Regulator: 'Shame on us' if we approved illegal card games

Case involves Jacksonville Kennel Club, Inc.

By Dara Kam

TALLAHASSEE, Fla. - Even if state regulators signed off on a popular type of card game years ago, that doesn't make the games legal, a Department of Business and Professional Regulation attorney told an administrative law judge on Wednesday.

The case involves Jacksonville Kennel Club, Inc. but could have wide-ranging implications for pari-mutuels throughout the state, most of which are hosting "designated-player" card games --- also known as "player-banked" card games. The games have eclipsed other poker games like Texas Hold 'Em among Florida gamblers, according to industry insiders.

Regulators first authorized the designated-player games, in which a player serves as the "bank," more than four years ago, but in December filed complaints against seven pari-mutuels over the games.

"If the petitioner (the department) allowed something that should not have been allowed, shame on us," Department of Business and Professional Regulation lawyer William Hall told Administrative Law Judge Suzanne Van Wyk during closing arguments Wednesday. "But … are these games legal, or are they not?"

Hall said that the way the games are being conducted --- not the games themselves --- violates state gambling law, which prohibits pari-mutuels from acting as the "bank." 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.

At the Jacksonville facility, also known as bestbet Jacksonville, designated players who work for third-party companies sit in front of trays of chips but do not actually play the games. Dealers, who work for the cardroom, dole out the chips to the other players at the table. Hall said the Jacksonville facility has essentially established a "bank," even if it does not directly operate it.

"If a mannequin was sitting in the designated player's seat, or you just put a Coke can there, the games would play no differently than if a living, breathing, human being was sitting there. They'd play the exact same way. Literally, all the designated player does is sit next to the chips," Hall said."Can that person legitimately be called a player?"

Companies, or individuals, must pay $30,000 to act as the designated player at the Jacksonville cardroom. But other cardrooms are requiring a $100,000 buy-in, according to testimony in the Jacksonville case. More than half of Jacksonville's designated players work for a company called Elevated, LLC, the facility's vice president of poker operations, Deborah Giardina, testified Tuesday. Pari-mutuels are paid by designated players a percentage of the amount bet on the games.

But John Lockwood, who represents the Jacksonville facility, argued that the law is open to interpretation.

"Nowhere does it say you cannot play designated player games. Nowhere does it say you cannot play player-banked games. This is simply an interpretation of the phrase 'or in which the cardroom establishes a bank against which participants play,' " he said.

Regulators in February sent cease-and-desist letters to six designated-player companies, ordering them to "cease conducting business activities related to the providing of designated players for the establishment of a bank in licensed cardrooms in this state."

"By providing this service your business is assisting the cardrooms in establishing a bank, and violating the law. Although individuals are free to participate in authorized games within licensed facilities, your business interest and active participation in the establishment of a bank is strictly prohibited," the letter read.

Jacksonville Kennel Club President Jamie Shelton testified Wednesday that the games, launched in September, bring in about $1 million a month. The company invested about $350,000 in setting up the designated-player games, and 85 employees would lose their jobs --- paying between $45,000 and $60,000 a year --- if they went away, Shelton said.

Addressing a legal point in his closing argument, Hall said the gambling operator had already recouped its investment in the games.

"Clearly it's a bad thing if people lose their jobs. But, as the law defines it, that's not a detriment to Jacksonville Kennel Club. It certainly is to those people. But the detriment is they will not make as much money going forward," Hall said.

Hall's comment drew the wrath of Christopher Kise, a lawyer who represents Tampa Bay Downs, which also operates the popular card games.

"The message he's sending on behalf of the (Scott) administration is that any business that invests in facilities and creates jobs based on regulatory approvals can have that eliminated by a political change in position, and that is not a detriment to be considered by the court," Kise said. "That argument is counter to the message that has been preached by this administration since day one. Jobs and capital investment matter."

Lockwood accused regulators of abruptly changing their view of the games after Gov. Rick Scott and the Seminole Tribe signed a proposed $3 billion gambling deal in December. The deal was never approved by the Legislature and never went into effect. The designated-player games are also an issue in a lawsuit between the tribe and the state over banked card games. A five-year deal giving the tribe exclusive rights to operate the banked games expired last summer, prompting the lawsuit.

But the agency's "motivation doesn't come into play," Van Wyk said Wednesday.

"What I am assigned to do is to determine, based on evidence, whether or not the games, as being played, violate the statute," she said. "We hear plenty of cases here where there are numerous political factors and background, none of which we are even allowed to consider."

Lockwood also accused regulators of trying to do away with their current rule --- years in the making --- dealing with the games without going through the proper process. The complaints were issued just months after state regulators trained investigators in how to play the games. One investigator testified that the games that were the basis of the complaint were no different than the games he was taught were authorized.

"It all comes down to a change in policy," Lockwood said. "They've had all these opportunities to clarify this through rulemaking. Essentially what it's coming up to is an unadopted rule that these games just simply can't be played."

Hall acknowledged earlier that the games have posed a challenge.

"This has been a fluid situation for several years," he said. "It may be frankly true (the department) is still trying to figure out how to regulate these games."

News Service of Florida