Judge Gives Life to Bid by Porn Mogul to End California Gambling Restrictions

Odds shifted toward the Hustler Magazine founder after a federal judge signals a California organized crime law is stale and perhaps unconstitutional.

Larry Flynt at a Free Speech Coalition event in Los Angeles, Calif., on Nov. 14, 2009. Photo by Glenn Francis, www.PacificProDigital.com.

SACRAMENTO, Calif. (CN) — Tilting the odds in Larry Flynt’s favor Thursday, a federal judge gave life to the porn mogul’s fight to oust a California law that’s preventing the expansion of his gambling industry portfolio.

U.S. District Judge John Mendez denied the state’s attempt to dismiss the entire case, saying the broad enforcement of the anti-organized crime bill could amount to regulation of interstate commerce.  

Enacted in 1986 by wary lawmakers hoping to keep the mob from opening legal cardrooms in the Golden State, the law prevents Californians holding gaming licenses from investing in out-of-state casinos.

But Flynt, who owns Hustler Casino and Larry Flynt’s Luck Lady Casino in Southern California, says the times have changed and organized crime groups no longer have a grasp on Nevada casinos or the gambling industry as a whole. With states collecting billions in taxes annually from legal casinos, Flynt and his co-plaintiffs argue California is needlessly preventing them from investing in the nationwide gambling boom that’s sprouted over the last few decades.

Flynt says the law is not only outdated but unconstitutional, as he’s missed out on various investment opportunities over the years. Furthermore, he argues the state could force him to divest from his nongambling businesses — such as his strip clubs — if one of his business partners simply opens an out-of-state casino.

In a 12-page ruling, Mendez says the rule Flynt calls “archaic” deserves a deeper look.

“Defendants again fail to illustrate how these allegations are insufficient as a matter of law,” Mendez said in denying the state’s motion.

Flynt and father-son co-plaintiffs Haig Kelegian Sr. and Jr. sued the state in 2016 shortly after it fined Kelegian Jr. for his ownership in an out-of-state casino. In order to renew the licenses at his two California cardrooms, Kelegian Jr. was forced to sell off his out-of-state holdings.

Mendez initially found the plaintiffs’ claims were filed outside the statute of limitations, but the Ninth Circuit disagreed and kicked it back to the Eastern District of California.

In court papers, Flynt argued the state is no longer worried about the mob’s interest in cardrooms and highlighted the fact regulators have issued exemptions to the law in recent years.

The plaintiffs do not seek punitive damages but want the court to find the law unconstitutional. They are represented by Paul Cambria Jr. with Lipsitz Green Scime Cambria.

Mendez, a George W. Bush appointee, said due to the lack of case law on the statute and “unhelpful” legislative history, he is forced to take a broad interpretation of the law and not the narrow view argued by the state.

“This could, theoretically, prohibit a licensee from forming a business partnership, unrelated to gambling, with a person who has interests in a casino,” Mendez said in a nod to plaintiffs’ argument.

Neither side responded to a request for comment late Thursday.

The legislation in question not only prevents residents with California gaming licenses from investing in outside casinos, it bars out-of-state residents who own gambling activities from obtaining California cardroom licenses.

More recently in 2016, then-Governor Jerry Brown vetoed a bill that would have exempted the owners of Hollywood Park Casino from the gambling law. But in the veto message, Brown said lawmakers should “thoughtfully examine those laws and amend them so that all participants in the industry receive the same benefits and opportunities.”

While Mendez allowed plaintiffs’ indirect regulation of interstate commerce claim to continue, he did dismiss with prejudice the remaining two interstate commerce arguments.

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