iGaming Daily

Jessica Welman (00:02.544)
It's a court battle years in the making. California tribes and state card rooms will square off in federal court to settle the issue of player-banked card games. There's no money or damages on the line, but the decision stands to potentially have huge economic ramifications for one of the largest gambling markets in the United States. Other actions with potentially big ramifications? The latest round of gaming legislation, including online casino bills from Maryland and Virginia.

We're going to cover all that and maybe a little more on today's episode of iGaming Daily. iGaming Daily is brought to you by OptiMove, the number one CRM marketing solution for the iGaming market. I'm Jessica Wellman, editor of SBC in America, joined by Charlie Horner, our media manager. Charlie, you've not been to California, have you?

Charlie Horner (00:47.756)
Never. Never know.

Jessica Welman (00:49.936)
see, this is the land of my college years. I've lived there for a little while thinking of them. I'm not quite sure where this is going to air, but these wildfires are terrifying and I hope everyone out there is staying safe. And I think right now this lawsuit is probably not top of mind for them, but it is worth discussing. I think it might be easier to turn the tables on this one though. I'm usually the one asking questions, but this is like a

a 12 year soap opera that you're just dipping your toe into. So how would you feel about just kind of we'll reverse roles and you ask me questions and I will explain to you the best I can what this drama is all

Charlie Horner (01:32.29)
Yeah, absolutely. think that's a great idea, Jess. mean, it's been, you know, I still keep tabs on the US industry as it's a very important one for us. yeah, this one's a little bit complex. So I think if I ask you the questions and you provide us with all the context and background that we need, that would be fantastic. So I guess really a good place to start is could you just give us a bit of an overview of this?

this dispute and sort take us back to the roots of it. What is the feud and where does it come from?

Jessica Welman (02:07.144)
shirt.

Yeah, so to lay the land for the California gaming landscape, you have a lot of different entities at play. You've got the lottery, you've got horse racing, you've got tribal casinos of which there are about 80. And then you have these things called California card rooms of which there are almost 90. I'm not going to try with dates and whatever. At some point in the 90s, California had a vote and kind of decided

California tribes have exclusive rights to certain types of casino games, namely house banked games, dice games, card games, that sort of thing. But what they did allow for is that these card rooms, the original intent was for them to be poker rooms. You know, it's there for you to play kind of peer to peer poker games, peer to peer stud, those sorts of things. And

Over the years, what's getting offered in these card rooms has started to veer into a space that feels a lot like casino card games. So, at a blackjack table in Vegas, the dealer is the dealer, right? And it never changes. What they decided to do as a workaround, which is actually kind of clever, is, okay, well,

We won't have the house in these card rooms bank these games, but we're gonna play blackjack and have the dealer move in a circle and each of you takes a turn being the dealer and you'll play around a blackjack. You'll be the dealer and if somebody, know, if they bust, you win their money. If they get a blackjack, you pay them your money, et cetera, et cetera. So that's how it started. It was moving around in a circle like this. Well, then they started getting

Jessica Welman (04:04.06)
Are you familiar with what a prop player is? Charlie, have you heard this term?

Charlie Horner (04:10.094)
think so, yeah, yeah.

Jessica Welman (04:11.944)
Yeah. So in California, you're allowed to have prop players where they're hired by the casino to fill out your poker game or fill out a table and that sort of thing. So they started using these prop players and instead of forcing the dealer to change every hand, they just offer people the opportunity. And if not, this prop player is going to be the dealer. And along the way, they've added some rules like

You know, after every two hands you have to offer, if anybody else wants to be the dealer, sometimes you have to take like a break for like 30 seconds or some indiscriminate amount of time. But it's really gotten to the point where essentially the tribes argue these player banked games are actually being banked by the house because these prop companies are actually have huge contracts with the casino.

They pay for surveillance at the tables. They help pay for the advertising budgets. And they, like any kind of gambling, it can be very volatile to be the dealer for a couple of hands. Like maybe you get unlucky and you got to pay out a bunch of people. But if you're the dealer long-term, you're going to make money. So if you can absorb the hits and stuff, it's a beneficial place to be. For the past 15,

years or so, 10 at the very least, the tribes have been screaming at the state like, hello, you gave us exclusivity on these games and these people are just doing these dumb workarounds. And we want to, you need to do something about this. Nothing was ever really done. Now to get into the civics lesson. Oh, did you have a question on what we've gone over so far?

Charlie Horner (05:57.06)
Well, my question, my follow-up question I think you're actually going to get into, my follow-up would be, well, you you mentioned at the top that this is been 12 years in the making and this even goes back to the 90s in some regard. So why hasn't anything been done sooner? Why is it now that this is only coming to the courts?

Jessica Welman (06:17.608)
So the tribes have begged lawmakers to do something because they have really been the people who could do something by changing the laws or cracking down. It's very hard because like these card rooms and the same, you'll see that a lot of, as we saw with like proposition 26 and 27, a lot of people's allegiances kind of depend on locally, whether they have a card room or whether they have a tribal casino, you know, because it's just benefits their local economy so much.

Up until now, the tribes have not been able to take this to court. Here's the weird civics lesson. In the United States, tribes are treated as sovereign nations. So it would be like France trying to sue somebody or the UK trying to sue somebody. So you can't really take it to court because they're sovereign nations. It's the same reason.

I believe we've discussed the Maverick case a little bit on the podcast. Does that ring a bell? That they couldn't bring the tribes in because it was their sovereign nation and you can't enjoin them in a lawsuit. So basically the tribes didn't want to give up their sovereignty in order to sue, but they also just wanted an answer. So what they eventually managed is, and this bill passed overwhelmingly last year, they convinced lawmakers to pass a bill that simply says,

Charlie Horner (07:21.058)
Yeah, yeah, that's the one up in Washington.

Jessica Welman (07:44.73)
you give us the right to sue these people so that the courts can litigate this. We're not allowed to charge for like sue for damages. We're not allowed to try to recoup our losses. We purely want to be able to sue them to get a decision on this. So right at the start of the year, they have filed this suit on the first day that they could and are hoping that the California federal courts can

can reach some sort of conclusion on this. It's seven tribes that are behind the suit. I think they've literally every card room in the state. I got nervous when I opened the brief and I was like 150 pages, but literally a hundred of them is just listing these card rooms and the various games that they've offered.

Charlie Horner (08:36.694)
And so, you know, you talk about there's not a financial reason for them to litigate this. Is this purely to try and get these card rooms to cease operations so that it can lay with the tribes to offer these games exclusively again?

Jessica Welman (08:54.458)
Yes, so they don't even want these card rooms to close necessarily. They just want them to stop offering these particular games. I think they would actually probably even be okay with some result that amounted to you can offer Blackjack, but it does have to move around person to person to person every hand. I think the big argument in the brief is that this has veered so far away from what the intent of

player bank games looks like that it doesn't even, you know, bear a resemblance to what it's supposed to be. TPPs stands for third party proposition players to give you a quick quote from the suit. By using well-funded TPTs to ensure liquidity for games and by refusing and failing to comply with legal requirements that the banking position must rotate away from the seat held by the TPPs.

Charlie Horner (09:34.436)
Mm-hmm.

Jessica Welman (09:51.42)
Carbrooms have created gaming experiences that are indistinguishable from banked games in Nevada or New Jersey casinos. I think some of this too though, is to give them leverage to potentially expand the kinds of games that they can offer. I could be getting this slightly wrong, but I believe there are certain dice games that they currently aren't allowed to offer at tribal casinos, like craps that they would like to be offering. I know that was kind of part of proposition 26 was,

Charlie Horner (10:09.124)
Mm-hmm.

Jessica Welman (10:20.88)
shoehorned in there, that kind of table games expansion, sports betting. A big part of the reason sports betting failed and we don't have consensus on any of this stuff is because this fight keeps going.

Charlie Horner (10:35.844)
Great. Let's look at those sort of indirect potential consequences of this then. There's almost 180, I think there might be 175 different card rooms that will be impacted by this. What's the economic impact of this? And then maybe we can talk about sports betting a little bit later.

Jessica Welman (10:57.394)
So for the card rooms, this would be a very substantial hit to their business. If you guys have never been to a California card room, I've been to several. I'm going to just use Commerce Casino in LA as an example. It's called Commerce Casino, first of all. There's an area that's poker, but the vast majority of the floor are these banked games.

It's a substantial part of their business. It's also much higher margins than poker. think I've probably said 10 times on this podcast, poker does not make a tremendous amount of money because it's peer to peer and all you're doing is raking the game. So you're taking a, you know, it's like 10 % up to a certain amount of money in most states, you know, in

At my casino in Ohio, it's like 10 % up to $6 a hand, which can get, it's lucrative. Is it as lucrative as a slot machine or a blackjack table? No. So I think especially there's not, I don't want to play a blackjack game where I have to potentially be the dealer and pay out for winning hands. So you're taking kind of their main product and really making it difficult for them to continue and expand the way that they have. A lot of these rooms have

remodeled, redesigned, expanded. So it would be a pretty big detriment to the card room economy if these games were changed back and not allowed to use the pro players anymore.

Charlie Horner (12:40.42)
That's really, really interesting then. And if we move on to sports betting, we had the vote in the midterms in 2022, Prop 26 and Prop 27 resoundingly failed. Could this have any impact on the potential legalization of sports betting in California? And if so, what would that potential impact be?

Jessica Welman (13:04.642)
I think it makes negotiations a lot easier. You know, when you have these tribal expansions of gaming, you have to renegotiate the compact, that sort of thing. The governor has to come in and make sure everybody's on board with everything. And this has been kind of a non-starter for the tribes for a very long time. So now that that is resolved, I think there's potential for the tribes to kind of give up a little more in the debate where

maybe you allow horse racing in as well, or you create some sort of situation. You're not going to get 20 prop 27 again, where it's like, come on in internet companies, you don't need to partner with anybody. That's not going to happen. But I think the question with all gambling expansion when it was online poker back in the day, it was just like who gets how much of the cookie jar and I think if this goes

the tribes way, there's more room for I think the commercial side of California to ask for a little bit back when it comes to opening up sports betting in the state.

Charlie Horner (14:15.222)
Absolutely. It's going to be fascinating. Thanks for guiding us through that one, Jess, because it's a complex topic. Yeah.

Jessica Welman (14:21.008)
Yeah, that was a dense one. I'm sorry. It's not going to get any lighter either. I'll give you a quick pause and then we're going to come back and I'm going to tell you about your favorite time of year, the legislative season and what we've seen from bills and online casino propositions so far. So take a breather and we'll be right back.

Welcome back to iGaming Daily. Charlie, covered Mar- No, you weren't dealing with us anymore this time last year. So Maryland, we talked about on the pod maybe, but that was probably our best hope at Online Casino and it didn't come close, right?

Charlie Horner (14:58.754)
Yeah, yeah. you know, the online casino side of things is always quite difficult for the legislative season. yeah, Maryland, probably the best hope and we didn't really get much from it last year.

Jessica Welman (15:12.934)
Yeah, it got out of the house. got into the Senate. It promptly died thanks to the surprising involvement of labor unions, which was a big thread that we saw last year, as well as the opposition of, of Cordish companies and some of these other land-based groups that are just not sold on the fact that this might be a cannibalization issue.

Last year also brought about that innovation group report that suggested that land-based cannibalization was happening. There's how many millions of reports that have suggested a wide range of what cannibalization looks like. All that being said, delegate Vanessa Atterberry is trying again with, I believe, basically the same version of the bill that she had before. think really though, we're coming back this year and lobbyists won't be as taken aback.

by the land-based backlash.

Charlie Horner (16:10.252)
No, they might not be as taken aback, but fundamentally, how has the landscape changed? We mentioned a little bit earlier that the Labour unions had a lot to say in terms of gaming and an expansion of gaming last year.

Has any of those fundamental environmental landscapes changed enough for this to progress any further than we saw last year without any fundamental changes to the bill itself?

Jessica Welman (16:38.792)
I think that's a very good point. I will be honest, I'm not quite sure in the election how much Maryland state legislature kind of got shaken up at all. You're talking about a state where Maryland Live is a very influential group and I'm not hearing anything to suggest that anything's going to be different this year. So we will see.

another one that's interesting and is also one where actually Cordish just got into this state. Virginia, is going to take a crack at online casino. What's interesting to me, they only legalized casinos five years ago. In 2020, they did a referendum and legalized four casinos. This past fall, they did another referendum.

And it is Petersburg is the city that's going to get the next casino that is a cordish project. And yet they're ready to, guess, State Senator Mamilok pre-filed an online casino bill. Curious what you think of this. So each of the state's casinos get up to three skins. They would pay a million dollar fee that lasts for five years on the license. Tax rate, fairly reasonable, 15%.

It would allow for credit card deposits, which is something that we heard at Nickel-G's they thought would be potentially difficult. This one also expressly states that if you have a live dealer studio, you can use, you know, the ones in New Jersey or the ones in Pennsylvania, Michigan, and you don't have to build a live dealer studio within Virginia. So, I mean, on the out, on...

the surface, this seemed like a reasonable enough build to you.

Charlie Horner (18:37.092)
Yeah, I mean, on the surface of things, it does look like an industry operator friendly bill. mean, the tax rate down at 15%, I think most operators would be quite receptive to that. The fact that you don't have to actually physically have a live studio in the state is another positive for the operators in terms of just having less costs. I think the...

The key thing here is the fact that casinos were only legalized in brick and mortar at the start of the decade. So it would be a rapid acceleration to go from six years ago not having any form of casino gaming to having brick and mortar and iGaming. I think it's really interesting. the fact that whilst there are four casinos that have been

voted on from referenda. There's only three of them open yet. Obviously the Petersburg one was only voted in last year and it's not going to be open for some time. So they haven't even managed to get all the casinos up and running. So to get iGame in before those...

Jessica Welman (19:49.512)
And some of them I think are still like temp structures, you know? Like I think Danville is fully built out now and Bristol might be as well. I mean, yeah, like these are going to get open. The Bristol one was open out of an old mall for a while until they built it out. So yeah, it is a bit of rapid expansion. Virginia is a state too. It's very rural for the most part. You have some.

hubs, you you obviously have DC, you have Richmond, Bristol is right on the edge of Tennessee and Virginia, like half of it's in Tennessee, half of it's in Virginia. And then you also have like Richmond, for example, voted down a casino in 2020. So there is pushback within the state that this isn't something that they want. I think what's interesting to me is you've made the point that this is

very industry friendly. I know it is expensive, especially for the evolutions of the world. But in this day and age where you have these pushbacks from labor unions and you have people asking, well, what's the job creation? Are you just sucking money out of the state to go to these big mega corporations? The Live Dealer Studio is just such a layup to me to win over people.

that you're investing something back in the state. We're gonna give you union dealer jobs at a live dealer studio is a great answer to how are gonna get back to the state? Whereas in this instance, how many jobs this is gonna create? 10, like a dozen. You might have some more people hired at the gaming commission, or the lottery, I suppose. But other than that,

I think the question that is going to get asked of all of these bills, what are you doing for the community? I don't know that this answers that one that well.

Charlie Horner (21:49.964)
No, in these sort of political negotiations, it's all about compromise and I guess that Live Dealer studio would be a nice little bone to throw to the unions so they could maybe not throw their support behind it, but at least not be so against it.

Jessica Welman (22:05.788)
Well, and maybe that's something that comes about in the horse trading of all of this too, is that you start at this point knowing that maybe you're willing to concede that down the line and look like you're compromising and actually be compromising for what it's worth. you don't, know, in negotiations, you don't want to put everything you're willing to have in the first draft of these sometimes. So we'll wait and see. With that in mind, I know we wrote about it on the SBC AmeriCast, I don't think we discussed it. There was like a placeholder bill at the end of 2024 to potentially up

sports betting and online casino taxes in Michigan. So that's dead for 2024 and would need to be reintroduced for 2025. Very minimal increases proposed, but what I'm hearing behind the scenes is that those numbers were placeholders and that they were gonna get swapped out for bigger numbers down the line. I don't know the appetite for refiling that in the meantime.

We've got a few other small ones, New Hampshire raising the gaming age 21. There is a Kentucky casino bill. I don't see that going much of anywhere. And out of nowhere just kind of legalize this fantasy sports too. I guess might as well while you're doing it, I suppose. But those are the two kind of big ones. There was a Minnesota hearing. Oh, you missed a good one. A very anti.

anti-gambling Minnesota hearing yesterday that Justin Byers wrote up for SBC Americas.

Charlie Horner (23:32.118)
a shame. love those.

Jessica Welman (23:33.754)
I know they're your favorite and there were like 10 witnesses. This one was specifically designed as a hearing to address. here's the thing, I will applaud Senator John Marty for being like, listen, if we're going to do this, we need to talk about what the negative ramifications are. So, you know, good on them for doing that. It was a very kind of slanted point of view of the hearing. Marty's bill, he has a sports betting bill. It's like the poison pill of bills.

There's no in-game betting whatsoever. I think there's no collegiate betting. There's some sort of massive tax. It was one of those, I think they swapped it out at one point during or added the taxis amendment on last year. And we were like, well, it's dead now. Cause if you're, know, DraftKings or BetMGM or whoever, you're like, nah, I'm good. I'll wait. We can try again.

Minnesota's still a state to watch. don't think Marty's bill will be the vehicle, but know, Nathan Stevenson tends to be one who takes these up. So we will keep an eye on all of those at SBC Americas. Charlie, what's been going on in your neck of the woods? I think you've been putting out quite a bit of content lately.

Charlie Horner (24:43.692)
Yeah, if you don't mind me putting a small plug out there, this week we have launched the second issue of Affiliate Leaders, our newest magazine in the SBC media stable. This issue will be distributing at ICE and it will be going to other various events and you can find it online. Just a brief overview, we cover a lot about the Brazil market launch, so we've got interviews with

Jessica Welman (24:52.575)
that's right.

Charlie Horner (25:13.918)
and the likes of Flashcore and 120 Group and some local affiliates such as Propane. Our cover star is Gentoo Media CEO, Jonas Warrer. We talk all about that company's rebrand and the legal split from Gig. There's some fascinating quotes in there. So thanks to everyone who contributed and I would urge people to check it out if you have some time spare.

Jessica Welman (25:43.144)
Yeah, my piece includes some stuff from Jonas as well. It's a lot of the affiliate CEOs. You got some stuff in there about the Google update that I'm excited to read as well. So you can check that out. I think on all of the sites we'll have something about it. So be sure to check out that, check out SBC Americas and sister sites for all the news and keep checking out iGaming Daily every day for the latest headlines from around the industry.