San Jose, California, avoided a potential multimillion-dollar budget hit last week after a San Francisco judge struck down new state regulations that would have strictly limited blackjack-style games at cardrooms across California.

Superior Court Judge Richard Darwin ruled this week that the state Bureau of Gambling Control, a division of Attorney General Rob Bonta’s office, lacks the authority to impose the gaming restrictions, which were pushed for by the state’s tribal casinos, the cardrooms’ main competitors.

After temporarily halting the regulations in May, Darwin found that only state lawmakers can make such policy decisions, according to card room industry officials, who sued to block the rule changes. Darwin issued the ruling from the bench and is expected to release a written decision July 10. The fight may not be over, however, since Bonta’s office can still appeal the decision.

San Jose Mayor Matt Mahan has warned the city could face tens of millions of dollars in losses if the restrictions are allowed to stand. He said tax revenue from card rooms accounts for about $25 million of the city’s $1.7 billion general fund budget, which helps fund police, parks, housing programs and other services.

A steep revenue loss could wreak havoc on the city’s finances. Last month, the City Council approved a range of cuts to close a $50 million annual budget shortfall, triggered in large part by slowing revenues and rising inflation. The city still faces a projected $26.8 million deficit next year, followed by an $11.8 million shortfall in 2028.

“We are pleased the Court recognized the importance of preventing these harmful regulations from taking effect,” Mahan said in a statement. “This decision protects our residents, local economy, and the essential public services our community depends on.”

San Jose is home to two large cardrooms, Casino M8trix and Bay 101.

Elsewhere in the Bay Area, cardrooms are spread across cities including Hayward, Emeryville, Livermore, Colma, San Bruno, Petaluma and San Rafael. While officials in Colma, a city with only around 2,000 residents, warned the gaming regulations could hurt the city’s budget, the impact on other cities in the region was less clear.

In March, the California Gaming Association sued to block the regulations, which would have banned cardrooms from hosting blackjack-style games in which the target is a hand of 21. The rule changes would also have imposed new restrictions on third-party “player-dealers,” who allow cardrooms to host “banked games” such as baccarat under a state prohibition on cardrooms offering games where players wager against the house.

“For more than a year, we have said this case is about far more than gaming — it is about whether the Attorney General and his regulators can bypass the Legislature and unilaterally rewrite decades of established law,” the association said in a statement. “Today, the Court delivered a clear answer: they cannot.”

The state’s tribal casinos were a driving force in lobbying the gaming bureau to adopt the regulations. The tribes, which are major donors to state politicians, including Bonta, argue that state law gives them exclusive rights to offer blackjack-style games. They say protecting those rights is critical to funding housing, education and healthcare programs for their members.

“Tribal government gaming also serves as an important economic engine for California,” the California Nations Indian Gaming Association wrote in a letter sent to the gaming bureau last year.

It remains unclear whether Bonta’s office will seek to appeal the court decision.

In a statement, his office said, “We are disappointed in the ruling but are reviewing our options and will respond appropriately.”

(Staff writer Ryan Macasero contributed to this report.)

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