Seven California Tribes Sue California Card Rooms Over Banking Mechanisms for Card Games

By Heidi McNeil Staudenmaier and Caitlin Vanderkarr

Nearly one hundred (100) “[d]efendants brazenly profit from illegal gambling” in California, according to a legal complaint filed by seven (7) casino-owning Native American tribes in the Superior Court of California in Sacramento County on Wednesday, January 1, 2025.¹ This marks the first lawsuit filed subsequent to the Tribal Nations Access to Justice Act² (the TNAJA) taking effect that same day.

On September 28, 2024, Governor Gavin Newsom announced that he had signed the TNAJA, California Senate Bill 549, into law.³ Pursuant to the TNAJA, tribes now have standing to bring legal action before California courts regarding house-banked games, so long as the tribes do not seek financial damages, compensation, or attorney’s fees in their litigation.⁴ The plaintiffs, the Agua Caliente Band of Cahuilla Indians, Barona Band of Mission Indians, Pechanga Band of Indians, Sycuan Band of the Kumeyaay Nation, Viejas Band of Kumeyaay Indians, Yocha Dehe Wintun Nation, and Yuhaaviatam of San Manuel Nation,⁵ filed suit promptly against all ninety-six (96) card rooms in the state of California⁶ to enforce their exclusivity and obtain a ruling in their favor.

The tribes, through their lawsuit, claim that the TNAJA was enacted by the California legislature to “provide an efficient mechanism to ‘determine whether certain controlled games operated by California card clubs are illegal banking card games or legal controlled games, thereby resolving a decade-long dispute between California tribes and California card clubs’.”⁷

In California, card rooms may offer “player-banked card games and peer-to-peer” style games, including poker.⁸ Enter third-party proposition players (TPPs), contractors who sit at the table and act as a banker voluntarily, effectively muddying the waters between the player-banked style of card rooms and the house-banked style allowed only on tribal lands. These TPPs facilitated blackjack and baccarat games amongst other players, accepting the volatility that comes with banking such games in exchange for “vast profits”, according to the lawsuit.⁹

Although card rooms allow other players to act as a banker after a set number of hands has been played,¹⁰ the tribes argue that TPPs were functioning as a de facto bank for all hands in a game, paying the card rooms a fee for this privilege,¹¹ and providing other financial support (such as advertising funds and surveillance equipment) to card rooms,¹² to the tune of “millions of dollars annually.”¹³ According to the suit, these tribes view the TPP-card room relationships as akin to “gaming experiences that are indistinguishable from banked games in Nevada or New Jersey casinos,”¹⁴ effectively infringing upon tribal exclusivity in house-banked card games.

Tribes, however, have not been able to attain legal standing to bring legal claims against these “privately-owned gambling halls” due to their status as sovereign governments.¹⁵ The TNAJA provides this standing, but limits it to a three-month window beginning on January 1, 2025.¹⁶ This narrows the present legal action to a judicial decision of whether California card rooms can legally offer the games in dispute in the manner in which they are currently offered.

Per the lawsuit, the tribes are concerned that card rooms facilitating gaming experiences analogous to tribal casinos negatively impact tribal gaming revenues. Meanwhile, card room representatives feel they are “in full compliance with the law” and that tribes are trying to “shut down lawful competition”.¹⁷ Taxpayers also have an interest, albeit distant, as the outcome of this lawsuit could impact tax revenues from card rooms, which pay for “millions of dollars” of “city services”.¹⁸ Several cities, in fact, derive around 50 percent of their budgets from these tax revenues.¹⁹

The tribes argue that card rooms that do not mandate and enforce banker rotation among players should be found to be operating in violation of the law.²⁰ A ruling that finds optional rotations illegal could remove TPPs’ or limit their involvement, thus, as the tribes argue, preventing card rooms from circumventing tribal exclusivity.

Legal questions regarding tribal exclusivity and card rooms began in 1984, when the California Constitution, Section 19, Article IV, was amended by voters to require the California legislature to “prohibit[] casinos of the type currently operating in Nevada and New Jersey”.²¹ Subsequent to legal challenges thereto, the California Supreme Court held that casinos styled after Nevada and New Jersey typically include “banked table games[.]”²² According to the Court, banked games falling within this definition, thus operating illegally, include games that are “banked by someone other than the owner of the gambling facility.”²³

The only legal precedent specifically focusing on games substantially similar to the type of games at issue here is Oliver v. County of Los Angeles (1998), 66 Cal.App.4th 1397.²⁴ The tribes include that reference to assert, in that case, the Court ruled creating the potential for a rotating bank within the rules could constitute a player-banked game.²⁵ This legal challenge derived from the 1998 voter approval of Proposition 5, a measure allowing for a “Tribal-State Gaming Compact”.²⁶ After the passage of Proposition 5, a legal challenge was filed involving the definition of banked games and the use of player pools, wherein the Court provided that a “players’ pool is a bank in nature” because it is a “fund against which everybody has a right to bet, the bank . . . taking all that is won, and paying out all that is lost.”²⁷ The California Supreme Court thus invalidated Proposition 5 regarding casino gambling on the grounds that it violated “Penal Code section 330’s prohibition”, which the tribes argue, if applied to card rooms, should result in a declaration that such banked games are illegal.²⁸

This was not the end of the legal issue for banked games. In a 2000 constitutional amendment proposed by Governor Grey Davis, Proposition 1A, Californians effectively voted to exclusively provide tribes the right to offer Class III games, which include banked games, at their casinos on tribal lands.²⁹ These games include those in dispute here, blackjack, baccarat, and pai gow poker. The tribes claim that they compensate Californians through their contributions to the state via “fair cost reimbursement and mitigation” as consideration for this exclusive right,³⁰ and should be able to enforce such rights.³¹

In their lawsuit, the tribes also claim the California Penal Code, Section 330, prohibits all banked games, and has done so since 1872 pursuant to a ruling on the issue.³² The legal complaint states that a casino “banked” game is composed of a game where an entity (or one player) with “an odds-based advantage takes on all comers, pays all winners, and collects from all losers.”³³ Legal representation for the tribes asserts that tribal contributions to California amount to “tens of millions” of dollars annually, pursuant to the Compacts’ provision of exclusivity to the tribes.³⁴

The Agua Caliente Band of Cahuilla Indians, et al. v. Parkwest Bicycle Casino, et al. lawsuit highlights the tensions between privately-owned card rooms and tribes within California regarding gaming exclusivity. While privately-owned card rooms seek to maximize their profits and growth by expanding the way in which they offer card games, tribes seek to protect their exclusivity negotiated with the state in exchange for tribal payments to the state. The Court will face complex legal issues head-on, setting precedent and sending a message through the state of California that sets the tone for future gaming.