Federal Judge Questions State On Card Games

September 2, 2016

A federal judge on Thursday appeared skeptical of the state’s defense of how gambling regulators handled controversial “designated player” card games at the heart of a legal challenge by the Seminole Tribe of Florida.

During a pre-trial hearing, U.S. District Judge Robert Hinkle repeatedly questioned J. Carter Andersen, a lawyer representing the state, about the games, also the subject of recent decisions by state administrative law judges in disputes involving cardroom operators.

The popular games have taken off since first introduced at Florida pari-mutuels more than four years ago, but the Seminoles contend that, by allowing the games, the state breached an agreement that granted the tribe the exclusive rights to operate “banked” card games, such as blackjack.

A five-year deal giving the tribe exclusive rights to operate banked games — part of a larger agreement, known as a “compact,” signed in 2010 — expired last summer, prompting the Seminoles’ lawsuit. Under the compact, the tribe is allowed to continue to operate the games for the remainder of the broader 20-year deal, if the state permits anyone else in the state to offer them.

Under Florida law, a “banking game” is defined as one “in which the house is a participant in the game, taking on players, paying winners, and collecting from losers or in which the cardroom establishes a bank against which participants play.”

Pari-mutuel cardrooms are allowed to conduct games in which players compete only against each other.

Years after the designated-player games first popped up at pari-mutuels in Florida, gambling regulators in January filed complaints against more than a dozen cardrooms regarding the games.

The complaints came months after the Seminoles filed their legal challenge accusing the state of breaching the compact.

“It only reversed its position and said that they were unauthorized banked games after the lawsuit which we are currently litigating was filed,” Barry Richard, a lawyer representing the Seminoles, said Thursday.

Richard cited testimony from Department of Business and Professional Regulation Deputy Secretary Jonathan Zachem, who headed the division overseeing gambling in January, when regulators proposed repealing a rule governing the card games.

In his deposition, Zachem said that “where a banker is using their table, their dealer, their facility — meaning the cardrooms — that they are establishing a bank,” Richard said Thursday.

Lawyers for the state insist that gambling regulators do not have the power to authorize card games prohibited by state law.

But Hinkle appeared to reject that argument during Thursday’s telephone hearing, focusing on the part of the law that bars cardrooms from “establishing” a bank.

“Why isn’t that a description of a designated-player game?” the judge asked Andersen.

“Regardless of what the regulator does, it’s the Legislature that determines whether or not the state permits banking games,” Andersen said.

But Hinkle then described a hypothetical situation in which gambling regulators allowed a facility to hold blackjack games.

“And (the cardroom) set it up and they go and they have a blackjack game. And you say, tough on the tribe. That doesn’t give them any right because even though the division formally said you can do this, it turns out it’s against the law, so you can ignore what the division said and tribe, you’re out of luck. That’s the state’s position?” Hinkle asked.

Andersen said that the Division of Pari-mutuel Wagering never “authorized” the games, but approved the cardroom operators’ internal controls laying out conditions for the games, which in some cases required potential designated players to put up $100,000.

Based on a review of the internal controls, it appeared “that the games would be played in accordance with state law,” Andersen said.

“The concept of designated player games in other jurisdictions and in the industry is that they are games similar to Texas Hold ‘Em where the button rotates and the players are playing against each other,” Andersen said. “If certain cardrooms were playing the games in an unauthorized manner, it’s our position that it isn’t something that was authorized.”

“Is it true or not true you never took an action to shut one down until after this lawsuit was filed?” Hinkle persisted.

“When the state learned that these things were a problem, the state took action,” Andersen replied, adding that the tribe only “started complaining about this last year.”

But Hinkle pointed out that the tribe initially objected to the games as long ago as 2012.

The judge also appeared troubled that regulators had signed off on a $100,000 “buy-in,” required by Melbourne Greyhound Park, to serve as the designated player, indicated by a “button” on the card table.

“It seems to me, it’s just common sense. I don’t know that it’s necessarily right, but it seems to me that nobody walked off the street that was going to play this game was going to take the button if you had to be approved in advance and come up with $100,000,” Hinkle said.

Hinkle also told the lawyers that he would not rule on motions for summary judgment but instead intended to hold a trial, slated to start Oct. 3 in Tallahassee.

Thursday’s hearing came less than a week after Administrative Law Judge E. Gary Early ruled against gambling regulators in a challenge filed by multiple cardroom operators.

Early said in a decision Friday that gambling overseers were wrong to do away with a rule governing the card games without replacing the regulations.

Gambling operators maintain that doing away with the rule, adopted in 2014, would put an end to games that bring in at least $87 million a year and are now offered at nearly every cardroom around the state. Regulators proposed doing away with the rule late last year.

In a separate case, Administrative Law Judge Suzanne Van Wyk sided with the state in a case involving the Jacksonville Kennel Club Inc., also known as bestbet Jacksonville. Van Wyk found that the manner in which the Jacksonville facility was conducting the games violated state law.

by The News Service of Florida

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Written by William Reynolds · Filed Under News