Advantage Play in California Card Rooms

California has two types of entities that offer casino table games. There are the Native American casinos that operate Las Vegas-style games. The gambler who visits these casinos will find a full slate of card-based table games that play in every way like the same games in Las Vegas and elsewhere. The other type of California casino is a unique confluence of legislative workarounds called a "card room." Technically, these establishments are not casinos at all. The players do not play against the house. Rather, card rooms facilitate the players playing against each other, while the card room collects a per-round fee for offering the games.

Because the casino is not banking the game, it is up to the players to bank against each other. This policy has given rise to an obscure niche business: corporate card room bankers. Each table has a professional "player-banker" who has enough chips available to act as the de facto “house.” The player-banker sits at the table with a rack of chips provided by his corporation and is responsible for covering the action that takes place each round. Formally in California, those who provide banking professionally are known as “Third-Party Providers of Proposition Player Services.”

To earn its profit, the card room charges the player-banker a fee for banking each round. In some cases, each player is also charged a smaller fee to play each round. The total fees collected by the card room for a round can depend on the casino, the game, the wager made by each player and the totality of wagers on the layout. It can get complicated. Typically, the total amount collected will range from about $3 per hand up to $10 per hand.

One way to think about the profit model is that the amount won from the games is split between the player-banker and the card room by way of taxes. The player-banker wins by banking the games. The card room then taxes the player-banker a fee per round that varies by the total wagers on the table. The card room sometimes taxes the player based on the amount of his wager. The house edge on the games has to reflect the intermediary service of the player-banker. Hence, the games tend to have a significantly higher house edge than in typical casinos.

Because of this fee-based arrangement, the card room has only secondary interest in protecting its games from advantage play. The card room is going to get their collection no matter what; it’s a sure thing, no matter who wins or loses at the table. This arrangement puts the player-banker at odds with the house with respect to the advantage players and game protection. Regardless of the AP’s activities, the player-banker pays a tax to the card room based on the totality of wagers, including the AP's wager.  The AP may also have to pay a fee to the card room for his wager. If advantage play does take place, it is the player-banker who is going to take the hit, not the card room. Yet the player-banker may have no actual authority to back off a player for advantage play.

This conundrum would be irrelevant if advantage play opportunities were insufficiently lucrative to overcome the collection fees and high house edge.  However, the unique approval process for new games to be accepted into card rooms has brought an assortment of surprisingly large vulnerabilities. California maintains a list of standardized types of games. New games that look and feel like established games can essentially bypass review.

Here is what the Office of the Attorney General states about its process:

"The Bureau of Gambling Control (BGC) is introducing a streamlined approach to simplify and expedite the approval process for certain controlled games. This process will result in a reduced application processing time as well as reduce the amount of fees expended for the background investigation."

Here is a letter that summarizes the new simplified game review process. In particular, this letter states:

"Gambling establishments will only need to submit a cover letter, signed application, and collection rates along with the appropriate application fee and background deposit. Game rules do not need to be submitted when utilizing this option. Approval letter will be issued within five to seven business days."

Here is the Application for Controlled Game Review referred to in the previous paragraph.

What this means in practice is that new games are placed in card rooms that are placed nowhere else. These games can be brought to the floor quickly, with minimal oversight or double-checking. In particular, side bets are the source of much of the profit for the player-banker: there are no fees paid on side bets by either the player-banker or the players. New side bets are tried all the time. Many of them can be whacked by APs.

Card rooms beware!