Gambling ships first appeared in Southern California in 1928 and were wildly successful from the beginning to the point where there was a virtual fleet of them off the shores of Los Angeles in just a few years. Their success was in their ablity to avoid California's anti-gambling laws by simply anchoring out of the state waters (3 miles) since federal law did not prohibit gambling.
Quite obviously, this did not sit well with state officals. Even then, California's Attorney General, Earl Warren dubbed them a nuisance. However, despite frustrated attempts to stop the operations, the state usually lost in court.
However, the most famous of all the gambling ships was the S.S. Rex run by Tony Cornero Stralla, started in 1938 after being released from prison in 1930 and failed partnership in one such venture. Cornero ran his ship like modern day Las Vegas casinos. He made it clear that his ship was free of illegal and rigged games, even going so far as to give a $100,000 prize to someone who could find one.
With virtually 1,000s of people on board at any given time, the Rex was sure to attract the eager eye of law enforcement. Indeed, with in a few months, Cornero was arrested by Los Angeles District Attorney Buron Fitts. In court, Cornero stated that Santa Monica Bay was actually Santa Monica Bight as a defense against Fitts arguement that since Santa Monica Bay, was a bay. That the legal coastline was an imaginary line between Point Vicente and Point Dume. Cornero won on his appeal and subsequently returned to the Rex.
By 1939 the state was through dealing with the gambling ships and put an end to them once and for all. Earl Warren believed that states had the right to rid themselves of a nuisance (As stated above) even if they are out of state juristiction because the in the case of the gambling ships, they could lead to the creation of drug or brothel ships. Subsequently, the state issued a cease and decest order.
With no ships complying, law enforcement officers seized all but one...yes, the Rex. Apparently tipped off by insiders, Cornero gated off the Rex's landing platform and turned the hoses on the officers. Since none of the gambling ships had any engines, the people on board would eventually surrender from hunger, so the officers simply laid siege to the Rex in what became known as the Battle of Santa Monica Bay. Unfortunately, there were still patrons on board. Luckly for Cornero, they were allowed to leave (Since the were getting increasingly angry and threating).
After 8 days, hunger won out, and Cornero and his associates surrendered and tons of gambling equipment ended up on the bottom of Santa Monica Bight. Although all money from the Rex was taken, and Cornero persuaded to pay taxes for his operation, he avoided any actual charges. The Rex was then fitted with engines and went off to serve in World War II, where it was sunk by a U-Boat off the coast of Africa.
So ended the battle, and the California Supreme Court decided to rename Santa Monica Bight, Santa Monica Bay.
Sources
http://www.losangelesalmanac.com/topics/History/hi06ee.htm