Do California cardrooms have a money-laundering problem?

Federal anti-money laundering mandates have become a top priority for gaming regulators across the nation. Since late 2023, Strip casinos in Las Vegas haven been engulfed in a far-reaching Anti-Money Laundering (AML) scandal that has cost the job of a prominent casino president and resulted in millions of dollars in fines to name-brand gaming operators, including, MGM, Caesars and Wynn.

Nevada regulators, fearful of federal interference, have been regularly preaching to the state’s casino operators to improve their compliance with the federal rules, which are designed to make it harder for drug traffickers, fraudsters and other criminals to wash their ill-gotten gains through casinos and other gaming establishments.

Other state gaming regulators have taken notice and have made improved AML compliance a focus. This summer, the California Gambling Control Commission received AML training. The head of California Attorney General’s Bureau of Gambling Control was in attendance, too.

Their interest in AML, however, goes beyond just the recent events in Nevada. California cardrooms historically have been among the worst violators of AML law, according to enforcement actions by FinCEN, the nation’s primary regulator of AML mandates.

Since 2000, FinCEN has brought only 15 enforcement actions against entities it classifies as casinos. Five of those actions were against California cardrooms, including the three most recent ones dating back to 2018.

The last two iterations of the U.S. National Money Laundering Risk Assessment from the U.S. Department of Treasury, published in 2024 and 2026, listed violations by California cardrooms as case examples.

“Card clubs are at least as vulnerable to use by money launderers as other gaming establishments, both because of their size and because those institutions often lack the controls found at casinos,” said former FinCEN Director Stanley Morris in 1998 when the agency issued a file rule extending AML regulations to “card club establishments,” which were identified as being “(m)ost frequently found in California.”

A statewide turf war
In California, cardrooms are unique establishments that harken back to the Gold Rush era when legislators were worried that minors on the frontier would get hustled by sharp gaming operators. State law explicitly bans these facilities from offering banked games like Blackjack and Baccarat, where gamblers wager against the house.

For much of California’s history, cardrooms were the state’s principal casino-style gaming establishments, although they technically operate differently than Vegas casinos. Several like the Commerce Casino and Gardens Casino in the Los Angeles area market themselves today as casinos, with the sort of glitz you might expect from Sin City.

In 2000, however, the cardrooms’ world was turned upside down when state voters approved Proposition 1A, authorizing tribal gaming in California. That ballot measure gave Native American casinos the exclusive right in the Golden State to offer banked games like the Vegas operators.

Since then, tribal gaming operators and cardrooms have been engaged in a statewide turf war for customers.

In December 2007, an obscure state official named Bob Lytle reinterpreted state law to allow cardrooms to offer variations of traditionally banked game

California cardrooms historically have been among the worst violators of AML law, according to enforcement actions by FinCEN, the nation’s primary regulator of AML mandates.

The tribes said this practice violated the will of the voters and tried to challenge it in court. But judges previously ruled that as sovereign nations they don’t have the standing to bring a lawsuit.

Last legislative cycle, former State Sen. Josh Newman authored SB 549, which sought to rectify the situation by granting the tribes special one-time access to state court to sue over just this one specific issue.

Gov. Gavin Newsom signed that bill into law in September 2024, and the tribes filed a lawsuit as soon as they were able to. But a Sacramento Superior Court judge dismissed the tribes’ suit in October 2025, arguing that the federal Indian Gaming Regulatory Act or IGRA preempts the will of the Legislature and governor.

The tribes are expected to appeal that ruling soon, but in the meantime California Attorney General Rob Bonta issued regulations in February limit both the blackjack-style games cardrooms may offer and the operations of third-party proposition players or TPPPs, which are special, licensed businesses that help cardrooms offer their alternate versions of banked games.

In June, a San Francisco judge also blocked implementation of those new cardroom regs. The state office is expected to appeal that ruling as well.

Inadequate oversight
The tribes have pointed to the cardrooms’ poor AML record as evidence that their rivals are shoddy operators. FinCEN’s enforcement actions document repeated failures by cardrooms to abide by the most basic AML standards.

For example, FinCEN in 2016 found that Hawaiian Gardens Casino — now known as The Gardens Casino — repeatedly failed to ascertain the identities of patrons who engaged in cash transactions.

In fact, FinCEN said that IRS examiners discovered that 62 percent of cash transactions in multiple logs involved unknown patrons. One of those patrons, according to FinCEN, was a woman known only to the cardroom staff by the alias Michelle. FinCEN said Michelle used other people to split or try to split large cash transactions into small amounts to avoid detection, which is a violation of the law.

Still, on 20 occasions, FinCEN said that the cardroom determined that Michelle’s actions required reporting to the federal government. Five times, the cardroom filed currency transaction reports or CTRs when Michelle was involved in cash transactions exceeding $10,000 in a single day. Fifteen other times, the cardroom filed suspicious activity reports or SARs when its staff spotted strange or potentially illegal transactions.

But the cardroom never actually figured out who Michelle was. FinCEN said that at least three times in 2013 cardroom staff asked Michelle for identification, but she refused to give it. Nonetheless, the cardroom continued to allow Michelle to gamble.

When IRS examiners later confronted the cardroom about this breach in AML standards, management said “they did not believe they were required to bar patrons who refuse to provide identification and that doing this would cause them to lose customers to other card clubs in the area,” according to FinCEN.

Loan sharking and RICO
It’s unclear from the FinCEN documents if Michelle was ever connected to any crimes, let alone what her true identity was. But the agency said that AML lapses by two other cardrooms helped facilitate loan sharking and racketeering.

Following a March 2011 raid of the Oaks Card Club in Emeryville, the United States Attorney for the Northern District of California charged employees and patrons of the cardroom for making illegal loans on the premises.

The cardroom itself and its owners were not charged, but two cardroom employees pled guilty to two counts related to illegal loans and a third pled guilty to RCIO conspiracy. FinCEN found nine times in 2009 and 2010 when the cardroom should have filed suspicious activity reports but didn’t, including instances when cardroom employees who pled guilty to making illegal loans to customers circumvented Bank Secrecy Act recordkeeping and reporting requirements.

Also in 2011, Artichoke Joe’s, a cardroom in San Bruno, was raided by state and federal law enforcement, which lead to the racketeering indictment and conviction of two patrons for loan sharking at the cardroom. FinCEN bluntly accused Artichoke Joe’s of turning a blind eye to “flagrant criminal activity that occurred in plain sight.”

FinCEN originally brought an enforcement action against Artichoke Joe’s for AML failures tied to this case in 2017, then rescinded that action and issued a new one involving the same facts in 2018. The most recent FinCEN case against a cardroom — indeed against any entity it considers a casino — was in 2024 when it brought an enforcement action targeting the Lake Elsinore Hotel and Casino.

FinCEN found that the cardroom, the smallest one penalized by the federal government, had laughably inaccurate policies that caused it to fail to file any suspicious activity reports from September 2014 until a Bureau of Gambling Control examination in 2017.

According to FinCEN, a policy document designed for use by the cardroom’s cage, dated January 2005, said that “suspicious transaction reporting will eventually make it into the regulation,” and suspicious activity reports are “not mandatory in the casino environment yet.” Casinos and cardrooms were required to report suspicious activities beginning on March 25, 2003.

FinCEN said its investigation of the cardroom uncovered dozens of unreported instances in 2016 alone in which patrons illegally split transactions, as Michelle did, or bought chips, carried them around without gambling and then cashed out — a major AML red flag.

‘The laughingstock of the world’
FinCEN only fined Oaks and Lake Elsinore $650,000 and $900,000, respectively. The agency was more heavy handed with The Gardens Casino, fining it $2.8 million, and with Artichoke Joe’s, fining it $8 million, but suspending $3 million of the penalty pending the cardroom’s compliance with making FinCEN-required changes to its operations.

There’s no evidence to suggest that Artichoke Joe’s didn’t comply with FinCEN’s requirements, but Capitol Weekly was unable to confirm that happened because neither the cardroom nor the agency responded to a request for comment.

Also not responding to requests for comment: the other cardrooms named in this story and the attorney general’s office.

Victor Rocha, the influential conference chair of the Indian Gaming Association who is frequently quoted on California gaming issues, said he thinks AML issues persist at cardrooms because state regulators go easy on them.

“California is the laughingstock of the world when it comes to AML,” he said. “You don’t have to Google search much to see how far they go back. Again and again and again and again. When they do get busted it’s great and welcome. And they do. But this seems to be far and in between.”

Kyle Kirkland, president of the California Gaming Association, which represents cardrooms, offered a different perspective.

“California cardrooms operate under extensive, transparent federal, state and local laws and regulations including the Title 31/Bank Secrecy Act Anti-Money Laundering requirements that apply to casinos and financial institutions,” he said in a prepared statement for Capitol Weekly. “As part of their compliance obligations, cardrooms work with regulators to identify and report actionable items, implement training and reporting and are subject to independent review by local, state and federal agencies operating in public forums.

“In contrast to independently regulated cardrooms, tribal casinos are largely self-regulated, resist independent oversight and enforcement and limit the public’s access to regulatory actions, if any.  An honest comparison of regulatory compliance between the two gaming segments should account for this difference and the public’s limited visibility into regulatory and enforcement activity at tribal casinos.”