Judge allows suit challenging spousal probes by gambling regulators

A San Francisco Superior Court judge overruled a demurrer Tuesday, allowing a lawsuit to proceed against California's gambling regulators over new licensing rules that require full background investigations of cardroom owners' spouses.

The California Gaming Association and David Shindle, a former shareholder of Players Edge Services, Inc., sued the California Gambling Control Commission and the Bureau of Gambling Control after a 2021 overhaul of licensing regulations and adoption of a new "spousal information" form.

At a hearing on the regulators' demurrer to the petition Tuesday, Superior Court Judge Christine Van Aken overruled it and told counsel she expected the lawsuit to be resolved through motion practice before reaching a bench trial.

At the end of the hearing, Van Aken said she would take the matter under submission to amend some verbiage, but the tentative overruling of the demurrer is expected to be adopted. California Gaming Association et al. v. California Gambling Control Commission et al., CPF23518317 (S.F. Super. Ct. filed Sept. 13, 2023).

An attorney for the California Gaming Association, Matthew W. McAleer of Colantuono, Highsmith & Whatley PC, thanked Van Aken for the ruling, saying the decision showed "The California Gaming Association does have standing in this matter and that our public interest standing in this matter is recognized."

Before 2021, spouses of cardroom owners who held only a legal interest in the business and did not participate in management could apply for a gambling license as "uninvolved spouses" and undergo a limited background check for a $1,500 fee, according to the plaintiffs' petition.

The plaintiffs argue that the new form's implementation changed how the regulators treat interests held by the spouses, now requiring full background investigations that can take more than a year and cost at least $6,600.

The regulators says the changes were part of a broad effort to "standardize cardroom and business licensing processes for consistency" following a recommendation from the State Auditor.

In their petition, the plaintiffs claim the agencies imposed "a far-reaching underground regulation" without proper notice under the Administrative Procedure Act.

The defendants also argue there is no underground regulation because the spousal form was formally adopted through the Administrative Procedure Act and the requirement that spouses be licensed simply reflects existing California family law and the Gambling Control Act.

The California Attorney General's office represents the regulators, and Deputy Attorney General James G. Waian said the state disagrees "with the public interest standing in this matter" laid out in Van Aken's ruling.

Waian argued in court filings that strict scrutiny of owners and their spouses protects the public by ensuring that anyone who might benefit from or influence a gambling business is properly vetted, reducing the risk of fraud, corruption or unsuitable operators.

The petitioners claim that the public interest is served by targeting only those who control or profit from gambling operations with regulations, as the Gambling Control Act was designed to do. They argue that forcing uninvolved spouses to undergo "costly, invasive licensing" does little to protect the public and instead imposes unnecessary burdens on families and businesses without improving oversight.

"The ability to challenge these regulations is very limited," McAleer said at the hearing.

The defendants' demurrer said asking for documentation or issuing industry guidance does not create new law; it merely applies and explains statutes already on the books.

Waian also disagreed with Van Aken's acceptance that the description of the change in requirements amounted to underground regulation.

"We believe that's not correct and that these are not regulations," Waian said. He asked Van Aken to amend her ruling to ensure it did not preclude the defendants from challenging the regulation's definition on the merits.

Shindle's individual claims stem from a 2023 condition placed on Players Edge's license. After the regulators rejected documents he submitted to show the ownership interest was solely his, the Commission conditioned the company's license on either providing additional documentation or having his wife apply for an owner license, Shindle claimed.

Shindle later sold his shares in May 2025, stating in the petition that he did so "to avoid the consequences of noncompliance with the condition".

The state's lawyers argue that development undercuts his ability to continue the lawsuit. In the same demurrer, the defendants claimed that because Shindle no longer holds an ownership interest and the spousal condition has been removed, he "lacks standing to pursue declaratory relief." Van Aken sustained this part of the demurrer.