Porn Baron Larry Flynt Catches Break in Bid to Change California Gaming Law

A federal judge in Sacramento sided with porn publisher and card room owner Larry Flynt in his legal fight against the law that prevents California gaming licensees from owning interests in out-of-state casinos.

US District Judge John Mendez on Thursday denied the state’s bid to dismiss the long-running case. He acknowledged that the statute in question could amount to the indirect regulation of interstate commerce, which could violate the commerce clause of the US Constitution.

Flynt owns two California card rooms, the Hustler Casino and the Lady Luck Casino, both in Gardena, Los Angeles County. He and his co-plaintiffs, Haig Kelegian Snr and Haig Kelegian Jr., sued the state in 2016, arguing the law was unconstitutional and “archaic.”

This was shortly after Kelegian Jnr. was forced to pay $210,000 in fines because a company majority-owned by his wife acquired a casino in Seattle. The Kelegians have had numerous interests in California card clubs at various times, including the Bicycle Casino, the Commerce Casino, and Ocean’s Eleven.

Redundant Anti-Mob Law

The prohibition on out-of-state casino ownership, enacted in 1986, was designed to limit the influence of organized crime on California’s gaming industry.

According to the plaintiffs, the law may have played an important role at the time, but today it is irrelevant. The mob hasn’t had a significant role in decades in casino ownership in Las Vegas or other major gaming hubs.

The plaintiffs say they are eager to invest in attractive business opportunities in the gaming industry outside California, but the law restricts them from doing so. They argue the existing rules impose a significant burden on interstate commerce by preventing them from doing business with anyone who has substantial investments in casino-style gambling elsewhere in the country.

Significant Burden?

“If a state statute ‘directly regulates or discriminates against interstate commerce, or . . . its effect is to favor in-state economic interests over out-of-state interests,’ it is ‘struck down . . . without further inquiry,’” wrote Mendez.

“If, however, a state statute “regulates evenhandedly” and “has only indirect effects on interstate commerce,” courts proceed to ask whether those indirect effects “impose a ‘significant burden on interstate commerce.’”

Mendez appeared sympathetic to the argument that the rules could constitute indirect regulation of interstate commerce and imposed a significant burden in the case of the plaintiffs.