California busts on new blackjack regulations for cardrooms

SAN FRANCISCO (CN) — A California judge delivered a victory to California cardrooms Tuesday, ruling against the implementation of sweeping changes that would have prohibited traditional blackjack and placed other restrictions on table games popular in cardrooms.

Ruling from the bench, San Francisco Superior Court Judge Richard Darwin sided with the California Gaming Association to find the state Bureau of Gambling Control acted beyond its authority when it issued the new rules.

“The bureau did not have the authority to issue statewide regulations,” the judge said in a ruling from the bench.

Darwin’s ruling means cardrooms can continue offering traditional blackjack and other table games that cardroom advocates say make up a large swath of the industry.

“We really appreciate the judge seeing it as we saw it in our papers, and that was that the bureau overreached in this effort. It’s a significant win, not only for the cardroom industry, but for all the cities and people and everyone that relies on us, so we’re obviously very pleased with it,” Kyle Kirkland, president of the California Gaming Association, told Courthouse News after the hearing.

The rule changes — issued by the state Bureau of Gambling Control and approved by the state Office of Administrative Law earlier this year — were supposed to go into effect on April 1, but were not expected to be enforced until June 1.

Darwin temporarily blocked California officials from enforcing the new rules in May, finding that the Gambling Control Act didn’t give the bureau the power to make such rule changes.

Attorney Jeremy Kreisberg of Munger, Tolles & Olson, representing the California Gaming Association, argued Tuesday that the bureau had the power to approve games individually, but did not have the authority to prohibit games from cardrooms categorically. That power, he said, lawmakers gave to the California Gambling Control Commission.

Members of the commission are appointed by the governor and confirmed by the state Senate. The bureau falls under the purview of the Justice Department, which is controlled by the attorney general.

“In our view, it could not be clearer that the power to set gaming standards statewide and categorically prohibit games statewide is a power the act gives to the commission,” Kreisberg said.

Kreisberg further argued that the legislature placed specific limits on the commission when issuing categorical game prohibitions, but not the bureau, because only the commission had the authority to issue such rules.

“To reach categorical game prohibitions … would allow the bureau to encroach on the ability given to the commission,” he said.

However, attorney Sharon O’Grady, representing the California Attorney General’s office, argued that it’s the bureau, not the commission, that has primary authority to control games.

“The bureau has been regulating game activity since 1999 and has actively tried to implement these restrictions for 10 years,” she said. “The idea that the commission is responsible is not in the legislative history.”

O’Grady told the judge that the Department of Justice is responsible for enforcing controlled gambling in the state, and the bureau has the power to regulate the games and implement the penal code. She categorized the new rules as “implementation regulations, not policy-setting regulations.”

“While the bureau has prosecutorial functions and the commission has adjudicatory functions, both have regulatory functions,” she said.

In a statement after the ruling, a spokesperson for the California Attorney General’s office said they were disappointed in the court’s ruling and were reviewing their options.

Similarly, the judge and Kirkland echoed the belief that the ruling will be further litigated on appeal.

“We all expect this to go up; it’s an important issue,” Darwin said.

“We realize that this could go on and be appealed; there are other aspects of the case that still need to be addressed. So, we’re taking a little victory today. We’ll enjoy this, heave a sigh of relief,” Kirkland said.

The new rules would have upended blackjack-style games, which are considered player-dealer games under California law for cardrooms. Under the proposed regulations, cardroom players couldn’t “bust.” Instead, the winner of a hand was determined by which player had the most points toward the target point count, when compared to the player-dealer.

Also, receiving an ace card along with a 10, jack, queen or king no longer meant an automatic win.

“Game names shall not include the number 21 or the word ‘blackjack,’” the proposed regulations state.

The regulations would have additionally imposed more restrictions on the role of the player-dealer. It’s a position that must be offered to other players at the start of every hand. Also, the position must rotate to at least two other players every 40 minutes or the game ends.

Additionally, a third-party provider of proposition player services — entities that operate as the casino bank under current rules — cannot serve as the player-dealer consecutively.

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