Gambling operators see red over prohibition on card games

By DARA KAM
THE NEWS SERVICE OF FLORIDA

THE CAPITAL, TALLAHASSEE, December 2, 2015…… Cardroom operators are outraged over a proposal by state gambling regulators to do away with a lucrative type of card games, which regulators have decided are illegal after approving them for three years.

During a packed hearing about the proposed prohibition Wednesday, gambling operators and their lawyer complained that regulators' sudden reversal about the card games would cost the state's pari-mutuels money --- as well as their customers' trust --- if the ban moves forward.

"Our patrons will be incensed," said Jamie Shelton, president of bestbet Jacksonville. "I can't explain it. We were authorized to do it and then we're not authorized."

Tampa Bay Downs Vice President Greg Gelyon accused regulators, who authorized the card games as recently as within the last two weeks, of establishing a set of rules only to "yank them away."

Dropping the games will cause his customers to question whether his cardroom has been operating legally all along, Gelyon said, and spark "a rumor mill that will go wild."

The uproar focuses on what are known as "designated-player card games," which include a hybrid of three-card poker and resemble casino-style card games but are played among the gamblers instead of against the house, which pari-mutuel operators contend makes them legal. Pari-mutuels are barred by law from offering "banked" card games, including blackjack, in which players bet against the house instead of against each other.

Division of Pari-mutuel Wagering Director Jonathan Zachem said state law prohibits the designated-player games because they are not expressly authorized in laws governing card games.

"It's under prohibited activities. It has to be specifically authorized. I think this is a legislative question. Clearly, there's enough people in this room, power in this room, to go right down the street to the Legislature and present this issue, and specifically allow this. This is something you all can do," Zachem said to the meeting room packed with lobbyists and gambling operators.

The proposed prohibition on the card games comes as the state and the Seminole Tribe renegotiate a deal, which was inked five years ago but expired this summer, that gave the tribe exclusive rights to operate blackjack and other banked card games at most of its casinos. The Seminoles contend that the designated-player card games violate the tribe's rights to exclusivity.

For at least three years, gambling regulators have authorized the designated-player card games, which have skyrocketed among cardroom operators over the past year. Nearly every pari-mutuel offers the games, which have boosted revenues at some facilities by as much as 20 percent, according to an analysis performed for a coalition of pari-mutuels represented by gambling lawyer John Lockwood.

The proposed prohibition is "inconsistent with the past three years of the division's position concerning these specific games," Lockwood said.

"It's unprecedented that an administrative agency would have such a change of policy that would have such a significant impact on the industry," he said. "We're going to prepare for the worst-case scenario, which is filing a rule challenge."

Lockwood said that the agency's rule change would require the Legislature's approval because it would have a cumulative industry impact of more than $1 million over five years.

An analysis performed by The Innovation Group, based on surveys of 10 pari-mutuels offering the card games, projected that the games could generate at least $5.5 million in taxes over five years, based on an estimated $55 million in revenues for the 10 cardrooms.

Many of the operators told the regulators at Wednesday's hearing that the wildly popular new games have overshadowed other poker games, such as Texas Hold 'Em. Cardroom revenues had flattened until the introduction of the designated-player games, they said.

The designated-player games also provide a less intimidating option for card players, the operators said.

"Traditional poker is dying," Magic City Vice President Alex Havenick told The News Service of Florida on Wednesday afternoon. "The fad has run out."

Cardroom operators said they had to undergo a rigorous, two-pronged process that took as long as six months before they were allowed to start running the games.

"They vetted the games. They reviewed the games. They never complained about the games," Havenick said. "They need to start regulating them."

But Zachem said his division intends to align its current rule --- which had permitted the card games --- with state law.

"I hear what the industry is saying. And I understand many of you might be upset about some of these things. But the reality is … the area to correct this is adjusting the statute. That is the area that prohibits the designated-player game," he said. "When some of these definitions in other areas were created, I don't think the concept of what these games could become was fathomed by the division. They've gone in a different area."

Lockwood linked the division's reversal about the card games to the state's talks with the Seminoles about a new deal, known as a compact.

"This is a complete about-face. The only reason I can guess is political posturing relative to the compact negotiations," he said in an interview after the meeting.