California CardRooms

Inside the Yocha Dehe / Viejas / Sycuan Lawsuit vs California, Targeting Cardrooms

It’s deep dive time here at Flushdraw, with a thorough look inside the lawsuit recently filed by three California tribal nations against the State of California that seeks to end the offering of all house-banked games at California’s many regulated cardrooms. The lawsuit, filed by the Yocha Dehe Wintun Nation, the Viejas Band of Kumeyaay Indians, and the Sycuan Band of the Kumeyaay Indians, names outgoing CA Governor Jerry Brown and the State of California itself as defendants.

The lawsuit’s real target, though, are the roughly 87 licensed California cardrooms that the tribes have alleged are violating California law by offering house-banked card games, meaning blackjack, pai gow, baccarat, or anything other than poker. The topic has simmered for the past several years. Last November two other tribal nations, southern California’s Rincon Band of Luiseño Indians and Santa Ynez Band of Chumash Indians, filed a similarly themed action in San Diego County Circuit Court, also alleging that the cardroom’s house-banked card games violate California gambling law and the state’s gaming contracts with its casino-operating tribal nations.

The stakes are significant. Should the card rooms be forced to cease offering these other card games, the rooms would lose, overnight, a major share of their revenue, while the tribal casinos would regain exclusivity over a gambling niche they believe they’e been solely entitled to all along.

The Yocha Dehe / Viejas / Sycuan lawsuit “asks the Court to require the State to uphold California law and fulfill its legal duty to California voters and contractual obligations to sovereign Indian nations.” The filing consists of a 38-page complaint containing myriad allegations, along with a 114-page collection of case exhibits asserting the continuing violation of the state’s ban against house-backed games, achieved through what the complaint calls “an ingenious four-prong system” designed to evade the real intent of the ban.

Among those prongs are the ongoing use of third-party prop players, or TPPs, to serve as the representative of the house and also serve as the dealer of the game in almost all instances. (The third-party prop player, given the ingrained house edge, then shares a contracted version of his profits with the house, though in an obfuscated matter.) The complaint also spends significant time on the “infamous Lytle Letter” of late 2007. The letter, written by Robert Lytle, then the Director of California’s Division of Gambling Control, changed the previous rule on the dealer position in card games being mandated to rotate from seat to seat, to instead “being offered” to all true player seats, with the presumption that the the non-TPP players had better leave the dealer position and the house edge with the prop player who actually serves as the “dealer” for virtually every hand.

Lytle resigned his position as Director soon after issuing the letter, and he went to work for San Jose’s Casino M8trix cardroom, which took advantage of the rule interpretations to expand their game offerings. Lytle was eventually stripped of his own California gambling license after a court found he had acted in his own interest, rather than the state’s, yet the rule changes he championed, according to the state, were still allowed to stand. Though not stated directly, the tribes’ complaint insinuates that the state didn’t want to curtail the enhanced revenue stream created by the cardrooms’ banked-games workaround, making the state complicit as well in violating the exclusivity included in the tribes’ ongoing gaming compacts.

It’s also worth that the complaint reiterates these tribes’ position that the whole dealer-rotation thing doesn’t matter; they assert that the games themselves are illegal under California law. The complaint also brings in references to some of the variations on blackjack created by California cardrooms, such as the variations on “blackjack” offered by many of the rooms. Those include “21st Century Blackjack” and “Pure 21.5 Blackjack,” the latter a Bureau-approved variant in which tens and face cards count as 10.5 (rather than 10) when dealt with an ace.

Yet the bulk of the vindictive in the complaint is saved for the state itself, in the form of the current iteration of the former Division, the Bureau of Gambling Control, which works with the California Gambling Control Commission to oversee virtually all gambling in the Golden State. The Bureau, according to the tribe — and in particular, since 2012 — has paid lip service to various tribal complaints about the banked games and the collection schemes while actually taking steps to make the games even more blatantly illegal in the tribes’ view. According the complaint, “The Bureau has officially enabled and sanctioned the cardrooms’ play of plainly illegal banked games.”

Neither any of the potentially impacted cardrooms or the state itself have commented on the lawsuit, which was filed in the US District Court for the Eastern District of California.

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