The different worlds of California card rooms and tribal casinos

This is the latest in Capitol Weekly’s series of occasional longform stories closely examining some of issues facing California lawmakers, regulators and voters.

The Hustler Casino and the Yaamava’ Resort & Casino at San Manuel both represent the pinnacle of California’s gambling industry, albeit in different categories of an oddly bifurcated sector.

The Golden State is home to two flavors of gambling establishments, even though both often refer to themselves as casinos. There are, of course, tribal casinos, of which Yaamava’ in San Bernardino County is one of the most successful. And then there are card rooms, which unlike tribal casinos are limited to table games and may be owned by individuals other than Native Americans. The Hustler Casino, just south of Los Angeles in Gardena, is the fourth largest.

These two forms of gaming entities seem to be in perpetual competition with each other, as evidenced by their constant sniping at each other under the dome and in the press, including within the virtual pages of Capitol Weekly. Both may be lucrative enterprises, and the operators of each kind have been known to flex their political muscle when needed, locally and in Sacramento.

Yet the rules governing the two types of casinos are different. Cardrooms are hemmed in, by not one but two state agencies that focus most of their attention on them, as well as by laws and regulations that generally keep them small and prevent them from expanding. Even their owners are effectively forbidden from venturing into other gambling markets outside of the state.

Tribal casinos, on the other hand, are largely self-regulated, with minimal oversight by the state and an obscure federal agency. They may, on occasion, renegotiate their compacts, allowing them to expand the number of slot machines they offer, and nothing may stop them from investing in other gambling establishments anywhere in the world. They are, after all, run by sovereign tribal nations.

Cardrooms are hemmed in, by not one but two state agencies that focus most of their attention on them, as well as by laws and regulations that generally keep them small and prevent them from expanding.

The stories of the Hustler Casino and the Yaamava’ Resort & Casino are stories of two sides of California’s gambling industry. They illustrate a balkanized regulatory environment that has improved the fortunes of one casino category and made owners of the other angry and bitter. In California, now is a good time to run a tribal casino and a not-so-good time to own a cardroom.

With apologies to Charles Dickens, this is a tale of two casinos.

Hustler Casino: Illegal origins
The Hustler Casino and its sister property in Gardena, Larry Flynt’s Lucky Lady Casino (also among the top 10 largest cardrooms in California), are obviously today associated with the late pornographer Larry Flynt, the outspoken publisher of Hustler magazine.

But the story of the two Gardena cardrooms actually stretches back to before Flynt’s birth in November 1942.

The origin of these modern cardrooms begin in 1930s Los Angeles, in the midst of the Great Depression. There, a young man named Ernest “Ernie” Primm – the future namesake of the small Nevada community just past the California border on Interstate 15 on your way towards Las Vegas – operated a series of illegal underground casinos, including one known as the Edgemont Club, above a coffin factory on 18th Street and Flower.

Primm’s life story, and the flamboyant history of Gardena’s cardrooms, is documented in author Max Votolato’s 2017 book Gardena Poker Clubs: A High-Stakes History, from which Capitol Weekly draws much of this account. (A representative of the Hustler Casino failed to respond to several requests to comment on this story.)

Primm’s illegal establishments offered craps, roulette, blackjack and other games played in Las Vegas. His long-time associate, Russell “Russ” Miller, was a doorman at the Edgemont Club. Primm’s illegal joints flourished under the corrupt reign of Los Angeles Mayor Frank Shaw. As history buffs know, Shaw’s mayorship was so corrupt he became the first mayor of a major American city to be recalled from office, in 1938.

He was replaced by a reform-minded mayor in Fletcher Bowron, who launched an assault on LA’s underworld. But Primm and his associates anticipated the coming change and moved their operations to Gardena, where author Votolato writes that Primm had a “loose connection” to city’s first mayor, Wayne Bogart.

In the summer of 1936, Gardena City Councilman Earl Powers introduced an ordinance to regulate skill games like Skillo, which is similar to bingo but played with a rubber ball. That fall, Primm announced the opening of Gardena’s first Skillo club, the Embassy Palace, at the site of a old cinema called the Embassy Theatre (located at the southern end of what is today the Hustler Casino’s parking lot).

For years, Primm and the local police chief, George Norman, and a group of concerned citizens battled over the legality and morality of gaming operations in the city. As described in Gardena Poker Clubs, a series of legal battles and police raids opened and closed the Embassy Palace throughout the late 1930s. By December 1940, Embassy Palace, operating under new management, had reverted back into a theater.

But Gardena city leaders doubled down. The new police chief, Elmo Field, a former bookkeeper at the Embassy, issued a skill game license for a new 10-table card room called the Western Club – and Primm and his associates were soon issued a license to start another new card room, the Monterey Club.

Proposition 13 brought competition
The California District Court of Appeals in the early 1940s definitively ruled that draw poker was legal in the Golden State, which officially authorized Gardena to license and regulate card clubs within its city limits. That put an end to legal wrangling over the card rooms and launched a sort of golden age of poker playing in Gardena.

In the ensuing years, Primm would go on to dominate the Gardena poker club scene, which for decades had a veritable monopoly on legal gaming in Los Angeles County, with the Monterey Club and a second card room, the Rainbow Club.

In 1942, George Distel, Frank Irvine and Archie Sneed Jr. converted the Embassy theater into a poker club, called the Embassy Club. By March 1945, there were four card clubs in Gardena; by then the Western Club had changed its name to the Normandie Club. Miller, Primm’s old doorman at Edgemont Club in Los Angeles, became a partner in the Normandie Club in 1947.

From then through the late 1970s, Gardena and its card clubs – peaking at six total – effectively controlled legal gaming in Los Angeles County. The city generated roughly a quarter of its annual revenue from its card clubs.

But the good times didn’t last: California voters distraught by the rising cost of property taxes passed Proposition 13 in 1978, which reverted property tax assessments back to their 1975 values and subsequently limited their annual increase to an inflation factor of just 2 percent.

As Votolato writes in Gardena Poker Clubs, “After the passage of Prop. 13, cities throughout the state began to seek out new sources of revenue to supplement funds lost from the reduction of property taxes. Many cities began to explore the idea of licensing card clubs.”

Soon after, the California Bell Club opened in the city of Bell in 1980, followed by the Commerce Casino in 1983 and the Bicycle Club (today the Parkwest Bicycle Casino) in Bell Gardens and Huntington Park Casino in 1984.

Gardena couldn’t take the intra-county competition and, eventually, its six card clubs dwindled to two.

One of the final two
The Embassy Club was purchased in 1953 by Los Angeles businessman Harry Klassman, who ran the property until a lawsuit over unpaid loans bankrupted him in 1966. The property was then purchased by the Beverly Hills businessman Warren Blank, who converted the old California Art Deco structure into a Spanish Colonial Revival-style building. As Votolato described it, “The luxurious re-stuccoed and re-roofed twenty-nine-thousand-square-foot club sat on 6.7 acres and featured porticos and sophisticated topiary landscaping. It was rechristened the Eldorado Club.”

In 1968, Blank sold the Eldorado Club to an eccentric entrepreneur named George Anthony. A former master sergeant in the U.S. Army Corps of Engineers during World War II, Anthony had previously owned a bowling alley, a restaurant, a mini-golf course, an appliance repair business and a catering company and he had several patents, including one for a simulator in antimissile warning sites. When he became a Gardena card club owner, he also owned a refrigeration company in Inglewood and held a patent on a freeze-dry unit.

“After the passage of Prop. 13, cities throughout the state began to seek out new sources of revenue to supplement funds lost from the reduction of property taxes. Many cities began to explore the idea of licensing card clubs.”

Anthony put his face on the Eldorado Club’s $50 poker chips and was a close enough associate of Jimmy Hoffa’s that the FBI once raided the club after the union leader went missing. But Anthony proved to be a canny businessman and eventually rose to become a leader in Gardena’s card club industry.

Over his nearly three decades in the city, he successfully led fights to permit alcohol and 24-hour gambling at Gardena’s card clubs. He also proved gifted at developing regular customers. In Gardena Poker Clubs, Votolato tells a story about the actor Gabe Kaplan, famous for his role in the TV-show Welcome Back, Kotter, who went to another Gardena poker club to cash a $10,000 paycheck. He wasn’t recognized at that club, but Anthony allowed him to cash his paycheck at the Eldorado, which turned Kaplan into regulator customer of the club. Kaplan went on to have a second career as a celebrity poker champion.

In 1983, when the opening of the Commerce Casino essentially put one of Gardena’s other card rooms out of business, Anthony honored the other club’s outstanding poker chips.

But with the increased competition, even Anthony couldn’t keep the Eldorado going. He resigned as general partner in March 1996 and the club filed for bankruptcy protection in May. By then, the only other card club still operating in Gardena was the Normandie.

It was a grim time in Gardena. The city was on the brink of losing a huge source of revenue, and workers at the club were going to be out of a job. Maggie Mundet, an employee at the Eldorado, wrote letters to two prominent California businessmen asking them to buy the club. One was media mogul Merv Griffin. The other was Larry Flynt.

‘Unfair’ regulatory environment
Mundet’s letter was all it took to get Flynt interested in buying the casino. Votolato quotes him as having told the press, “Quite frankly, it looked like a good business opportunity to me. I’ve always wanted to own one. I’ve been gambler all my life, and I know people in the industry that can operate this properly.”

Flynt faced some community opposition due to his history as a pornographer. But acquisition of the property eventually went through. The Eldorado was demolished and in June 2000 the $30 million Hustler Casino opened in its place. The building, designed by Venice-based architects, sported terracotta tiled walls that were dotted with flashing portholes and a “neoclassical” interior with a brushed aluminum ceiling, giant chandeliers and French provincial furniture.

Fifty-five percent bigger than the Eldoardo, the Huster Casino at its grand opening had a sports bar and an Asian American restaurant, among other amenities. Votolato said the casino was an instant hit and restored some of Gardena’s luster. But it took Flynt nearly three years to get licensed by the state (in the interim, his longtime attorney Alan Isaacman acted as the surrogate owner), and Flynt was outraged by what he viewed as unfair competition from tribal casinos.

In fact, Votolato quotes Flynt as saying he ran for California governor during the 2003 recall campaign in part because he was so upset by tribal casinos:

“We’ve always tried to fight that. That was one reason why I ran for governor, not that I had any illusions of being elected. I just used the platform to try to get my point across that Indian gaming was unfair. And don’t get me wrong, I don’t care what the governor or the state give the Indians in terms of gaming privileges. But the private clubs in the rest of the state should have the same gaming. In other words, if the Indian reservations can have slot machines, we should be able to have slot machines. And I think it’s unfair but the Indians put a lot of money into California politics and so far, they’ve been able to have their way.”

In January 2016, news broke that a joint IRS and California Department of Justice’s Bureau of Gambling Control investigation of the Normandie for violations of money laundering statutes had led to a settlement. The cardroom had failed to record a series of large-scale transactions, which resulted in the Normandie paying the government more than $1 million and its current owners having to give up their California gaming licenses.

Later that year, Flynt stepped in to buy Normandie, renaming it Larry Flynt’s Lucky Lady Casino.

Today, the Hustler Casino may have a maximum of 91 gaming tables and the Lucky Lady 50, making them both among the 10 largest card rooms in California. The city of Gardena is “heavily dependent” on the Flynt card rooms to fund its city programs, in the words of Mayor Tasha Cerda.

Like all cardrooms in the state, the Gardena cardrooms are jointly overseen by the California Gambling Control Commission and DOJ’s Bureau of Gambling Control.

The commission establishes regulations for the cardrooms, approves licensees and rules on allegations of wrongdoing. The bureau conducts surprise inspections and ensures that all cardrooms are in compliance with state laws and regulations.

One critical rule that the bureau and the commission enforce is that no one involved in a California cardroom may own more than 1 percent of, or have significant influence over, any other gaming operation that does not meet California cardroom standards. (That effectively prevents California cardroom owners from ever going into business in Las Vegas.)

In short, the state has “full regulatory authority” over cardrooms (like Hustler and Lucky Lady), said Stacey Luna Baxter, a commissioner with the California Gambling Control Commission.

Yaamava’ Resort & Casino: A tribe overcomes its grim beginnings
Like every tribal gaming facility in the United States, the Yaamava’ Resort & Casino traces its origin to 1979 Hollywood, Fla. There, the Seminole Tribe of Florida, eager to generate more income for its tribal economy, opened the nation’s first tribally owned, high-stakes bingo hall.

The local Broward County Sheriff, Robert Butterworth, threatened to shut down the 1,200-seat hall, leading the tribe to take him to court. In 1981, the tribe beat back the sheriff’s attempt at oversight under Florida law and helped establish the legal theory that states were barred from regulating high-stakes bingo on tribal reservations. In the aftermath of the Seminole Tribe of Florida v. Butterworth, tribes across the country started looking into starting bingo halls of their own.

On July 24, 1986, the San Manuel Band of Mission Indians opened its own bingo hall near Highland, Calif., about an hour southwest of Big Bear Lake in San Bernardino County. The tribe’s ancestral roots lie near Big Bear, where the Serrano ancestors of San Manuel known as the Yuhaaviatam, or “People of the Pines,” lived.

In 1866, as new California settlers looked to drive native people out of their lands, a militia sponsored by the state massacred most of the Yuhaaviatam during a merciless 32-day campaign of violence. The tribe’s leader, Paakuma’, to whom the Spanish gave the name Santos Manuel, led the less than 30 remaining members of the Yuhaaviatam out of the mountains to the valley floor, which had long been a part of the vast Serrano ancestral territory.

It’s from this leader, Santos Manuel, that the modern San Manuel Band of Mission Indians draws its name.

In 1891, Congress approved the Act for Relief of Mission Indians, which recognized San Manuel as a sovereign nation and established the tribe’s reservation in San Bernardino County. Over the ensuring decades, San Manuel members lived in poverty, without basic services like running water. So, when the tribe learned it could generate income through bingo in the 1980s, it jumped at the chance to enter the gaming business.

“I don’t care what the governor or the state give the Indians in terms of gaming privileges. But the private clubs in the rest of the state should have the same gaming.”

In 1988, two years after the founding of San Manuel Indian Bingo, Congress approved the Indian Gaming Regulatory Act, or IGRA, in 1988, which established a regulatory framework for Indian gaming in the United States. The Act created a federal agency, National Indian Gaming Commission, to regulate some aspects of gambling on Indian lands, although it also provided for tribes to be the primary regulatory authority.

Critically, the IGRA also established three classes of gambling on Indian lands. Class I gaming is defined as social games and traditional or ceremonial games. Tribes may offer Class I games and regulate the activities.

Class II gaming allowed high-stakes bingo and certain games on tribal reservations – but only if such games are also allowed elsewhere in a given state.

Class III gaming covered all other forms of gaming, including banked card games like Blackjack and Baccarat, as well as slot machines, horse racing, lotteries and craps. Under the IGRA, tribes are only permitted to offer Class III gaming if they enter into an agreement with their state, known as a tribal-state compact.

In 1994, San Manuel expanded its bingo hall into a 100,000 square-foot casino that offered Class II games, including non-banked card games.

Ballot-box battle
As tribal gaming expanded across California, the casinos next door in Nevada began to grow worried about competition.

In November 1998, despite opposition from Nevada casinos, California voters approved Proposition 5, the Tribal Government Gaming and Economic Self-Sufficiency Act, which amended state law to clarify that the state was permitted to enter into gaming compacts with tribes to authorize Class III gaming.

However, after the election, the Hotel Employees and Restaurant Employees Union (HERE) challenged the legality of Prop. 5 in the California Supreme Court, which invalidated the ballot measure. The reason? A constitutional amendment was required to change gaming policy in the state.

So, the tribes, the legislature, Gov. Gray Davis and Attorney General Bill Lockyer went back to the drawing board and put on the March 2000 ballot Proposition 1A, which voters approved to amend the state constitution and clarify, once and for all, that Class III gaming is allowed exclusively on California tribal lands under compact with the state.

With the legal issues finally settled, San Manuel secured a gaming compact with the state and set out to expand its operations. On January 31, 2005, the tribe opened its new San Manuel Indian Bingo and Casino, with a 465,000 square-foot gaming floor, high-limit gaming areas and several new restaurants.

Expansion era
Over the next decade or so, San Manuel became a successful tribal government gaming operator.

Former tribal chairman James C. Ramos became involved in mainstream California politics, first serving on the San Bernardino County Board of Supervisors from 2015 to 2017, then getting elected to the Assembly in 2018. (He currently chairs Budget Subcommittee No. 6 on Public Safety and is a member of the Budget; Governmental Organization; Jobs, Economic Development, and the Economy; and Local Government committees.)

On May 4, 2021, the tribe announced it was buying the iconic Palms Casino Resort in Las Vegas for $650 million. The casino, then owned by Red Rock Resorts, the owner of Station Casinos, a chain of casinos serving Las Vegas locals, had been closed since the initial COVID-19 pandemic shutdown. In fact, Red Rock executives elected to keep Palms closed to focus on other, more lucrative properties.

San Manuel, with a vision to extend its gaming and hospitality expertise beyond its reservation, jumped at the chance to make history and become the first tribe to wholly own and operate a Las Vegas casino, joining Seminole Tribe of Florida, which purchased the Hard Rock chain, in expanding beyond tribal gaming establishments.

San Manuel’s purchase of the Palms was a commercial venture that had to be approved by the Nevada Gaming Commission. California regulators have no role in Nevada, of course, and the federal government considers commercial gaming to be under the authority of states. So California regulators didn’t review San Manuel’s purchase of the Palms and there were no requirements that the feds review it either.

“(T)he Bureau had no role in the transaction,” an Attorney General spokesperson wrote in an email to Capitol Weekly.

On September 24, 2021, the tribe changed the name of its flagship tribal casino to the Yaamava’ Resort & Casino at San Manuel to allow “the Tribe to pursue additional growth opportunities and serve the community under the San Manuel Band of Mission Indians enterprise,” according to a press release.

San Manuel, with a vision to extend its gaming and hospitality expertise beyond its reservation, jumped at the chance to make history and become the first tribe to wholly own and operate a Las Vegas casino.

“What started 35 years ago as a humble bingo hall has since evolved into one of Southern California’s premier destinations for gaming, entertainment, and culinary delights,” the tribe said in the press release. “As part of its three-phase expansion project, earlier this year the casino added additional slot machines bringing the total to more than 6,500, an additional high-limit gaming room, three retail shops and new bars and restaurants around the property. This December, Yaamava’ Resort & Casino will open its new 17-floor hotel featuring 432 guest rooms, including 127 spacious suites, as well as a pool deck with seven private cabanas, a full-service spa, and additional culinary options. Next year, a 2,800-seat entertainment venue will debut.”

Under the new branding, the resort, the tribe and its top gaming executive, Peter Arceo, have won several industry awards, including recently being named the “Best Casino Outside of Las Vegas” by USA Today readers.

After the addition to the hotel, Yaamava’ Resort & Casino had just about everything visitors would expect from a top-flight destination, including a five-star steakhouse, but the one thing it didn’t have was ample meeting space, as the resort was designed primarily for gamblers and visitors within a two-hour drive.

San Manuel rectified that in June 2023, when it purchased a 40 percent share of the Waldorf Astoria Monarch Beach Resort & Club in Dana Point. With that addition, the tribe added 30,000 square feet of indoor meeting spaces and 80,000 square feet of outdoor gathering areas, rounding out its burgeoning resort empire.

Today, the San Manuel’s gaming operations have to contend with oversight by four government entities – the California Gambling Control Commission, DOJ’s Bureau of Gambling Control, the Nevada Gaming Commission and the National Indian Gaming Commission – but, depending on your perspective, independent oversight of the Yaamava’ Resort & Casino is minimal, but effective, according to tribal gaming executives.

For the most part, San Manuel regulates the Yaamava’ Resort & Casino itself, with the San Manuel Tribal Gaming Commission serving as the operation’s primary overseer.

“Tribal gaming regulators are the primary regulators of Indian gaming,” said Monique Fontenot, public affairs specialist for the National Indian Gaming Commission, in an email.

Gaming tribes insist that their in-house gaming commissions are truly independent from their casino operations and offer rigorous, unbiased oversight and regulation. Also, unlike other gaming operations, tribal casinos must annually conduct independent audits that are scrutinized by the federal commission, sometimes known by its initials NIGC.

So, while cardrooms have been haunted by money laundering and other violations, California’s tribal casinos have avoided problems with lax regulation.

The NIGC conducts on-sight visits of tribal gaming facilities and reviews audited financial statements and employee licensing submissions, among other oversight duties. The two state agencies – the California Gambling Control Commission and the Bureau of Gambling Control – have limited regulatory authority over tribal gaming operations, per the tribal gaming compacts.

Generally, the commission reviews the suitability of key employees, vendors and funding sources of tribal operations. The bureau is responsible for ensuring that tribal operations like the Yaamava’ Resort & Casino have the correct number of gaming devices on site, as authorized by the compacts.

But unlike with the cardrooms, the bureau cannot show up to tribal casinos unannounced, and it cannot conduct undercover operations at the facilities. The bureau has to ask permission to enter a tribal casino like Yaamava’.

A political battle on two fronts
As the stories of the Hustler Casino and Yaamava’ Resort & Casino at San Manuel illustrate, the trajectories of California cardrooms and tribal casinos are divergent, with cardrooms growing minimally from their heyday in the mid-20th Century while tribal casinos have had the opportunity explode since they became authorized in 2000.

The political tensions created by this disparity are on full display in Sacramento these days in the debate over Senate Bill 549 by Sen. Josh Newman, D-Fullerton, which seeks to give gaming tribes the legal standing to sue cardrooms over the arcane system they use to offer Blackjack.

Under Prop. 1A, tribal casinos have the exclusive right to operate card games using house money in California. These are so-called “banked” games like Blackjack and Baccarat, which pit gamblers against the house.

But cardrooms say they use a workaround that legally allows them to offer banked games through the use of third-party proposition players, or TPPPs, which are special, licensed businesses that work within cardrooms.

TPPP employees volunteer to act as the house or bank at every table where banked cardrooms are played. Before a dealer deals a hand of Blackjack, he or she offers all the players the chance to serve as the house or bank for a hand or two. Most gamblers don’t have the funds to cover that kind of action – but TPPP employees do. So TPPP workers, who must wear badges to differentiate themselves from the employees in a cardroom, volunteer to play the role of the bank.

Cardrooms say that by partnering with TPPPs they are legally able to offer banked games because they are not serving as the house or bank, the TPPP is. Tribal casinos, on the other hand, say the cardroom-TPPP system violates the law, and Newman’s bill would allow tribes to get their day in court to challenge it.

Tribes have attempted to sue cardrooms over their offering of Blackjack, but their suits were dismissed over a lack of standing. Previously, judges have ruled that tribes, as sovereign nations, aren’t eligible to sue in courts. SB 549 would change that – and cardrooms are worried that in court their entire business model could be destroyed.

Meanwhile, the bureau also has recently announced its intent to promulgate new regulations concerning banked games in cardrooms and the operations of TPPPs, which also threaten the cardrooms’ business model.

The stakes of the concurrent fights over SB 549 and the bureau’s proposed new regulations are high for the cardrooms. Losing either one could mean their death, making tribal casinos the only form of gambling establishment in the state.

The tale of California’s two casinos could have dramatically different endings.