Card room can’t handle rush on cashier

California Attorney General Xavier Becerra issued an emergency shutdown order of the Magnolia House Casino for not having enough money to cover cash outs. Located in Rancho Cordova, just outside Sacramento, the Magnolia House has kept its restaurant open in the meantime.

In a press release on Monday, the Attorney General’s Office said that Magnolia House was being closed for “failing to meet its obligations under the California Gambling Control Act of 1998.”

“Despite numerous warnings from gambling regulators, Magnolia House failed to take corrective actions or respond adequately to requests for information,” Becerra’s office said. “The California Department of Justice’s Bureau of Gambling Control issued the emergency order to close the card room after multiple reviews of its finances revealed that it was seriously underfunded, threatening significant losses to patrons and players.”

It sounds like it is possible for the 10-table card room to re-open at some point, but not before “it is able to demonstrate that it has addressed its funding issues.”

Layer between players and card room

In California, card rooms differ from tribal casinos in that they are not legally allowed to serve as the house. It’s a weird setup which makes little sense at all even if it somehow was originally based in something reasonable. Third-party gaming providers are the ones actually handling the bets.

I’ll let the Sacramento Bee explain from a December 2016 piece:

The third-party employees aren’t dealt any cards but handle the betting. They make the payouts to winning players and rake in the chips from the losers. They also pay a small fee to the card room at the beginning of each hand, based on how much has been wagered – the only money the card rooms make from gambling.

Magnolia Room handling everything poorly

That gets to another accusation by the Attorney General’s office. Not only is the Magnolia Room short on funds and thus running the risk of not being able to pay gamblers, it has played fast and loose with money it should not be playing fast and loose with. Specifically, the card room has not deposited funds from those third-party providers into segregated, insured accounts.

Magnolia Room has also “allegedly illegally used or converted funds held in trust to cover operation expenses it could no longer meet.”

This sounds a lot like what sketchy online poker rooms have done in the past, using player funds that are only supposed to be held securely for when players cash out, to pay operating expenses.

It also seems like this wasn’t just a case of, “Oops, we didn’t realize we were screwing up” on the part of the card room. The Attorney General’s office said that the Magnolia Room has had ample opportunity to explain what has been going on.

“Magnolia House allegedly failed to adequately respond to written requests for information regarding deposits from undisclosed sources even though extensions were given,” the press release said. “Instead, the card room provided misleading and incomplete information and failed to supply any of the requested documents.”

Yikes. It does not seem like this is going to be a quick fix.

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