California Tribes Take Legal Action to Safeguard Their Gambling Turf Against Competitors

Following the enactment of a new statute on January 1, seven tribes with casino operations initiated a lawsuit in Sacramento County on Thursday against multiple California card rooms, marking the opening of a new chapter in one of last year’s priciest political conflicts.

Currently, significant amounts of tax income, which fund municipal services including law enforcement and road maintenance, may be at risk.

The tribes’ lawsuit asserts that the gambling establishments dispersed throughout California are unlawfully providing card games such as blackjack and pai gow poker, which diminish the tribes’ gambling profits.

“Defendants shamelessly benefit from unlawful gambling,” stated the tribes in the introduction of their complaint. A representative from the cardroom industry responded by affirming that the cardrooms are “fully abiding by the law.” “This effort by tribal casinos to eliminate legitimate competition by tax-compliant California enterprises will not succeed,” the statement continued.

The lawsuit would not have been feasible had Gov. Gavin Newsom not endorsed Senate Bill 549 in September. The tribes contend that California voters, years ago, granted them exclusive rights to host the contested table games, which they utilize to support historically marginalized tribal communities. However, as sovereign entities, the tribes previously lacked the legal capability to sue the approximately 80 privately-operated gambling facilities in the state.

The legislation provided tribes with a three-month timeframe to initiate lawsuits against card rooms beginning January 1. They filed their case on the very first day California courts resumed operations in the new year.

According to the bill, tribes are prohibited from collecting any financial compensation or legal fees stemming from the lawsuit. Rather, judges will solely determine whether card rooms will be allowed to continue offering the disputed games. The potential consequences are significant, as several municipalities derive nearly half of their budgets from taxes on cardrooms, implying that a tribal victory in court could threaten funding for police officers, firefighters, and other local services.

For instance, close to two-thirds of the budget for the small city of Hawaiian Gardens and nearly half for the city of Commerce, both located in Los Angeles County, are sourced from local card rooms.

San Jose City Councilmember Sergio Jimenez informed legislators in July that the city receives $30 million annually from card rooms—sufficient to support 150 police officers or 133 firefighters. Jimenez stated that this funding is endangered if the tribes ultimately succeed in court.

The card room sector maintains that the games are legitimate and that the attorney general’s office has authorized each of them through the years.

The lawsuit arises after tribes convinced lawmakers last year to pass SB 549 during one of the costliest political struggles of the two-year legislative session that concluded the previous summer. A bipartisan coalition of legislators, many representing districts with large tribal casinos, advocated for the gaming legislation, while a smaller group of legislators with cardrooms in their districts opposed it.

This followed a failed sports betting initiative in 2022, which the tribes expended millions to promote and included a similar provision that would have permitted the tribes to pursue legal action.

Conflicting gambling factions contributed at least $4.3 million to the 120 members of the Legislature since January 2023, as per the Digital Democracy database. In response to what they perceived as a critical threat, card rooms launched a massive lobbying initiative against SB 549’s introduction. In 2023, the Hawaiian Gardens Casino alone allocated $9.1 million on lobbying, marking the second-highest amount documented to state regulators, with only the multinational oil company, Chevron Corp., spending more.

Subsequently, even after losing the fight over SB 549, the cardroom industry expend more than $3 million leading up to the November elections in retaliation against four legislators who played vital roles in the bill’s endorsement.

Three candidates targeted by the card rooms ultimately lost, including the bill’s author, Democratic Sen. Josh Newman from Fullerton.