa Ynez Band of Chumash Mission Indians jointly filed a lawsuit in San Diego County Superior Court against nine California card clubs, including Gardens Casino, Hustler Casino in Gardena, Commerce Casino in Commerce and Hollywood Park Casino in Inglewood.
The suit accused the card clubs of engaging in “unfair competition by unlawfully, unfairly and fraudulently engaging in banked card games that are expressly reserved for Indian tribes under state and federal law.”
The lawsuit said card clubs are still violating the law that gives the Indian tribes exclusive right to operate casino-type games even if card clubs rely on third-party bankers and even if card clubs create games with rules that are similar to but not exactly the same as blackjack.
Steve Stallings, chairman of the California Nations Indian Gaming Assn. and a tribal council member for the Rincon Band of Luiseno Indians, rejected the accusation by some card club owners that the Indian casinos have asked the state to adopt new card club regulations. But he said the tribes have pushed state officials for years to enforce the existing laws regarding banked games.
Although card clubs can’t have any financial stake in the outcome of games in their clubs, Stallings said the club owners often own the thirdparty banking operators. To get around the law, he said, those third-party bankers play only in competitors’ card clubs.
“It’s collusion and fraud to say they are not offering house-banked games,” he said.
Asked if he was concerned that a change in regulations might be a financial blow to the card clubs, Stallings said: “Card clubs were all profitable before they started with these practices and they will be profitable afterwards.”
During the November workshop near LAX, more than 200 people packed into a conference room to testify before the Bureau of Gambling Control about new card club regulations. Most of the speakers voiced support for the tax revenue generated by the card rooms.
“Don’t take away the resources for our kids,” said Maria Alana, a resident of Bell Gardens, where nearly half of the city’s general fund revenue comes from the city’s card club, the Bicycle Hotel & Casino.
Commerce Casino Chief Executive Haig Papaian told the panel that his card club has 2,500 workers and said he wasn’t sure why the state would consider new regulations.
“What has changed?” he asked. “What have we done?”
None of the panel members responded.