High stakes: Inside the multimillion-dollar battle for gambling rights in California

A card room at Commerce Casino in Commerce on March 14, 2024. (Photo by Ted Soqui for CalMatters)

Powerful tribal casinos and their rivals in California’s multi-billion dollar gambling industry are fighting an epic battle in the Legislature this year. Millions of dollars in tax revenues for local cities hang in the balance.

Pending legislation would let California’s tribes sue their competitors, private card clubs, over their claim that card rooms are violating the tribes’ exclusive rights to Las Vegas-style gambling.

Card rooms have responded with an enormous lobbying blitz. The Hawaiian Gardens Casino in Los Angeles County spent a staggering $9.1 million on lobbying last year, the second highest amount reported to state regulators. Only the international oil giant, Chevron Corp., spent more.

“If you’re going to attack us and try to take away what we’ve had for decades, then we’ve got to fight back,” said Keith Sharp, the card room’s general counsel. “And so we’re going to spend the money that we need to spend. I mean it’s about survival at this point.”

Cities also have a lot at stake with the card rooms. San Jose officials told legislators they could hire 80 police officers if they could add 30 more tables to their local card rooms. Nearly two thirds of the budget for the city of Hawaiian Gardens and almost half for the city of Commerce, also in Los Angeles County, come from local card rooms.

“Those games, we’re very dependent on here in the city,” said Commerce Mayor Hugo Argumedo. “They provide many of the programs and services that we offer to the residents in our community.”

The legislation, Senate Bill 549, is backed primarily by a group of Native American tribes that run major casinos. The tribes are among the most influential and biggest spending lobbies in Sacramento. Since 2014, California’s candidates for state office have received about $23.5 million from tribes. That’s more than double what oil companies have given the state’s politicians during the same years.

The state’s card room industry, by comparison, has donated about $3.8 million during the same timeframe.

A group of tribes contend the 80 or so privately-owned gambling halls are illegally offering games such as blackjack, baccarat and pai gow poker, and by doing so, they’ve for years been stealing hundreds of millions of dollars of revenue from historically disenfranchised tribal communities across California.

“It’s not about killing card rooms. It’s not about killing cities. It’s about protecting what’s ours,” Tuari Bigknife, the attorney general for the Viejas Band of Kumeyaay Indians, told CalMatters. His tribe operates a large casino in San Diego County.

SB 549 is pending before the Assembly Governmental Organization Committee, which handles gambling legislation. A hearing hasn’t been scheduled, but those following the bill say it will be heard later in April or in May.

Card rooms frame the issue as a David vs. Goliath fight, since their annual earnings are barely 10% of what tribal governments make from gambling at their 70 tribal casinos. The card rooms also have influential allies in local governments officials who say their cities could go bankrupt if their local gambling hall loses this legislative fight.

When the pandemic shut down gaming in Hawaiian Gardens, the city was forced to lay off much of its staff and cut services. Mayor Victor Farfan said it was a sign of what would happen if the card room was no longer able to play the disputed games. 

“We’re very, very limited in what we can do,” Farfan said in an interview with CalMatters at Hawaiian Gardens City Hall, the card room visible from the parking lot. “And so we’re fortunate enough to have a revenue source that we do today.”

Mayor Victor Farfan at Hawaiian Gardens City Hall in Hawaiian Gardens on March 14, 2024. (Photo by Ted Soqui for CalMatters)

Tribes, however, argue there are other ways for cities to raise money without infringing on tribes’ gambling rights that California voters enshrined into the state’s constitution.

“They can tax; they can issue bonds; they can do lots of things,” said Bigknife, the attorney general for the Viejas tribe. “All this does is shut down illegal revenue.”

The gambling dispute has roots in the Gold Rush, a time when unscrupulous gambling halls were fleecing miners. In response, the young Legislature prohibited gambling halls from offering games like the kind in Las Vegas where casinos are the “house” and take bets directly. 

That prohibition lasted until 2000, when voters approved an initiative that gave tribes the right to negotiate compacts with the state to host certain house-banked casino games. 

No one disputes that the privately owned card rooms can offer poker, since players bet against each other. The dispute behind SB 549 involves traditionally house-banked card games, especially blackjack, the most lucrative of the disputed games.

Under the California constitution, the card rooms can’t accept wagers from customers. The card clubs get around the prohibition by contracting with third-party companies that serve the role as the “house” or the “bank.” These third-party employees typically sit at card tables next to the card room employees who deal cards to players. The third-party employee plays no part of the game except to collect players’ bets and pay out winnings. The dealers must periodically offer the opportunity for the players to act as the bank. Almost every customer declines. The card clubs collect fees from each game.

The gambling halls say their business model has been approved by state regulators. 

“Every game that (the tribes are) saying is illegal right now, every single one of them has been explicitly approved individually in every card room in the state of California,” Ed Manning, a lobbyist for the card room industry, told lawmakers last summer at the bill’s first hearing.

Tribal casinos, however, call the card room business model an illegal sham, and they have been pleading with state regulators, voters and now lawmakers to end it. 

The tribes have repeatedly urged the California Justice Department to step in and prohibit the disputed games. The past three attorneys general have discussed various regulations, but so far none have resolved the politically fraught issue.

Current Attorney General Rob Bonta last year proposed a new set of rules that card rooms say could make it difficult to keep playing the disputed games and tribes say don’t go far enough. The proposed regulations are pending at the department's Bureau of Gambling Control without a schedule for consideration.

Meanwhile, card rooms and tribal governments have been donating heavily to Bonta since he took office in 2021. Since then the card room industry has donated at least $287,000. Tribes have given at least $222,000, according to OpenSecrets. Bonta said he is considering a campaign for governor in 2026.

Getting no satisfaction from regulators, the tribes tried to sue card rooms for unfair business practices. But California’s courts have ruled that because the tribes are sovereign governments, they don’t have standing to sue under that particular statute.

The tribes next turned to voters. In 2022, the tribes put Proposition 26 on the ballot. The initiative, mainly about sports betting, contained a provision that would have allowed anyone, including tribal members, to file a lawsuit if they believed state gambling laws were being violated and the Department of Justice declined to act.

Voters overwhelmingly rejected the measure after more than $170 million was spent trying to sway them.

A card room at Commerce Casino in Commerce on March 14, 2024. (Photo by Ted Soqui for CalMatters)

Now, the tribes want lawmakers to give them a brief window to sue card rooms to settle their dispute. SB 549 explicitly prohibits the tribes from seeking monetary damages, penalties or attorney’s fees from card rooms. It would only let a court decide whether the gambling halls’ business model is legal.

The tribes contend that if the card rooms are operating legally, they have nothing to fear.

“The card rooms should relish the opportunity to defeat the tribes on this issue and to prove up the legality of what they’re doing,” Bigknife, the Viejas attorney general, told lawmakers at the hearing last summer.

Sharp, the general counsel for the Hawaiian Gardens Casino, said the bigger worry is that if SB 549 passes, the courts would become the de facto gambling regulator. It could force card room operators to seek a court’s permission for any new game they’d like to play or any time they’d want to modify the hundreds of games they already play, he said.

“We'll be tied up in court forever, so the lawyers will make money,” Sharp said. “That may be the (tribes’) other strategy: … Grind the card rooms down ultimately with legal fees.”

Plus, the card rooms argue that if the tribes are given standing to sue them, it wouldn’t cut both ways. As sovereign governments, the tribes couldn’t be sued by the card rooms.

SB 549 is authored by Fullerton Democratic Sen. Josh Newman, and it has nine co-authors including prominent Democrats, Cecilia Aguiar-Curry, the Assembly’s majority leader, and former Senate President Toni Atkins. The bill’s Republican co-authors include Senator Scott Wilk and Assemblymember Marie Waldron, both former minority leaders in their chambers.

Despite the support for the tribes from some of the Legislature’s most influential members, it’s anyone’s guess whether the bill ends up making it to the governor’s desk. This gambling dispute doesn’t break down along partisan, regional or ideological lines. How lawmakers vote will most likely depend on whether they have a major card room or a tribal casino in their district.

Meanwhile, both sides have been spending millions of dollars to influence lawmakers.

Atkins' campaign, for instance, has received at least $215,000 from tribes since 2014.

“SB 549 allows tribes to bring their concerns about possible infringement of their constitutional rights to the courts, where this issue can be addressed by an impartial judicial system,” Atkins told CalMatters in an emailed statement. “After a history fraught with injustice, allowing tribes access to the courts to get an answer is a step worth taking.”

The tribes also have been major backers of causes important to prominent Democrats, including Gov. Gavin Newsom. For instance, the Federated Indians of Graton Rancheria contributed $1.5 million to the campaign for the Newsom-championed Proposition 1 mental health bond, which barely passed in the March primary election. That tribe also donated $750,000 to help Newsom defeat the 2021 campaign to recall him.

By comparison, card rooms and their affiliated businesses have only donated at least $229,250 to Newsom since 2014.

But money isn’t the only way the gambling interests are trying to sway legislators.

It was a sunny day in December when a bus stopped at Sen. Newman’s Fullerton district office. Dozens of protestors stepped off, wearing small red and white stickers on their chests, made to look like nametags. 

“Hi. My name is Newman,” they read. “I support wealthy tribal casinos over my constituents’ jobs.” 

Shavon Moore-Cage, a member of AFSCME (American Federation of State, County and Municipal Employees), a municipal employee union, was among the more than 100 people who attended the rally that day. 

She said the protesters wanted to send a message to Newman about his “job-killing” bill that would harm the local gambling hall whose tax revenues bankroll her employer, the city of Hawaiian Gardens.

“We ruined his day, hopefully,” she said as she grinned in a recent interview. Newman didn’t respond to repeated requests for comment from CalMatters.

AFSCME Local 36 member Shavon Moore-Cage at Hawaiian Gardens Town Hall in Hawaiian Gardens on March 14, 2024. (Photo by Ted Soqui for CalMatters)

Newman is one of the state’s most vulnerable Democrats. He was successfully recalled in 2018 before regaining his seat two years later. Newman just spent months fending off a primary challenge from four novice Democratic candidates with possible ties to the gambling dispute.

A local chapter of AFSCME gave more than $700,000 to the four challengers. The statewide union is an opponent of Newman’s casino bill. Janice O’Malley, a lobbyist representing AFSCME’s statewide political efforts in Sacramento, didn’t respond to requests for comment.

But Moore-Cage said her union, AFSCME Local 36, didn’t back the four candidates. Newman told Politico he believes the election challenge was payback over a separate fight about University of California workers.

Newman’s colleagues have noticed the pressure he’s been under, regardless of whether the card room dispute played a role in AFSCME’s decision to back Newman’s primary challengers. 

“I feel sorry for Newman,” said Assembly member Aguiar-Curry, the principal coauthor of SB 549. “For God sakes.”

She said Newman’s gambling bill has some of her colleagues “worried about their campaigns.”

Still, she said it’s time to pass SB 549 and move the dispute between the tribal casinos and the gambling halls to the courts. “Let’s just get this done,” Aguiar-Curry said, “and, as they say, have a brass backbone, legislators.”

Aguiar-Curry’s district, which stretches west of Sacramento to Napa and north to Lake County, is home to Cache Creek Casino Resort, run by the Yocha Dehe Wintun Nation, one of the anti-card room tribes.

“Illegal activities at card rooms in our region have led to annual losses of $13 million to our gaming operation, Cache Creek Casino Resort,” Anthony Roberts, chairman of the Yocha Dehe Wintun Nation, told CalMatters in a statement. “These activities violate our rights and impact our ability to serve our people, employees and local governmental partners.”

State Sen. Bill Dodd speaks during the first day of session at the state Capitol in Sacramento on Jan. 3, 2024. (Photo by Fred Greaves for CalMatters)

The Yocha Dehe tribe is a prominent political spender, having donated at least $2.6 million to statewide political campaigns since 2014. Aguiar-Curry’s reelection campaign has received $37,700 from the tribe.

The tribe recently attacked Democratic Sen. Bill Dodd of Napa, whose district overlaps Aguiar-Curry’s, over his role in the card room dispute.

In 2022, Dodd cast a deciding “no” vote that killed a bill the Yocha Dehe and other tribes wanted that would have temporarily extended an expiring moratorium that kept new card rooms from opening.

Dodd told his colleagues at the time that a longer-term card room moratorium was needed. He jokingly called the never-ending moratorium debates “the Continuing Employment Act for Lobbyists.”

“I’m sorry to say that, but you know what? We shouldn’t have to hear this every two or three years and be subject to these fights,” he told the committee.

The Yocha Dehe tribe was furious at Dodd, since without the moratorium in place, new competing card rooms could potentially enter the market. Plus, the tribe was still smarting over a failed constitutional amendment Dodd introduced in 2019, which would have legalized sports betting via computers and cell phones. The amendment also would have clarified that card rooms had a right to offer their disputed games.

Early last year, the tribe sent out mailers to Dodd’s constituents, accusing him of being too friendly to card rooms. They also put up a billboard on J Street not far from the Capitol in Sacramento.

“After $94,000 in political contributions from card rooms, Bill Dodd made it easier for card rooms to expand and open in Napa,” the billboard read.

In response, Dodd sent a video to his colleagues in the Legislature. Standing in front of the billboard, he said the tribe “impugned my character and misled the public on my positions.”

“This was put forward by special interests and sleazy lobbyists,” he said in the video. “You know, I’ve never liked bullies, and I never let bullies win. Cache Creek Casino and their lobbyist, Kevin Sloat, don’t respect legislators. They don’t respect the facts or the rules.”

Sloat declined to comment, referring to the tribe’s emailed statement to CalMatters. It didn’t address the tribe’s dispute with Dodd.

In the end, Dodd co-authored legislation last year that prohibits new card rooms from opening in California for another 20 years. It had support from most card rooms and tribes. The warring gambling factions may not agree on which games card rooms should be allowed to offer, but both sides can agree that they don’t want any new gambling halls cutting into their revenues.

The Yocha Dehe tribe was a notable exception. The tribe testified that it opposed the bill because it allowed some smaller existing card rooms to expand the number of what it contends are illegal gaming tables. (Aguiar-Curry, the tribe’s close ally, cast the lone “no” vote in the Assembly.)

Dodd’s fight with the tribe could play a critical role in deciding the fate of the pending bill that would give tribes standing to sue card rooms, should SB 549 pass the Assembly.

He chairs the Senate’s Governmental Organization Committee, and he can decide whether to grant the bill a hearing. Dodd declined to comment for this story.

Leave a Reply

The Exedra comments section is an essential part of the site. The goal of our comments policy is to help ensure it is a vibrant yet civil space. To participate, we ask that Exedra commenters please provide a first and last name. Please note that comments expressing congratulations or condolences may be published without full names. (View our full Comments Policy.)

Your email address will not be published. Required fields are marked *