California Tribes Formally Sue Card Room Rivals Over Gambling

We knew this day of reckoning was coming — the day that California tribes dropped a lawsuit on the head of card rooms across the state. The day ended up being January 3, which makes sense.

You see, in September 2024, Governor Gavin Newsom officially signed into law Senate Bill 549. Thanks to the new law, tribes can file suits against gambling venues they don’t operate (they previously weren’t allowed to do so) starting in 2025. The law gave them until April 1 of this year to bring a lawsuit forward. Obviously, they didn’t wait long to do so (a whole three days).

So what’s the issue? Well, no surprise, it’s about who can and can’t offer betting inside the state. The lawsuit could potentially upend the balance of power in the Golden State’s gambling sector. Let’s bring you up to speed in case you’ve been living under a rock these last few months.

7 Tribes Bring Forward Lawsuits

Here’s the thing about California’s betting scene: it’s complicated. Very complicated actually. That’s because there’s not one tribe that’s the go-to for the industry like betting in Florida, for instance. Not even close. There are dozens upon dozens of them. When there are that many stakeholders — and billions of dollars at stake — it’s hard to reach consensus agreements.

Still, seven of those tribes came forward on January 3 with lawsuits in hand. They brought the suit to Sacramento County against dozens of card rooms up and down the state. The crime? Tribes allege that the card rooms are illegally operating gambling venues.

“Defendants brazenly profit from illegal gambling,” the tribes said in the opening line of the lawsuit.

In the 2000s, California voters overwhelmingly passed Proposition 1A. This gave tribes the exclusive rights to offer casino gaming inside the state. The proposition put a giant hole in Nevada’s betting industry, as locals flocked to the neighboring state to gamble. Card rooms, though, offer table games — not slots — and the tribes have taken issue with it.

The tribes wanted to end card rooms ages ago but weren’t allowed until Senate Bill 549 passed. Getting that bill through the front door took gaudy sums of money from the tribes, but they think it’s worth it. If you look at the numbers, they might have a point as we’ll explain next:

What’s At Stake In California Betting Battle

Yes, there are hundreds of millions in casino revenue at stake here. Who gets what from that — the tribes or card rooms — will be decided by the courts. But that’s only staffing the surface. The ramifications of this lawsuit will affect everyday folks of California, whether they bet or not.

Understand this: city governments tax card rooms, and a lot too. In many California cities, about half of the local government budget — the same money that’s used to pay police or firefighters — comes directly from these card-room taxes.

Don’t believe us? We got the numbers right here. Nearly two-thirds of Hawaiian Gardens’ budget and nearly half of Commerce’s — both small cities in Los Angeles County — come from local card rooms. In San Jose, City Councilmember Sergio Jimenez told lawmakers that card rooms generate $30 million annually, funding the equivalent of 150 police officers or 133 firefighters.

If the card rooms lose and that tax money goes poof, the fallout will be felt by the whole state. Perhaps many of these public services will get slashed, though with the current Los Angeles fires, the optics of that would be bad (cities want more firefighters, not less). More realistically, city governments will have to pass new taxes to make up the revenue. If that’s the case, then it’s fair to wonder how much more Californians can tolerate given how high tax rates already are.

Card Rooms Obliging (For Now)

Let’s shift perspective over to the card rooms themselves — which predated tribal casinos by decades. Just as the tribes feel, they too feel their rights are being infringed upon. Thus, don’t expect them to “go quietly into the night.”

In the card room’s eyes, they are doing no wrong by offering table games to Californians. What about Proposition 1A, you ask? Well, card rooms have bypassed the compact using TPPPS (Third-Party Providers of Proposition Players). The card rooms enacted this system in 2007. Under it, independent companies licensed by the state play as the “bank” or “house” in card games — not the card rooms themselves. Everyday players typically don’t have the funds or want to act as the bank, thus TPPPS step in. As it stands, there are currently 23 licensed TPPPS providers.

Card rooms argue TPPPs are perfectly legal because the providers are financially independent. This separation means there are no house-banking games, which is what’s directly outlawed in Proposition 1A. The tribes who’ve brought forward lawsuits disagree obviously.

Now it’s on judges to decide who’s in the wrong and who’s in the right. That’s all the courts can do as the Senate bill said no financial compensation can be awarded from any suits — only a decision on whether card rooms can legally operate or not.