Cities prepare for the impact of new cardroom regulations

The president of the California Gaming Association warned last month that new state regulations restricting the ability of cardrooms to offer their most popular table games would “wipe out a critical source of revenue for dozens of cities.”

Some California city leaders have adopted similarly apocalyptic messages in light of the new rules. But not all cardroom cities are treating them as a crisis, or even as a minor concern.

Attorney General Rob Bonta announced the new regulations in February amid mounting pressure from the state’s gaming tribes, who have long maintained that cardrooms are offering games in violation of the law.

Under Proposition 1A approved by voters in 2000, tribal casino have the exclusive right in California to offer so-called banked games like blackjack and baccarat, where gamblers wager against the house.

Cardrooms are explicitly prohibited under state law from offering banked games. But for nearly two decades state regulators have allowed them to offer variations of the games in cooperation with third-party proposition players or TPPPs, which are special businesses that operate within cardrooms.

TPPP employees offer to act as the house or bank at every table where quasi-banked games are played. Before a dealer deals a hand of blackjack-style games, he or she offers all of the players at the table the opportunity to serve for a hand or two as the house or bank.

Most gamblers don’t have the means to cover that kind of action. But TPPP equip their employees with a bankroll to do just that. Their presence facilitates the banking of blackjack-style games in cardrooms where the house is barred from wagering against its customers.

Bonta’s new regulations would seem to spell an end to that arcane workaround, limiting both cardrooms’ ability to offer blackjack-style games and TPPPs’ ability to bank every hand in a game. Combined, the two new regulations will require cardrooms to dramatically rethink the most popular and profitable games they offer.

The state’s own economic assessment of the regulations projects that they could result in the loss of hundreds of millions of dollars in revenue for cities as well as hundreds of jobs in California’s cardroom/TPPP sector, which was estimated in 2019 to have a total annual economic impact of $5.6 billion annually, per a report commissioned by the California Gaming Association, which represents the cardroom industry.

Several California cities rely on cardroom revenue to balance their budgets. When the regulations were under consideration in 2023, representatives of the cities of Bell, Bell Gardens, Colma, Commerce, Compton, Cudahy, Gardena, Hawaiian Gardens, Inglewood and San Jose all sent letters saying how devastating they would be.

The state’s own economic assessment of the regulations projects that they could result in the loss of hundreds of millions of dollars in revenue for cities as well as hundreds of jobs in California’s cardroom/TPPP sector, which was estimated in 2019 to have a total annual economic impact of $5.6 billion annually.

In recent weeks, Commerce and Bell Gardens made headlines after they declared fiscal emergencies in response to the regulations. Leaders in both cities have put measures on the June 2026 ballot asking residents to approve ¼-cent sales tax increase to address expected shortfalls.

Commerce and Bell Gardens are home to two of the three largest cardrooms in California –Commerce Casino and Parkwest Bicycle Casino, which are authorized for 374 and 250 tables, respectively.

But there are dozens of other California cities with cardrooms and while leaders in some of those places say they are deeply concerned about the new regulations, others say the new rules won’t affect their budgets at all.

Cardroom advocates project big trouble
Several cardrooms and TPPPs, led by the California Gaming Association, filed lawsuits challenging the state’s new regulations in early March.

They’ve also asked for preliminary injunctions to stop implementation of the regulations, which took effect on April 1, but cardrooms don’t have to submit their compliance plans until May 31.

That will represent the cardrooms’ next opportunity to make their case about regulations. From the moment they were announced, the president of the California Gaming Association has been sounding the alarm. His rhetoric only grew darker when the lawsuits were filed.

“Attorney General Bonta’s regulations threaten to eliminate more than half of California’s cardroom jobs,” said Kyle Kirkland in a March press release where he also issuing his warning about them wiping out revenue for cities. “These games have operated legally for decades under multiple Attorneys General, yet one public official is now moving to shut them down without identifying a single public safety concern or addressing the 1,764 public comments about these regulations.

“Our industry repeatedly raised legal and economic concerns throughout the rulemaking process, but the Attorney General refused to engage with the communities and working families who will be harmed. We are asking the court to stop these unlawful regulations before they wipe out thousands of jobs and put many local economies into fiscal distress across California.”

Helen Fisicaro, vice mayor of the town of Colma, said leaders of the small San Mateo County community are concerned about effect the new regulations will have on their cardroom, the Lucky Chances Casino, the sixth largest in the state, with 60 authorized tables.

We are asking the court to stop these unlawful regulations before they wipe out thousands of jobs and put many local economies into fiscal distress across California

Fisicaro said Lucky Chances employs nearly 600 people and acts as an “economic engine” for the small community of about 1,700 residents. She said the cardroom opened in Colma a few years after she first joined the Colma City Council in 1994 and she’s seen firsthand the stabilizing effect it’s had on the town.

“Lucky Chances has become a fixture in our community,” Fisicaro said, noting the cardroom donates to local charities and provides economic aid to students and adults and that its facility serves as a meeting place in a town known largely for its cemeteries. “They’re really a good community corporation,” she said.

Fisicaro said tax revenue from Lucky Chances accounts for more than 15 percent of Colma’s annual budget. She said she’s unclear if the new regulations could cause Lucky Chances to go out of business or merely cut back but believes a significant change in its operations will have “immediate consequences” for Colma.

“Why can’t we all just operate?” Fisicaro asked. Colma has no tribal casinos nearby, she said. “Let’s share,” she said. “Let’s not be hogging what’s out there.”

Colma is member of one of two joint-powers authorities in the state established to advocate for cities where cardrooms are located. Colma’s JPA, California Cities Gaming Authority, headed by former assemblymember Rudy Bermudez, also represents Gardena and Inglewood, which are home to three other major cardrooms.

Hustler Casino and Larry Flynt’s Lucky Lady Casino, both in Gardena, are authorized for 91 and 50 tables, respectively, while the Hollywood Park Casino in Inglewood is authorized for 75.

The other JPA, California Cities for Self-Reliance, represents the cities with the three largest cardrooms in California, Commerce, Bell Gardens and Hawaiian Gardens, as well as Compton.

The Gardens Casino in Hawaiian Gardens is tied with Commerce Casino for the largest in California by number of authorized tables while Compton’s Crystal Casino is the state’s 14th largest cardroom with 42 authorized.

Both JPAs have mobilized to defend the cardrooms in their member cities.

“The impact it would have on community is just devastating,” said Juan Garza, executive director of California Cities for Self-Reliance.

Varying responses from cardroom cities
Seventy-eight cardrooms are currently authorized in 64 California cities. Twenty-three of those cardrooms, however, are not active.

That leaves 47 California cities with at least one operating cardroom. Six have two: Chico, Citrus Heights, Gardena, Livermore, San Jose and Stockton (with Stockton also having one authorized casino not operating). Sacramento has three.

Folsom and Madera, two of 17 cities with one or more authorized cardrooms but no operating ones, are not considering any cuts directly related to the new regulations, representatives told Capitol Weekly.

The finance directors for Napa and Gilroy, home to two mid-sized, active cardrooms (the Napa Valley Casino, authorized for 16, and the Garlic City Club, authorized for 12) both said that the new regulations will have no impact on their city budgets.

Rancho Cordova’s Michelle Mingay, the assistant director of administrative services-finance, said the city is closely monitoring the fiscal impact of the new cardroom regulations and considering whether future revenue projections may need to be adjusted.

But she noted that while cardroom activity generates revenue for Rancho Cordova, it is not a significant source for its the General Fund and the city hasn’t identified any budget cuts tied to the regulations.

Two cardrooms are authorized in Rancho Cordova: the active Parkwest Casino Cordova, authorized for 11 tables, and the Epoch Casino, authorized for 10 tables, but closed since 2024.

A spokesperson for the Bay Area city of Hayward said that city leaders “aren’t anticipating any budget impacts at this time because we are not aware of how pending regulatory or legislative changes would impact card rooms in Hayward.”

Hayward’s cardroom Palace Poker Casino is authorized for 13 tables. The city spokesman said that Hayward receives annually from Palace Poker:

• $2,861 in business license tax revenue,
• $214,643 in card club permit revenue and
• $188,116 in parking mitigation fees

for a total annual take of $405,620.

Also unclear on the potential impact of the regulations are city leaders in Stockton.

Representatives of the NorCal cities of Livermore and Lodi both told Capitol Weekly their leaders are still assessing the potential implications of regulations. The public information officer for Lodi added that its cardroom, Parkwest Casino Lodi, generates revenue that supports the city’s General Fund.

“Like many local jurisdictions, we are experiencing fiscal pressures due to rising costs and increased service demands,” Lodi spokesperson Nancy Sarieh said. “While no specific reductions have been identified, adjustments will likely be needed to align revenues with expenditures.”

Parkwest Casino Lodi is authorized for 15 tables. Livermore’s two cardrooms, Parkwest Casino 580 and Livermore Casino, are authorized for 16 and nine tables, respectively.

The six active Parkwest Casino-brand cardrooms in California (Parkwest Bicycle Casino in Bell Gardens, Parkwest Casino 580, Parkwest Casino Cordova, Parkwest Casino Lodi, Parkwest Casino Lotus in Sacramento, Parkwest Casino Manteca) are all owned by an obscure but apparently well-heeled businessperson named John Hee-Jong Park and others. A seventh Parkwest Casino, in Somona, is authorized but not operating.

Of the cardroom cities that responded to Capitol Weekly inquiries about the new regulations, one of the most vocally opposed was San Jose, where two of the state’s largest cardrooms are located. Its cardrooms, Bay 101 and Casino M8trix are tied for 11th largest in the state, with both authorized for 49 tables.

After Bonta announced the new regulations in February, but before the cardrooms filed their lawsuits in March, city leaders called on the California Department of Justice to rescind the regulations three times, in a February 18 meeting with the governor’s office and legislators and in letters dated February 19 and March 3.

“A substantial loss of revenue and economic activity for the City’s cardrooms would jeopardize thousands of jobs across the state and necessitate painful cuts to the City’s budget, thereby reducing our capacity to fulfill the Governor’s priorities in homelessness, housing, and public safety, among other core public services,” wrote Emily Lam, director of the San Jose City Manager’s Office of Administration, Policy, and Intergovernmental Relations, in the first letter.

“If enacted, these regulations will inflict a direct and devastating financial blow to the City of San José – an estimated $32 million annual hit to our General Fund,” wrote Mayor Matt Mahan and four city councilmembers in the second letter.

A San Jose General Fund forecast estimates cardroom business tax receipts of $31 million for 2025-26, slightly above the prior year’s actual $30.6 million. But, it adds, “If the regulations are implemented as currently outlined and the cardrooms and/or customers do not transition to other gameplay, according to cardroom representatives, the Cardroom Business Tax revenue could potentially decrease up to 85% ($25 million) beginning in 2026-2027.”

If that happens, the forecast says, San Jose will have to dip into its rainy day fund.

A looming fight
Yolanda Morrow, director of DOJ’s Bureau of Gaming Control responded to San Jose’s first letter with a two-page letter of her own that simply recounted the process it used to approve the regulations.

“DOJ adopted these regulations in accordance with the Administrative Procedure Act (APA),” Morrow wrote on behalf of the AG. “The Office of Administrative Law formally approved these regulations, pursuant to the APA.”

Of course, the cardrooms’ pending preliminary injunctions and lawsuits have something to say about the legality of regulations. The state is expected to fight them every step of the way and tribes have entered the fray as well.

On April 9, seven gaming tribes – the Agua Caliente Band of Cahuilla Indians, the Federated Indians of Graton Rancheria, the Pechanga Band of Indians, the United Auburn Indian Community, the Viejas Band of Kumeyaay Indians, the Yocha Dehe Wintun Nation, and the Yuhaaviatam of San Manuel Nation – filed motions to intervene in the cardrooms’ lawsuits.

“For years, Petitioners have operated their illegal banked games under the cover of a letter from a member of the Bureau of Gambling Control, Robert Lytle, who authored it ten days before resigning to take a job working for cardrooms,” the tribes wrote in one motion, citing a 2023 Capitol Weekly story on Lytle. “While Petitioners now assail the Bureau’s authority to establish regulations for banked games, they took no such issue when a member of the Bureau acted in their favor—and continue to use Lytle’s opinion as a shield for their illegal conduct. Since the ‘Lytle Letter,’ Petitioners have repeatedly fought against independent review of their games’ legality. But earlier this year, the State finally took steps to bring Petitioners’ games closer to compliance with the law: it adopted new regulations aimed at prohibiting at least some banked games in cardrooms. Petitioners, still seeking to dodge review, now sue to stop those regulations.”

Adam Lauridsen, attorney for the intervenor tribes, said his clients have moved to inject themselves into the proceedings “to ensure that California’s gaming laws are properly interpreted and applied to stop illegal cardroom gaming.”

“Cardroom casinos are not above the law,” he said in a statement. “The Bureau of Gambling Control’s regulations are a positive step towards ensuring that cardrooms operate within legal limits. The last three Attorneys General have proposed these type of rules, but the cardrooms have obstructed and sued to block the regulations and meaningful oversight.”

Cardroom cities, meanwhile, are watching from the sidelines. One of the cities most affected is Hawaiian Gardens, home of the Garden Casino, one of the two largest cardrooms in the state.

While Petitioners now assail the Bureau’s authority to establish regulations for banked games, they took no such issue when a member of the Bureau acted in their favor—and continue to use Lytle’s opinion as a shield for their illegal conduct.

Hawaiian Gardens City Manager Ernesto Marquez said the city’s General Fund traces nearly 65 percent of its General Fund to revenues generated by the Gardens Casino.

But he said the city has refrained from declaring a fiscal emergency like Commerce and Bell Gardens because it has $20 million in emergency reserves and because its cardroom relies less on blackjack-style gaming than the cardrooms in those other cities.

Instead, he said the city has opted to take a wait-and-see approach with the idea it could seek a tax increase in two years.

Still, Marquez said Hawaiian Gardens is concerned about the potential impact of the regulatory changes. He said the city won’t be filling open vacancies and will continue to closely monitor new developments involving the regulations.

“Any loss of revenue is very concerning,” he said, adding that city leaders are so worried about changes impacting cardrooms that “We have alerts for anything on the news daily.”