As California tribes sue their gambling rivals, cities could be the losers

On their first opportunity since a new law took effect Jan. 1, seven casino-owning Native American tribes filed suit in Sacramento County Thursday against dozens of California card rooms, opening a new front in one of last year’s most expensive political battles.

Now, millions of dollars of tax revenues that pay for city services such as police and road repairs could be in jeopardy.

The tribes’ suit alleges that the gambling halls scattered across California are illegally offering card games such as black jack and pai gow poker that cut into the tribes’ gambling revenues.

“Defendants brazenly profit from illegal gambling,” the tribes said in the opening line of their lawsuit.

In a statement, a card room industry representative said the cardrooms are “in full compliance with the law.”

“This attempt by tribal casinos to shut down lawful competition by tax-paying California businesses will fail,” the statement said.

The suit would not have been possible if Gov. Gavin Newsom hadn’t signed Senate Bill 549 in September. Tribes say California voters years ago gave them the exclusive rights to host the disputed table games, which they use to benefit historically disenfranchised tribal communities.

But because the tribes are sovereign governments, they lacked legal standing to sue the state’s 80 or so privately-owned gambling halls.

The bill gave tribes a three-month window to sue card rooms starting Jan. 1. They filed the lawsuit on the first day California courts opened for business in the new year.

Under the bill, tribes cannot receive any money or attorneys’ fees from the lawsuit. Instead, judges will only decide whether card rooms can continue to offer the disputed games.

The stakes are high since some cities receive nearly half of their budgets from taxes on cardrooms, meaning a tribal victory in court could jeopardize money for police, firefighters and other local services.

For example, nearly two thirds of the budget for the small city of Hawaiian Gardens and almost half for the city of Commerce, both in Los Angeles County, come from local card rooms.

San Jose City Councilmember Sergio Jimenez told lawmakers in July that the city receives $30 million each year from card rooms, enough to fund 150 police officers or 133 firefighters. Jimenez said that money’s in jeopardy if the tribes end up prevailing in court.

The card room industry claims the games are legal and that the attorney general’s office has approved each of them over the years.

The suit comes after tribes persuaded lawmakers last year to pass SB 549 in what was one of the most costly political fights of the two-year legislative session that concluded last summer.

A bipartisan coalition of lawmakers, many of them with large tribal casinos in their districts, pushed for the gambling measure, while a smaller group of lawmakers with card rooms in their districts opposed it.

It followed a failed 2022 sports betting initiative that the tribes spent millions of dollars to sponsor and that included a similar provision that would have let the tribes sue.

The opposing gambling interests donated at least $4.3 million to the 120 members of the Legislature since January 2023, according to the Digital Democracy database.

Facing what they saw as an existential threat, card rooms responded to SB 549’s introduction with a massive lobbying blitz. In 2023, Hawaiian Gardens Casino alone spent $9.1 million on lobbying, the second highest amount reported to state regulators. Only the international oil giant, Chevron Corp., spent more.

Then, despite losing the battle over SB 549, the card room industry spent more than $3 million in the lead up to the November election in retaliation against four lawmakers who played key roles in the bill’s passage.

Three of the candidates targeted by the card rooms ended up losing, including the bill’s author, Democratic Sen. Josh Newman of Fullerton.