The Online Poker Report article “Tribes Take Shots At California Cardrooms, Regulators At Conference About Sports Betting, Expanded Gaming” includes misleading and inaccurate claims. The article reflects author/tribal advocate Dave Palermo’s ongoing efforts to disparage the California cardroom industry. Several sources quoted are affiliated with tribal interests and lack cardroom experience.
“American Indian tribes meeting last week in Southern California say they are ‘fed up’ with what they perceive to be the state’s inability to regulate cardrooms…”
Cardrooms are regulated by two state agencies, the Bureau of Gambling Control (“Bureau”) and the California Gambling Control Commission(“Commission”) and must adhere to all federal, state and local laws, including extensive regulations on all aspects of operations. Cardrooms are also subject to detailed local ordinances and additional licensing consideration and enforcement by local law enforcement agencies. No other segment of California’s gaming industry is as thoroughly monitored and regulated as the California card room industry.
Compared to tribal casinos, California cardrooms are subject to greater and public regulatory oversight including:
- Compliance with California’s Gambling Control Act and specific city/county gaming ordinances
- Public licensing and disciplinary hearings by the California Gambling Control Commission
- Compliance and enforcement actions by the California Department of Justice and local law enforcement
- State-mandated minimum internal control standards covering all aspects of operations
- Approval of game rules, advertising and promotions by the California Department of Justice
- Disclosure to and approval of capital investments and ownership changes by state and local regulators
- Required participation in statewide Responsible Gambling programs administered by regulators
- Payment of federal, state and local taxes, including specific state and local gaming taxes and fees
- Adherence to California minimum wage and other California labor laws
In contrast, tribal casinos are “self-regulated” in non-public forums and not subject to many of the items listed above. Given the lack of transparency, no source can claim that tribal casinos are better regulated than card rooms with any credibility. The sources that state otherwise in the article are tribal spokespeople.
“Tribes contend the cardrooms are violating provisions in the state constitution and tribal-state compacts giving the state’s 62 tribal government casinos the exclusive right to operate banked and percentage card games.”
California cardrooms do not offer banked or percentage card games. Instead, they offer games in which any player may serve as the player-dealer, i.e. wager on the dealer’s hand. Tribal interests have repeatedly insisted the practice is unlawful, citing their perceptions about such games. Oliver v. County of Los Angeles, (1998) 66 Cal.App.4 th 1397, 1409, the case often cited by tribal interests, does not state that the player-dealer position has to rotate every two hands nor does it define what amount of time is too long for the position to remain with one person. Following the Oliver case, the State Legislature passed Assembly Bill 1416 (2000) to clarify the issue. The statute confirmed that player-dealer games are legal under the Penal Code and the State Constitution, and the Legislature also provided for the licensing, contracts and regulation of third party companies to take the player-dealer position. Third party companies and their employee/players are licensed by the Commission and the contracts between third parties and card rooms are approved by the Bureau prior to implementation.
“Operators instead profit from financial arrangements with the TPPPs. They often sit at the games with stacks of chips totaling tens of thousands of dollars. State law prohibits cardrooms from having ‘any interest, whether direct or indirect, in funds wagered, lost or won.’”
It is lawful to have contracts between cardrooms and third-party players as mentioned in Fact #2 above. Those contracts are reviewed and approved by the Bureau prior to implementation. The California Legislature and state regulators have approved this arrangement. Furthermore, in California card rooms, all players have the opportunity to wager on the dealer’s hand, a practice not offered by tribal casinos.
“California law also requires that the dealer position be continuously and systemically rotated among the players. The deal is seldom, if ever, rotated in California/Asian games.”
State law and the decided cases involving player-dealer games have not defined what is meant by “continuous and systematically rotate”, and there is no statute, ruling or standard that states that “continuous and systematic” means “every hand.” The hour hand of a watch, holidays and celestial bodies can all be said to “rotate” in continuous and systematic fashion. Cardrooms do offer the player- dealer position to active players every two hands, an advantage to players not offered at tribal casinos.
Historically, tribal casinos operated player-dealer table games until 2000 when they were permitted house-banked games and slot machines. When tribal casinos offered player-dealer games, the player-dealer position rotated rarely (perhaps once a shoe), if at all.
“…And the cannibalization is no longer an insignificant issue. This is revenue being driven away from tribal gaming.”
The growth of tribal casinos in California has not been affected by cardrooms. Cardrooms only offer poker and table games, which make up a very small portion of tribal revenue (less than 10%); most of the tribal casino revenue is generated from slot machines. According to tribal sponsored studies, revenue at California tribal casinos grew by another eight percent and several California tribal casinos have recently completed multi-million dollar expansions. California tribal casino revenue exceeds $8.0 billion, which dwarfs the California cardroom industry revenue of about $1.5 billion.
“But the California cardroom industry has been the target of far more federal money laundering, skimming and loan-sharking raids than the nation’s nearly 1,000 tribal government and commercial casinos combined.”
California cardrooms must comply with all federal, state and local laws and have their disciplinary actions aired in a public forum. Cardrooms are also subject to the same criminal enforcement and civil litigation that all non-tribal businesses face. In contrast, tribal casinos frequently hide behind the claim of “sovereign immunity” to avoid public scrutiny. That said, tribal casinos in California have experienced their share of public scandal. Recent examples include:
- 2011: The former chairman of a Northern California tribe was sentenced for bribery and tax evasion related to the operation of that tribe’s casino.
- 2014: An armed confrontation between competing tribal factions of a tribal casino in Central California terrorized patrons and employees, resulting in the closure of that casino for fifteen months.
- 2016: Eleven people were arrested in connection with an undercover drug sting operation at another Central California tribal casino.
- 2017: Three casino executives of a Northern California tribal casino were charged with orchestrating a multi-million embezzlement scheme.
In addition, the IRS also devotes a full page on its website to the abuses and schemes identified by the Office of Indian Tribal Governments including but not limited to bribery, embezzlement and tax fraud.
Finally, with the growth in tribal gaming revenue in California, wealthy tribes have turned to tribal disenrollment as a means of concentrating the benefits of commercial gaming in the hands of fewer tribal members. In a GGB article, “Tribal Gaming’s Dirty Secret” in February 25, 2016, Professor David Wilkins of the University of Minnesota stated:
“The lack of transparency (among tribal governments) has made it difficult for us to verify exactly when disenrollments became an issue…But disenrollments didn’t really come into play until the early 1990s. That coincides with gaming…“The number of disenrolling tribes begins to increase as gaming revenues begin to increase…It’s about greed…”
“…The pattern of disenrollment in California is very different from tribes in other states. In California, you’ve got this massive spiral of disenrollments that’s been going on since the late 1990s.”
“Ray Patterson, gaming commissioner for the Yocha Dehe Wintun Nation, said he witnessed a ‘complete lack’ of internal operating controls in cardrooms he has visited. ‘When you look at the gaming industry in California, where’s the black eye?’ Crowell asked. ‘Where’s the corruption? Where’s the money laundering? It’s all in the cardrooms. The track record is pretty damn poor.'”
As stated above, California cardrooms and casinos in other states such as Nevada have more transparency and oversight than tribal casinos in the state. Cardrooms are subject to public licensing and disciplinary hearings by the California Gambling Control Commission as a part of the strict regulation and oversight by multiple federal, state and local agencies. Even Nevada gaming establishments must adhere to many regulations, oversight and transparency requirements. Due to their sovereignty, California tribal casinos operate with limited transparency.
With respect to internal controls, California cardrooms are subject to strict internal control standards which cover gaming operations, financial reporting, security and surveillance, player conduct, cage/count procedures, cash handling and the like. These controls are enforced by the Bureau of Gambling Control and failure to adhere to them can result in loss of licenses. In addition, cardrooms are subject to responsible gambling requirements and the same safety, emergency, food handling and harassment standards that all California businesses face. In contrast, tribal casinos, behind the cloak of “sovereign immunity”, are largely immune from outside regulatory oversight or the California legal system.
“But officials with the California Gaming Association and Communities for California Cardrooms, lobby groups representing the industry, decline to discuss the dispute over game rules.”
No attempt was made by the author to contact the California Gaming Association for comment on this article.
Sources in this article include multiple tribal advocates:
- Bo Mazzetti, Chairman of the Rincon Band of Luiseño Indians,
- Scott Crowell, Tribal attorney and operates a self-proclaimed “Tribal Advocacy Group”
- Steve Stallings, CNIGA Chairman and tribal council member of the Rincon Band of Luiseno Indians.
- Ray Patterson, Tribal Gaming Agency Executive Director (incorrectly identified as a “gaming commissioner for the Yocha Dehe Wintun Nation”)
- Dave Palermo, author of the article, free-lance reporter, posts articles on Pechanga.net and whose bio claims he is “…working as an advocate for several tribes and tribal associations.”