The City of Dallas is coming for the poker rooms it once approved

Gambling operations are illegal in the state of Texas – unless you’re talking about the Texas Lottery – which is why the city of Dallas is trying to shut down a poker room it approved for operation. The Texas Card House is on Harry Hines Boulevard, past the strip clubs, sex shops and sleazy theaters that line the city’s de facto red light district, in a strip mall next to Sam Moon Trading Co. On a gray Monday afternoon in January, I find it very bright and packed with players ranging from 20-something types to grey-haired retirees. It looks more like a La Quinta breakfast room than a sin den.

Ryan Crow, CEO of Texas Card House, shows me around. He’s well cut, with neatly parted hair and a bashful smile, more of a business school brother than Scorsese. He tells me business has been brisk since opening in October 2020. Texas Card House has a full production studio tucked away in a back room. Their regular YouTube streams, complete with commentators breaking down the action, reach 41,000 subscribers.

“We knew when we opened there would be a lot of people,” says Crow. “But we didn’t know how important certain games would be. When we organize a tournament, people arrive internationally.

But in December 2021, Crow received a letter from the city revoking its certificate of occupancy and ordering it to close. He was shocked. Prior to their opening, Crow had met with elected officials, the Dallas Police Department Vice Squad and the Dallas County District Attorney’s Office. He explained how poker rooms could operate legally in Texas and how they could kill underground gambling, eliminating thefts, drugs and prostitution that often accompany them. Dallas is actually overdue for a boom in poker rooms across the state. Texas Card House opened its first location south of Austin in 2015. There are now over three dozen poker rooms operating in Texas.

Dallas seemed to follow suit. At a 2019 city council meeting where bewildered members discussed the Texas Card House licensing process, City Attorney Chris Caso explained how it all works. The Texas Penal Code provides an exemption to the state’s gambling ban if operations meet three criteria. The games must take place in a private place, the organizers cannot benefit economically from the action and the players must assume an equal risk. The spirit of the law prevents cops from raiding people’s poker nights. It also allows charity events and country club card rooms.

Texas Card House founder Sam Von Kennel wondered if these three criteria – in legalese, “defense vs. suit” – also suggested a business model. If a private poker club required memberships and didn’t take a “rake”, ie a share of each pot, it could comply with the letter of the law. In 2015, Von Kennel went all-in.

There is a term for this kind of business: “regulatory entrepreneurship”, which was coined by two law professors, Elizabeth Pollman and Jordan Barry, in a 2017 Southern California Law Review item. Essentially, regulatory entrepreneurs are doing business bluffs, building companies that “plan to change the law and, in some cases, just break the law in the meantime.” Examples include Uber and Airbnb, both of which have grown so rapidly that by the time lawmakers tried to tackle how they affected labor markets or housing supply, they were “too big to be banned,” as Pollman and Barry put it.

Crow’s investment group bought Texas Card House from Von Kennel in 2015. The Dallas room has become one of the company’s most popular, in part because it took players away from the thriving underground scene of the city, which has a rich history. Texas Hold’em is believed to have been popularized in Dallas in the 1920s. In the 1930s and 40s, rival mobsters Benny Binion and Herbert Noble ran illegal casinos throughout the city before moving to Las Vegas. The city was also home to the AMVETS Club, a poker room that operated on Lower Greenville Avenue, across from the current location of HG Sply Co., from 1969 through the 1980s. Poker Hall of Fame members such as Doyle Brunson and “Amarillo Slim” Preston played there.

Not that keeping history alive has anything to do with the current state of affairs. After Texas Card House, there was Shuffle 214 in northeast Dallas and Poker House Dallas near Brook Hollow Country Club. The city began to change its stance on poker after a fourth card room, the Champions Club, attempted to open in the former III Forks restaurant off the Dallas North Tollway. The champions made two crucial errors. Their location was a stone’s throw from the Bent Tree North Homeowners Association, and it was in a part of Dallas that’s in the more conservative Collin County, where the district attorney took a tough stance against poker rooms. North Dallas Councilwoman Cara Mendelsohn initially signaled her support for the clubs, but, after voters spoke out, she reversed course.

“My church has asked me to register a protest against them being allowed to open,” Holy Communion Cathedral church member Jeffrey Hurt said at an October adjustment board meeting. . “We don’t think a place to play near our church is appropriate at all.”

The board rejected the Champions Club’s application for a certificate of occupancy, so the club’s owners took legal action. When I contacted the city attorney’s office, the building inspection department, and Mendelsohn, they all cited this lawsuit as the reason they couldn’t speak.

But as I dig through the archives of the Board of Adjustment hearings, another architect of the city’s war on poker emerges. Senior Assistant Attorney Gary Powell was hired by the city in 2021 after a 36-year career in private practice and was tapped to investigate the poker room kerfuffle. Powell interprets the state’s gambling ban broadly, arguing that “defense of suit” justifications made by poker rooms do not hold because gambling is specifically prohibited in the Texas Constitution. Gambling will not be legal in Texas, Powell argued, until the state amends its constitution.

“I dug this probably just as deep – I’m probably more confident than anyone in the room and probably top 10 or 15 in the state,” Powell shamelessly offered in a November meeting. “I understand what is allowed here and what is not.”

Powell may be right. If the courts agree with him, he could set off a legal chain reaction that could bring down Texas’ fledgling legal poker scene. Not only that, but its broad interpretation of Texas gambling laws may impact other organizations. If the “lawsuit defense” arguments only apply to penny poker games around the kitchen table, as Powell seems to suggest, what about all those charity casino nights? And will a stricter interpretation of the Texas gambling ban force a crackdown on country club card rooms?

The answers to these questions will likely only come after a legal battle. After this article went to press in February, the Board of Adjustment was to hear Texas Card House’s appeal regarding the revocation of its certificate of occupancy. If that fails, Crow told me, he’ll probably sue the city too. (The Board of Adjustments decided to delay its decision.) So far, Attorney General Ken Paxton has not weighed in on the matter, although Arlington State Rep. Chris Turner has formally requested a notice after a poker house operator began exploring a location in this suburb. .

The battle over poker is reminiscent of other recent legal battles the city has waged from the top of its high horse. The same week I visited Texas Card House, the city council was deliberating on an ordinance that would force sex businesses in the city to close at 2 a.m. In 2016, billionaire Ray Hunt and former senator Kay Bailey Hutchison pushed the city to ban porn convention Exxxotica, only to leave taxpayers with a $650,000 legal settlement when courts ruled the ban was unconstitutional.

The city’s aversion to poker rooms seems to be as much about deep insecurity as gambling law. Dallas is both a Bible Belt city and a border city. Efforts by civic leaders to project a polished image have long been undermined by the city’s reputation as a destination for gambling and sex. If the Champions Club had never tried to open a few blocks from churches and schools in Bent Tree, Gary Powell might never have fallen down his legal rabbit hole that could end up leaving taxpayers, once again, paying the fallout of a moral crusade. no other city in Texas chose to pay.

But if Powell is right, and if the courts decide to close the loopholes that created Texas’ poker rooms, then the city – and the state – should respond by pushing to change state law or the Texas Constitution. Texas to enable operations such as Texas Card House, which have already shown interest in bringing the Dallas poker scene out of the shadows.

At the Texas Card House, I met a former underground dealer who asked not to be named. She told me that a few months before Texas Card House opened, there was a stabbing in an underground game involving a well-known local player. She was relieved that there was now a safe place to play.

“There was a wave of thefts,” the dealer told me. “Several games have been affected. Some games called the police. Other games didn’t call the police because they were scared.

If the city succeeds in shutting down the outboard poker rooms, she says, it will simply force players back underground.

“If the city shuts them down, they’ll keep playing,” the dealer told me. “They’re not going to stop playing.”