Larry Flynt Loses Bid to Overturn California Casino Law

Posted on: October 31, 2017, 02:00h. 

Last updated on: October 31, 2017, 01:36h.

Hustler Magazine creator Larry Flynt failed in his bid to expand his casino ownership portfolio when a federal judge dismissed his challenge to a California law that doesn’t allow individuals to operate gambling venues both inside and outside the state.

Larry Flynt Casino California
Larry Flynt lost his bid to overturn a California law that prevents license holders in the state from owning out-of-state gaming venues. (Image: Stephane De Sakutin/Getty Images)

U.S. District Judge John Mendez dismissed with prejudice the claim, saying that it fell outside of a two-year statute of limitations. Flynt made the claim alongside Haig Kelegian Sr. and Jr., who own stakes in many cardrooms in California.

Flynt himself operates two cardrooms in Gardena: Larry Flynt’s Lucky Lady Casino and the Hustler Casino. According to his complaint, a California law that he sees as outdated prevented him from investing in out-of-state casino investment opportunities in 2014 and 2015.

Law Written to Prevent Mob Influence

The case is all about the Gambling Registration Act, a law that was designed as a way to limit how much influence organized criminal organizations could have in California’s gaming industry.

The legislation prevents California residents who have a gaming license from the state from owning anything more than a 1 percent stake in any “out-of-state, casino-style gambling entity.” In addition, out-of-state residents who already own gambling businesses elsewhere cannot get a license in California.

While that law may have played an important role at the time it was crafted, the plaintiffs argued, that day has long since passed, as the mob hasn’t had a significant role in casino ownership in Las Vegas or other major gaming hubs in decades. In addition, they argued that the statues violated the U.S. Constitution’s commerce and due process clauses.

Flynt also argued that he might have to divest himself of minority holdings in some of his “adult” businesses that are located outside of California if they added gambling at some point in the future.

Case Dismissed with Prejudice

However, Judge Mendez failed to find any continuing harm to the plaintiffs. While the court had previously dismissed the case earlier this year, this time the judge took the additional step of telling them not to bring the case back to him with further amendments.

“The court also finds that any further amendment would be futile and, therefore, grants defendants’ motion to dismiss with prejudice,” he wrote in his decision.

The defendants in the case included both the state’s Bureau of Gambling Control and a number of California government officials, including Attorney General Xavier Becerra.

Timing issues played an important role in the decision. The case was legally tied to a June 2014 ruling by the California Gambling Control Commission in which Kelegian Jr. was fined $200,000 after transferring ownership of an out-of-state gaming interest to his wife in an attempt to skirt state laws.

As the statute of limitations on related matters is two years, and Flynt and his co-plaintiffs did not file a complaint until December 2016, the case was dismissed.