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Community Corner

Time to Reconsider San Pablo Casino's Special Exemption

By Bill Cizmadia, President – Council on Prosperity and Accountability

California’s casinos and card rooms are among the state’s most heavily regulated industries. Every aspect of a casino’s operation, from its card-handling to its security procedures, is subject to oversight and review from the state’s Gambling Control Commission. These regulations are vital in ensuring that organized crime and violent gangs don’t seize upon the millions of dollars that flow through a casino’s doors every week. 
But, one California card room isn’t subject to the same level of scrutiny as the state’s other gambling operations. The San Pablo Casino, owned by the Lytton Band of Pomo Indians, is the only card room in the state that is operated by a Native American tribe. Consequently, it operates in a gray area— more than just a card room but not quite a traditional Indian casino. 

This special status allows San Pablo to circumvent the state rules and strict oversight applied to every other casino and card room in the state. It’s a consequence of a provision snuck into an omnibus bill by Rep. George Miller, D-Martinez. The legislative language retroactively granted the tribe a compact, allowed it to take over an existing card room and effectively sidestepped the normal regulatory process. 

Of course, that raises the question: if San Pablo has taken advantage of this special loophole for years, what’s the concern today? 

In the past few years, card rooms have seen a dramatic increase in the number of third partyproposition players, or what the industry refers to as banking groups. In California, card rooms cannot be involved in the action on casino-style games. That’s where a third party proposition player comes in— to enhance the action inside the casino. These third party players provide the deep pockets to entice bigger bets from players. 
Casino Enterprise Magazine has described these banking groups as “its own casino inside of a casino.” The state gambling commission now estimates that 30 banking companies operate in California and have submitted more than 2,000 applications for licenses. In other words, it’s become a big business.  California’s economy is bolstered by the thousands of gaming jobs both with casinos and card rooms and banking companies.  But without proper oversight, these jobs could be at risk.
Of course, more money brings more problems. In 2011, just as the number of third party players was rising, law enforcement officials uncovered a vast loan sharking scheme at two Bay Area card rooms. Loan sharks were reportedly advancing money to desperate players at Artichoke Joe’s and Oaks Card Club, and threatening force to collect unpaid debts. One Oaks Card Club employee, who oversaw the casino’s Asian gaming, deposited nearly $3 million into his personal bank accounts, but remained undetected by spreading the deposits across smaller transactions to avoid federal depositing regulations. Ultimately, Artichoke Joe’s and Oaks Card Club paid out $575,000 in fines, while promising to clean up their acts. 

Recent problems at Bay Area card rooms underscore the importance of regulating the industry. At the time of the law enforcement raids, both clubs were using the same banking operation, PT Gaming, LLC.  It’s the same entity that now has an exclusive banking operation at San Pablo Casino. Again, evidence that San Pablo Casino’s special status deserves a second look.  

This is not just an issue of fairness.  If something was found to be going very wrong inside the San Pablo Casino, it could threaten the jobs of hundreds of employees who work in and around the casino.

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