By I. Nelson Rose
Published in Gambling and Public Policy: International Perspectives, 1991
Edited by William Eadington and Judy Cornelius
On September 6, 1989, the Oregon State Lottery began taking bets on games of the National Football League. Fifty years from now that date will be remembered as the beginning of the end of the Golden Age of Legal Gambling.
If the future depended solely on advances in technology, the future of gambling could be summed up in two words: ‘video poker.” The video poker machine is the closest thing we have to the perfect gambling device. It is fast, fun, easy to learn, has the potential for large jackpots, allows even novice players to gamble without being intimidated, and has at least the illusion that skillful participation will change the results. But we are not about to see video poker machines in every convenience store, at least not right away, no more than we are going to find the other great gaming fantasy, true sports betting, enter every home through the living room television set. The technology already exists, but other important factors shape what forms of gambling are allowed under the law.
The future of gambling is one part technology, and nine parts sociology, psychology, morality, tradition, demographics and pure irrationality. While the South Dakota State Lottery is introducing video poker machines as a form of “video lottery terminal,” the Mississippi Supreme Court is deciding whether simple charity bingo should be allowed. While state after state in the Midwest legalizes riverboat casino gambling, other jurisdictions do not even have state lotteries. The explanation for the haphazard way in which gambling seems to spread is more than mere regional biases; the future of legal gambling can be understood only by looking at patterns that have been established in the past.
It must be remembered that legal gambling is still viewed by a majority of the population as a morally suspect industry. This means that only certain forms will be allowed, and then only under limited circumstances. Often this means pure hypocrisy. Why else are the states calling their video poker machines “video lottery terminals?”
THE SPREAD OF GAMBLING
It is easy to fall into the mistaken assumption that gambling has become completely respectable. Every three years, the Institute for the Study of Gambling and Commercial Gaming of the University of Nevada, Reno, organizes an international conference on gambling; about one-quarter of the attendees are professionals associated with the treatment of compulsive gamblers. In 1987, throughout the Seventh International Conference could be heard numerous public and private lamentations about the spread of legal gambling; specifically, there were discussions by those involved with the treatment of compulsives about what should be done to educate legislators to stop the spread. In 1990, at the Eighth International Conference, not a single person raised the issue. In just three years it would appear that legal gambling has become an accepted part of American life. As an extreme example of this change, the Ohio Council on Compulsive Gambling came out in favor of the casino gambling initiative for Lorain, Ohio, in 1990, since it would have meant increased funds for its treatment programs.
However, focusing on individuals whose lives are most closely involved with gambling, either as operators or mental health professionals, presents a false image. The reality is more clearly seen in the vote in November 1990 for a legal card club in West Hollywood, California. The proponents spend $300,000 on a sophisticated campaign that included the distribution of 10,000 free video tapes. The proposal would have brought in $10 million a year in needed revenue for the city. Yet, the issue was voted down 75% to 25%; the proponents received only 2,461 votes.
Part of the answer can be seen in Americans’ attitudes toward legal gambling. Most people simply do not take gambling seriously, unless they are asked to approve it in their own backyards. Then, if it is viewed as one of the “safe kinds,” bingo or a state lottery, it will be allowed. If it can be isolated to mountain town, or somehow sanitized by 30 feet of river water, that is somehow also viewed as all right. But if the general population is asked to vote for casino gambling or slot machines where their children might be tempted to play them, then they will say no.
Not that virtually all of the spread of the fastest forms of legal gambling have come without the express approval of the general public. No state has adopted high-stakes casino gambling by a vote of the people since New Jersey in 1976; in fact, open campaigns for true casino gambling have been universally unsuccessful. The spread has been either through the adoption of seemingly harmless gambling, such as state lotteries, or through the actions of administrators, legislatures, or even the courts, in the case of Indian gaming in gradually increasing the speed and dollar volume of the games. Even Mississippi has now legalized high-stakes casino gambling, but it was done through a vote of the legislature, not the general population, and is limited to riverboats and only those counties where the local voters approve.
Gambling will continue to spread, in this manner, for the same reasons it has in the past:
1. The morality argument is dead. It is no longer considered acceptable to oppose gambling on the ground it is immoral. This reflects a general trend throughout the United States of the rise of situational ethics. But gambling opponents lost their main moral spokesmen. Once churches started running bingo games they lost the right to say that betting on a horse race is a sin. Government no longer enforces morals. Seventy years ago all gambling was illegal and it was a crime to sell someone a drink. Today, government is selling lottery tickets and bets on football games and there is talk of legalizing drugs. With no one to say what is right or wrong, everything has become a cost/benefit analysis. And gambling makes money, even accounting for social costs, particularly if it is run as a monopoly. It is certainly less painful to start another game than to raise taxes.
2. Government has said it is okay. With all the talk about forbidden fruit, it is important to remember that most people will not break the law, even if they will not get caught; drivers stop at red lights at 3 a.m. in the desert. There are also millions of adults who believe government knows best and will protect them; it is not a coincidence that George Orwell called his 1984 dystopia dictator “Big Brother.”
3. The outrageous becomes acceptable if taken in small doses. This is the tremendous power of incremental change. The first state lottery of this century, the New Hampshire Sweepstakes in 1964, cost $3, required players to fill out a form, and drawings were held only twice a year; it was a financial failure. New York followed; but it too did not live up to its expectations. But other operators, particularly New Jersey, discovered the secret of marketing gambling, making lottery tickets cheap and drawings often. In a series of short steps, twice-a-year to weekly to daily drawings to rub-off tickets, we have arrived at Player Activated Terminals, where the lottery player can put money into a machine and be paid on the spot. Thirty years ago it would have been unthinkable that states would be operating such slot machines.
4. The domino effect. New Hampshire was first, but 80% of its players came from New York, Massachusetts and Connecticut. The second lottery was New York, the third, its neighbor, New Jersey. When every state has lotteries, the first to introduce off-track betting or casinos has an advantage. In the next few years, the non-lottery states will fall like dominoes; in fact, Texas is the only prize left worth pursuing. Low-stakes and riverboat casinos will spread like ripples in a pool throughout the middle of the nation.
5. The easy money is not so easy; states are hooked on gambling. Lottery tickets are poor consumer items; people buy them for a while and stop. States are forced constantly to come up with more promotions and new games. Lotteries want desperately to get into sports betting; they will, starting with sports cards. States like Iowa, which thought they could sit back and make millions on $5 maximum casinos on riverboats, will find that the state will have to constantly support the enterprises, particularly during winter, and come to the rescue of failing operations.
6. Gambling begets gambling. Players always want games that are faster and easier, with at least the illusion of player participation. The faster and bigger versions of the state lottery have almost wiped out the instant ticket games; casino table games are dying out, with many casinos becoming nothing more than video slot warehouses. Eventually we will see video poker machines and lottery terminals in every city.
7. Competition for the gambling dollar is fierce. Casinos in Nevada have had to introduce Megabucks and million dollar keno games to compete against California’s lottery. Innovations, like state-wide electronically linked video poker tournaments, wait to be developed. Bingo games on Indian land are already linked by computers and satellites, MegaBingo offers a guaranteed prize of $1 million. Race tracks, having lost their customers to lotteries and casinos, will soon offer slot machines, telephone wagers and sports betting theaters. Off-track betting parlors will spread, with more exotic bets like “Pick 9” to compete against lotto. Charities, hurt by state lotteries and Indian games, have already asked for permission to raise their prize limits, to play keno in the name of bingo, and to dispense break-opens from vending machines; electronic bingo devices are being tried everywhere; charity-run sports books may be next. With Indians operating their high-stakes casinos in South Dakota, will the state legislature still limit casino gambling to $5 bets in Deadwood? Iowa thought it would have a monopoly with its riverboat gambling, a parasitic casino industry growing fat off the Chicago market. But, you cannot prohibit other jurisdictions from legalizing; Illinois will beat Iowa at its own game, while the courts will allow Iowa Indians to offer high-stakes casinos on their land throughout the state.
8. Operators push to the limits. Games like MegaBingo are already going across country, and soon they will be international. Bingo and lottery devices are the next electronic frontier, since slot machines are the fastest developing part of the casino industry. Casino gambling will continue to come in the back-door through acceptable alternatives, such as riverboats. The wild card is the Indians, who may offer sports betting and lotteries by phone and mail before the public is ready.
THE THIRD WAVE REVISITED
In my 1986 book, Gambling and the Law, I wrote that a third wave of legal gambling is sweeping the nation. Five years later it looks like I was too conservative; it is not a wave but a virtual explosion. I am not talking just about the money, although that is significant.
We know that over $200 billion is bet legally each year. And that does not include illegal sports wagers, which may be the biggest form of gambling in the country. To give a comparison, even in 1989, the best year in motion picture history, with Batman I, Ghost Busters II, Indiana Jones III, Star Trek V and James Bond XIV, all of the movie theaters in the United States took in about $8 billion, only 3% of the amount bet legally and about one-third of the total amounts won by commercial gaming industries in the U.S. State lotteries alone sold twice as much as the movies.
It is not just the money, but rather the general availability of gambling that is the real story. For the players this looks like an unmixed blessing. With only a little effort, gamblers can find any type of game or bet they want. And since these wagers are legal, and usually heavily regulated, they know that the game is honest, they will be paid if they win and will not, be robbed on the way to the car, and they will not be arrested for simply making a bet. For legal gambling operations, the blessing is definitely mixed. New games introduce new players to gambling, but competition for the gambling dollar is fierce. As Amie Wexlet, Executive Director of the New Jersey Council on Compulsive Gambling, put it, “The gambling dollar is like a rubber band: it cannot be stretched forever.” Another analogy may be more appropriate: the legal gambling dollar is like a child’s rubber balloon: the more available gambling is, the more people will gamble; however, players can only lose their gambling dollar once, and if the balloon expands too far, it will burst.
We really do not know where the new forms of gambling are drawing their money, but they are hurting the established operations. My impression is that most people do not treat gambling money as merely part of their entertainment, budget. People are spending just as much on movies or beer as they were before the current gambling boom. So where is the money coming from? The California Lottery, for example, sold over $2 billion in tickets in 1990, and kept half. Overall, the total amount bet went up, but local race tracks suffered some slowdown, as did some slot machines in Nevada. Even more important for legal gambling operators, and eventually for players, is what the spread of gambling means for the future. It is important to remember that the prior two gambling waves ended with nation-wide prohibitions on gambling. Is the current boom headed toward the same bust?
THE OUTCOME OF THE THIRD WAVE
Like a prophecy fulfilled, it looks like we are doomed to repeat our history, having failed to learn the lessons of the past. Twice before in American history players could make legal bets in almost every state, but these waves of legal gambling came crashing down in scandal and ruin. Perhaps it is our frontier mentality; Americans are always flip-flopping between having the law simply outlaw what everyone agrees is illegal, like murder, and trying to enforce morality, like Prohibition. We have the most trouble with the morally suspect industries, alcohol, drugs, abortion, and gambling. Although the Prohibition Era is the best example, American law has always contained limits and prohibitions that large numbers of the population violate on a fairly regular basis, often without even knowing they have broken the law.
The anti-gambling prohibitions epitomize the traditional approach taken by American laws. These laws are not only designed to protect people from themselves, but are part of a greater moral framework designed to reflect the legislators’ and courts’ views of a paradigm society. The voting public accepts this approach to laws regulating behavior indulged in by a large percentage of the population. Surveys and election results have shown that voters want most of the anti-gambling laws to stay on the books, even if they do not want those laws actively enforced.
Or perhaps our cycles of complete prohibition to complete permissiveness and back again can be explained by our tendency to go overboard. American business is very good once it is turned loose; multi-billion dollar corporations are now devoting their resources to finding more ways to extract dollars from losing gamblers.
Legal gambling is in danger today from a massive dose of self-delusion. The corporate and government executives and accountants who run the games have convinced themselves that everyone has accepted gambling as merely another form of entertainment. They forget that for hundreds of years gambling was viewed as a vice, or worse, as a sin. You cannot erase a life-time of learning through even the best television ads.
But a casino is not an adult Disneyland. The casino’s goal is to make as much money as it can by beating its own customers in any way short of losing its license. As one extreme example, Nevada casinos know that in the 60 years that gambling has been legal; no casino has ever been fined for allowing minors to gamble. To exploit this opportunity, some casinos in Las Vegas entice children in by setting up low-stakes blackjack tables on weekends and by not checking the identifications of slot players, unless the minor wins, then the casino refuses to pay! When the casino wins it keeps the child’s money; when the casino loses, it keeps the child’s money; and when the casino gets caught gambling with children, it pays no fine.
Disneyland would not exploit minors, or drunks, or compulsives, even if it could get away with it. But some casinos do it every day and then lie about it, even to themselves. A large gambling operation has no morals.
No one would ever suggest outlawing The Magic Kingdom, but one good scandal and there are millions who would jump at the chance to get rid of legal gambling. Since scandals are inevitable, they may get their wish.
Sometimes it is unfortunate that our memories are so short; we believe that what we see about us has always existed and will continue unchanged indefinitely. Of course, there are natural restrictions even the best memory cannot stretch beyond a human lifetime. Historical writings allow us to reach backwards in time, but we lose the emotional feel of what went before.
Gambling has once again spread virtually everywhere in the United States, and in every form. But it is this very success that may eventually spell doom for the legal games. The problem, as Dr. Valerie C. Lorenz, Director of the National Center for Pathological Gambling, has put it, is that “There is a pervasive atmosphere of gambling in this country.” Twice before in American history when gambling was available everywhere it led to complete prohibition.
PATTERNS FROM THE PAST
To see where we are going it is first necessary to review where we have been. With legal gambling in America we find patterns of booms and busts that repeat in great seventy year cycles.
Gambling has had a recurring, consistent pattern throughout the country’s history, beginning in the earliest colonial period and persisting up to the most recent elections. When all forms of gambling are illegal there is pressure for legalization, first of one game and then, gradually, of all forms. Although it may be illegal, many people are gambling, at either social games or underground commercial lotteries, race books and casinos. The anti-gambling laws are difficult to enforce and the general population does not want arrests made anyway, if it means taking police resources away from more serious crimes. The result is widespread evasion of the law, leading to disrespect and corruption of law enforcement and the legal system. The response by the public is a demand for reform, for something to be done to prevent involvement by officials in these areas of moral ambiguity, for legalization.
Sometimes the breakthrough in the flat prohibition on gambling comes from the legalization of a seemingly benign form. Charity bingo, for example, is often seen as a relatively harmless game, a means of raising needed money for worthy causes, not as a form of dangerous gambling; although, the reality can be something far different. (Today, charity bingo is the least regulated form of commercial gambling.) State lotteries are sold as a voluntary tax; the California Lottery even took the official position that buying a lottery ticket is not gambling, but merely a fun way to raise money for education.
Once one form of gambling has been legalized, the anti-gambling arguments based on morality begin to fade away. Legalization of gambling seems to correspond with a general trend toward permissiveness in society. The Victorian morality that says nothing is permitted is replaced by the belief that everything is permitted, so long as you do not hurt another person. And gambling is the least harmful of the victimless crimes.
People see the state legalization of one game as the moral approval of gambling in all forms and see hypocrisy in the remaining prohibitions. Even the legalization of a game by a neighboring state can start the decline of the moral barriers against gambling. It is difficult for a state official to argue that a lottery would be immoral when his constituents are going across the state line by the millions to buy tickets.
Once the idea of legalized gambling has been accepted, at least in principle and even if only with a single game, proponents can direct discussion away from morality and toward cost/benefit analyses of various other games that might be legalized. Once all of the states in a region have the same game, the first to legalize a new game has an advantage and can siphon off the disposable income of its neighbors, until they too install that game. A domino effect is created, as can be seen by the spread of state lotteries from state to state throughout the Northeast and now across me nation.
Meanwhile, the police and prosecutors are finding it increasingly difficult to enforce those anti-gambling laws that are still on the books, and venality is growing. Even the police begin to see hypocrisy in trying to prohibit a wager when an almost identical game is being actively promoted by the state. Again, there are cries for reform and for a relaxation of the laws against all forms of gambling.
‘This is where America is in the 1992, with the wave of legalized gambling still rising throughout the nation. In the past, the wave continued to grow until many forms of gambling became legal, widespread and commercialized. At this stage in the cycle everyone seemed to be playing and the amounts of money involved were staggering. Those few prohibitions that still existed were virtually ignored by the police, and venality and corruption became widespread and open, with some officials instituting a “licensing” system of posted bribes for gambling establishments.
Historically, the next stage has been a devastating deluge of public scandals. Legal gambling is very big business with very few paper records; of the at least $200 billion that is bet each year, most is in the form of untraceable cash. It is not difficult to understand the temptation to rig the outcome of a legal game. But cheating can be devastating to the long-term acceptability of the game. Players can live with adverse odds, but cheating cannot be tolerated, particularly when it results in winners not being paid. Add well-publicized incidents of cheating to public disclosures of official corruption and a reawakened morality, and the result will be a call for sweeping reform, for turning out of office all tainted officials, and for closing down the games.
What appears to be the final stage of the cycle is the revolt by the majority of the population, sweeping in an era of reform, of moral fervor, and with it an attempt to outlaw gambling forever. Statutes and even constitutional amendments are passed to lock in the prohibitions on gambling. Of course, this stage of prohibition only leads, inevitably, to the next stage where demand once again builds for a legalization of some forms of gambling. The first wave of legal gambling began even before there was a country. The American colonies were awash in legal gambling: they were founded by lotteries. The first race track was set up in New York in 1666. But by the 1820s and 1830s numerous well-publicized scandals and the spread of Andrew Jackson’s reborn morality brought gambling, particularly lotteries, into nearly universal disrepute. By 1862 only two states, Missouri and Kentucky, had legal lotteries.
The second wave came with the Civil War and the expansion of the western frontier. Licensed casinos dominated the heart of Gold Rush San Francisco and tickets for the infamous Louisiana Lottery were sold in every city and by the millions through the U.S. Mail. Again, scandals and the spread of Victorian morality spelled the end. In 1909, the territories of New Mexico and Arizona were forced to outlaw casinos if they wanted to become states. By 1910 only Maryland, Kentucky and New York allowed betting, and only on horse races, and in that year New York closed down its tracks. Even Nevada outlawed all forms of gambling.
The third wave began with the Depression. In the 1930s Nevada re-legalized casinos, 21 states opened race tracks, and charities began playing bingo, in open violation of the law. The 1940s saw the race track boom continue and casino gambling come to Puerto Rico. Bingo and social gambling began to be legalized in the 1950s, but it was not until the 1960s that the states got into the act: New Hampshire rediscovered the state lottery in 1963.
GAMBLING AND CONTROVERSY, GROWING TOGETHER
Today, legal gambling is the nation’s fastest growing industry. Small stakes charity bingo has become million dollar Indian satellite bingo, video and cable bingo, keno games, vending machines selling pull-tabs and, in states like Maryland, three reel slot machines. In fourteen states, charities run full-scale casinos.
We are already seeing some backlash in the form of extremely negative commentaries, particularly against government’s role in promoting state lotteries. But the problem goes beyond the media. A friend told me he was shocked and depressed to go back to his 25th year reunion and see his old high school auditorium turned into a casino, with craps, blackjack and roulette for a different charity every night. This is a man who regularly takes trips to Nevada and plays poker in the card rooms of California, but, like most of us, he wants his gambling isolated, kept apart from his “real” everyday life. “Casinos are okay in Las Vegas, but not in my home town.”
The new Charity Games Advertising Clarification Act, 18 U.S.C. 1307, which went into effect in May 1990, lifted most of the federal restrictions on state lottery commercials and all such limitations on charity gambling. Indian games were exempted in 1988. By 1993 the country will be blanketed in newspaper and magazine ads and radio and T.V. commercials for state-run sports cards, charity games and Indian off-track betting, high-stakes bingo and casinos, For-profit commercial casinos are legal not only in Nevada and Atlantic City, but also in Puerto Rico; Deadwood, South Dakota; three mountain towns in Colorado; on riverboats in Iowa, Illinois, Mississippi and Louisiana; and on day-trips to nowhere from the ports of Texas, Washington, Florida and elsewhere. The federal Indian Gaming Regulatory Act “grand fathered-in” high-stakes commercial casinos on Indian land in North Dakota, South Dakota, Washington and Michigan; and accidentally opened the door to much, much more. The tribal-state compact has already been signed, as ordered by federal courts, allowing the Mashantucket Pequot Tribe to open a high-stakes casino in Connecticut, because that state allows charities to run low-stakes “Las Vegas Nights.”
Race tracks have been found in almost every state for decades. But the big growth in the 1980s has been off-track betting. Most common are inter-track wagers: virtually every track allows bettors to wager on races being held at another track. But, off-track betting has also spread to county fair grounds, where there may not even be a track, and luxurious teletheaters, with restaurants and wide screen closed circuit television.
Gambling is not limited to licensed games. Mailboxes are stuffed with “You May Already Be A Winner” sweepstakes. Gambling came back to the stock market for the first time since the Great Crash of 1929, with similar results, when Congress overrode state anti-“bucket shop” laws to legalize trading in stock index futures.
And then there are the state lotteries.
If you think about it, it is extremely strange for governments to be pushing lottery tickets. The lottery is the only consumer product actively promoted and sold by the state. The state does not sell toothpaste, or even brushing your teeth, but it now tells people they should gamble. In those few states where the government owns all the liquor stores the state does not actively try to get people to drink. (Well, not exactly. The state of New Hampshire owns all liquor stores and actively advertises to customers in Massachusetts, which still has Sunday “blue laws.”)
Lotteries were made legal, originally, because of the old argument: “people are going to gamble anyway, so it is better for government to get the money than organized crime.” Why then is any form of gambling allowed to advertise, particularly one run by the state. State lottery directors are in a bid. Like any retail business, their immediate concern is to make the maximum amount of sales. Today, lotteries are the only part of government whose sole purpose is to make as much money as it can. The main marketing concern of every lottery directory is how to attract new players. But the lottery, as a part of state government, faces political restrictions that are not imposed on private enterprises.’ For example, no state lottery would promote sales through welfare offices or to the unemployed, although, these are natural marketing targets.
There is, however, an additional danger; lotteries do not realize that the more successful they are, the faster they will be outlawed. A Pennsylvania television commercial shows a woman sticking her tongue out and giving her boss the “raspberry” after winning the lottery. Gamble and you can quit work. Should government be sending this message? Or similar ads, which knock people for saving when they could be buying lottery tickets.
The greatest enemy of legal gambling is the work ethnic state lotteries are picking on a sleeping giant that could, and will, destroy them in an instant if suitably aroused.
The California Lottery had so much negative publicity in 1990, when it changed from a 6/49 to a 6/53 lotto game, from odds of 1 in 14 million to 1 in 22 million, that it was forced to change the basic character of its ads. The original idea had been to create “lotto fever,” to attract upper-middle class individuals who will not buy lottery tickets unless the amount is a life-changing jackpot. But the Lottery found that even a prize of $60 million does not make the front pages any more, especially when Florida had a $100 million prize the same week. So, the Lottery is running ads telling how much they are doing for schools, and other spots featuring a player who won $12 million and kept his job. The Lottery is also looking to expand its games, including introducing a game with lower odds for hard-core players.
Nobody has bothered to ask whether this is the proper role for government. Should it be the official policy of the State of California to get people to start gambling who otherwise would not make a bet?
In communist countries (those that are left), the government owns everything; in America, the only retail businesses owned by government are liquor stores in a few states, and state lotteries. Why not let private enterprise run the lotteries? If making money is the goal, why doesn’t the state own all the restaurants, or open its own brothels?
The answer is that gambling is still morally suspect. History has shown that private ownership of lotteries leads to widespread cheating. One hundred fifty years ago lotteries were outlawed because they sometimes did not have a drawing at all, the operators simply kept all the money. A game with terrible odds, if the only game in town, is one thing. But no gambler will stand for a game where no one wins.
On the other hand, gambling is not as morally suspect as prostitution; there are no state-run brothels. The problem for legal gambling is that it has become too respectable.
The state with the most forms of legal gambling is Iowa, not exactly a bastion of hedonism. Nevada has no state lottery; New Jersey has no legal poker games of pull-tabs. Iowa has all that and more: all forms of casino table games and slot machines, and wagers on greyhound, quarter horse and thoroughbred races. The only thing missing is sports betting, and it is coming.
In other countries legal gambling is more stable. The Italian lottery, Lo Giuco del Lotto del Italia, has had almost constant weekly drawings since 1530. It usually takes a major political revolution to change the games abroad: gambling returned to Spain with a vengeance with the rebirth of democracy after the death of the fascist Franco in 1975. Foreign legal gambling is definitely booming, and may, in fact, also be heading toward a fall. Technology, and hard sell, are becoming international; a T.V. commercial in Poland, at the time it was a communist country, showed workers leaving their desks to watch the results of that country’s Big Spin.
We are not alone in refusing to recognize the danger widespread gambling presents to itself. The Japanese stock market in the late 1980s deflated in a classic speculative bubble. When people “invest” for short-term large profits, in the belief the government cannot let the market fall, you can be sure that the market is heading for a crash.
Whatever happens abroad, we know the history of gambling here at home. In America legal gambling self-destructs after a few decades.
THE BOOM AND BUST: HOW IT MIGHT HAPPEN
It is difficult to predict the exact scenario of the coming boom and bust. In 1979 I wrote a Fordham law review article (Rose, 1979) showing how legal gambling would spread through America. Building on my earlier work, professors John Dombrink and William Thompson, in their recent book The Last Resort: Success and Failure in Campaigns for Casinos (University of Nevada Press, 1990), have shown that people treat different forms of gambling differently: casinos are considered so dangerous that any one powerful political actor, such as a governor, can defeat a move to legalize, while lotteries are not treated seriously, so that it is almost impossible to defeat them at the polls. They could have added that most people treat charity bingo as if it is not
gambling at all.
What none of us predicted was how legal gambling could get around these barriers. Lotteries have spread everywhere, but so have casinos, in the publicly acceptable forms of low-stakes games for charities, worthy causes and on riverboats: casinos by subterfuge and camouflage. High-stakes gambling came to Indian reservations through court cases and a desperate political compromise in Congress.
The timing of the waves is also sketchy; it is hard enough to see what is happening around us without trying to predict how people will feel in forty years.
The short to intermediate term prediction, now through the next few decades, is easy: more gambling and more changes in the law.
In the eyes of the law, gambling is still a morally suspect industry. Unlike traditional businesses, like manufacturing, legal gambling cannot even exist without a change in a state’s laws. Legal debris from the crashes of the prior two waves of the 1820s and 1890s remain on the books. Often state constitutions or federal criminal statutes have to be amended to allow a game to exist, and these changes in the law are often difficult to accomplish. In the view of some in power, like the U.S. Treasury when it imposed reporting requirements on casinos in 1985, they would be just as happy if this cash-based sinful business simply went away.
As more forms of legal gambling become established, even in neighboring jurisdictions, the moral barriers against changing the law begin to drop. Law always trails society. It is an indication of how respectable gambling has become that the United States Supreme Court for the first time heard a number of major and minor cases in the decade involving legal gambling. The most dramatic reversal of the law’s traditional antipathy toward gambling came in the Supreme Court’s 1987 decision that a full-time gambler could declare himself to be in the trade or business of gambling for tax purposes. The case involved a handicapper who spent all his time at the track, but, importantly, at the end of the year he had lost more than he won.
Lower courts are also changing their views toward legal gambling. The spread of state lotteries makes it hard for a state to say it has a public policy against gambling. This directly affects the rights of licensed casinos to collect gambling debts. The last decade already saw major breakthroughs on the collect ability of casino debts in non-casino states, including California. The next decade will see a 100% reversal, from an overwhelming majority of jurisdictions closing their doors to collection suits to virtually every state acknowledging that it no longer has a public policy against legal gambling.
But respectability has a price. Courthouse doors are also being opened for suits against casinos. Courts are creating new duties for gambling establishments, toward their employees, patrons and third parties. Dealers, who were always considered at-will employees who could be fired without cause, have won wrongful termination suits, claiming sex discrimination. A federal judge in New Jersey ruled that casinos have the same obligations as bars, declaring, “a casino has a duty to refrain from knowingly permitting an invitee to gamble where that patron is obviously and visibly intoxicated and/or under the influence of narcotic substance.” GNOC Corp. v. Aboud, 7 15 F.Supp. 644, 655 (D.C.N.J. 1989).
Compulsive gambling was recognized as an official mental disease by the American Psychiatric Association in 1980. Courts are struggling with the concept; after all, the law does not punish people for being ill, nor reward businesses that exploit the sick. So far, the legal gambling establishments have prevailed, but in all likelihood before the turn of the century a casino, racetrack, state lottery or bingo hall will be hit with a multi-million dollar verdict because a gambler embezzled or committed suicide.
The next two decades offer once-in-a-lifetime opportunities, and dangers. It is not too late to begin major projects; legal gambling generates so much cash that even a massive casino project like The Mirage in Las Vegas will pay for itself in a few years. But operators who hesitate too long will be lost. Because everything we see around us, from casinos in Reno to state lotteries to charity bingo games, is going to be outlawed.
The crash will come when the general population says, “This is too much.” Many visitors are turned off by Nevada’s slot machines in grocery stores; how will they feel if they see similar devices at home, run by charities or the state lottery?
The next crash will be triggered by scandals, inevitable given the enormous cash involved. State lotteries, the most heavily regulated, honest businesses in America, have already been rigged by insiders. Imagine the public reaction if lottery personnel fixed a $100 million prize.
The lotteries have become lax in their security. It is impossible for a state lottery to even attempt to police professional football games. I asked an official of the Oregon State Lottery how he would respond to someone fixing an NFL game. His response, “Cheating is the NFL’s problem, not ours.”
Sports betting will speed the fall. Security of the game is impossible; after all, how much does it take to bribe a college kid, especially when he does not have to lose, only shave a few points? And if it is okay to bet on pro and college games, how about high school games? Alabama was hit in 1989 by a scandal over alleged fixing of prep school games.
Think of the message large scale sports betting conveys to our children: “It’s not whether you win or lose, but if you beat the spread.” As a short-term solution to increase sales, it makes sense for state lotteries to embrace sports betting. As for its long-term impact, sports betting is self-inflicted poison.
In 1974 the NFL took Delaware to court to prevent the lottery from running a football betting game – and lost. The game was so poorly designed and the opposition of organized sports was so great that no other lottery dared try it. Until now.
No one connected with the Oregon Lottery sees the irony, or the danger, in basing the game on point spreads set by Nevada odds makers. No one realizes that people will eventually rebel against the image of the state as bookie.
Sports betting will spread quickly, once a successful game format is developed. As state after state begins to offer variations on sports cards, a lottery director will find it impossible to turn them down, especially if he wants to keep his job. Oregon started with a complicated game involving many teams; other states will first copy, then go to simpler sports cards, direct bets, and, eventually, in-store Player Activated Terminals and at-home telephone bets.
The danger of sports betting to legal gambling can be seen in the Pete Rose scandal. If legal gambling makes our heroes more interested in winning a bet than in winning the game, it is not only heroes that will go, but gambling.
Legal gambling will die if it is hit by scandals at the same time the nation is undergoing a rebirth of conservative morality. Victorian morality, which tells people what they should and should not do, even in the privacy of their own homes, is not dead, only sleeping.
It is somewhat amazing that gambling spread so far during the Reagan era; it is difficult to imagine Dwight Eisenhower pushing state lotteries. There is a theory that America goes through 30 year cycles, the 1980s were like the 1950s, etc. This means we are due for another swing to the right in the 2010s.
It is easy to imagine a reborn morality sweeping the nation in the year 2019 or earlier. Legal gambling will be only a small part of a general moral upheaval. A majority of the population probably already by their arguments: “homosexuality is not merely an alternative life-style; a woman should not be allowed to have an abortion simply because pregnancy interferes with her tennis lessons; there is too much sex and violence in the media; legal gambling is destroying the work ethic.”
If the big crash comes, who will survive? State lotteries will be the first victims; they are creatures of the state that can be erased by a swipe of the pen if they are seen as doing more harm than good. Similarly, the experiment in Atlantic City is just that, and experiment; and when experiments fail they are quickly discarded.
Indian gambling is more difficult, since the tribes are so dependent on it for revenue. But if gambling is once again seen as morally repugnant, the federal government will step in. The Bureau of Indian Affairs prevented Nevada’s Moapa Band of Paiute Indians from opening brothels, even though prostitution is legal in that state.
Charity gambling will also be outlawed; it will not go underground like in the Depression, but rather will be gone completely, if it is viewed as morally wrong. Licensed card rooms in the Western states will also disappear.
Illegal and social games will continue, as they always have, eventually giving rise to a new round of legalization.
Nevada presents the most interesting question. Reno might outlaw gambling, but could Las Vegas survive without casinos? Even if there is universal, national pressure against gambling, southern Nevada could hold out. However, a social movement to outlaw gambling could force Congress to outlaw everything under its power to regulate interstate commerce.
Skimming, children gambling, compulsives, suicides, embezzlements, and simply too much hard sell; mix in a juicy scandal, perhaps another rigged world series or, better, the Olympics; add in a rebirth of morality, a national desire to return to traditional values, and everything we see about us will once again be outlawed. First gambling has to spread everywhere, and there is plenty of room to grow. The 1990s and the first decade of the 21st century will be the final boom. By 2029 it will all be outlawed, again, for a while.
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