1928 saw the appearance of the first of the gambling ships that floated off the Los Angeles County coastline. Although it was illegal to conduct a gambling operation in California, the state’s jurisdiction only extended three miles offshore. There was nothing in Federal law that forbid gambling, so operators of floating gambling casinos merely had to anchor just outside the three mile limit. The ships proved so profitable that, by 1930, a virtual small fleet of gambling ships lay anchored a few miles offshore from Long Beach and Santa Monica.
This did not sit well with local law enforcement and protectors of public morality who saw this as an affront to state laws. Numerous attempts were made to shut down or frustrate the operations of these ships, but gambling ship operators managed to fight off most such attempts in court.
In 1930, Tony Cornero Stralla was released from prison after serving time for Prohibition violations. He immediately saw the profit potential in gambling ships. After an unsuccessful partnership in one such ship, Cornero launched his own in 1938, the S.S. Rex. The Rex foreshadowed the approach that Las Vegas would later adapt. It focused, not on high rollers, but on the middle class. It offered clean, delightful places for gambling and entertainment, with free or subsidizing food and transportation to and from the ships. Cornero deliberately and dramatically portrayed the Rex as free of the often rumored rigged games. He offered anyone an immediate $100,000 cash payout if they could find any game on his ship that was illegal or rigged.
Despite efforts to frustrate public interest in the new gambling ship, the Rex was a success from the beginning. It operated 24 hours per day with normally between 1,000 to 3,000 gamblers aboard at any one time.
It did not take long for anti-gambling ship forces to take notice. Just months after the Rex opened, Los Angeles District Attorney Buron Fitts attempted to shut down the ship. With Los Angeles County Sheriff Biscailuz and Santa Monica Police Chief Dice (no kidding) in tow, Fitts commandeered several of the water taxis servicing the Rex and sailed out to arrest Cornero. After a brief standoff, Cornero submitted to arrest so as to challenge the issue in court.
Fitts argued that Santa Monica Bay constituted an "inland" body of water and therefore, the coastline was not the true coastline of the State of California. For a true state coastline, one had to draw an imaginary line between Point Vicente and Point Dume. Consequently, the Rex would have been required to anchor itself many miles out to sea, a proposition that would have required an inconvenient and unattractive seafaring trip to visit the ship. Cornero, for his part, countered that Santa Monica Bay was not in fact a bay. It was a bight, a large coastal indentation. Cornero proclaimed that Santa Monica Bay was more accurately called Santa Monica Bight. Although the court sided with the District Attorney, it was overturned upon appeal. Cornero returned to operating the Rex.
In 1939, State Attorney General Earl Warren proposed a new legal argument against offshore gambling ships. He called them "a great nuisance" because they drew millions of dollars from legitimate purposes and would inevitably lead to the appearance of floating narcotics dens and houses of prostitution. He reasoned that states had the power to abate a nuisance even if it lies outside state jurisdiction.
After failing to comply with a state order to cease and desist, all but one of the gambling ships were seized by law enforcement. The Rex, however, gated off its landing platform and turned a fire hose on raiding law enforcement vessels. Thus began the siege of the Rex. Since the Rex had no engines of its own and thus could not sail off, Warren figured that the ship would eventually have to surrender or starve. After eight days, Cornero surrendered, he said, "because I need a haircut." Law enforcement officers swarmed the ship, tossing all of its gambling equipment into the water.
Although the seized gambling ship operators maintained that their operations were legal and, consequently, acts by law enforcement upon raiding their ships amounted to piracy, the courts upheld Warren’s legal arguments. The California Supreme Court finally agreed that Santa Monica Bight should once again be known as Santa Monica Bay. Cornero himself, however, escaped facing any charges.
The Rex ended up being put into war service in World War II. It was later captured by a German submarine and sunk off the coast of Africa.