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  • July 11, 2014 - Reflections

    By Jean S. Horner
    The other day while walking down a corridor in a public building, I saw what appeared to be someone walking toward me. On coming closer, I found it was my own reflection in a huge mirror. For a moment it frightened me. Somehow a full-length reflection of one’s self is a startling thing. ...




Gambling, Gambling Everywhere

Online betting is new force in a nation saturated with casinos and lotteries


By John W. Kennedy
June 1, 2014

The casino gambling habit that a few Midwestern states took up in the early 1990s has spread throughout most of the nation, to the point where the market in various regions is saturated. There are 979 land-based, riverboat, tribal or racetrack casinos across the country.

Since the start of the recession that began in 2008, several Southern states have instituted lotteries and most Northeastern states have legalized casinos, ostensibly to generate new revenues or plug budget gaps. The Eastern Seaboard states of Florida, New Hampshire, Massachusetts, New York, and New Jersey all have seen proposals arise from multiple quarters to expand or create gambling options as an alternative to raising taxes.

But some states accustomed to plenty of long-standing gambling opportunities are discovering that profits from lotteries and tax revenues from casinos aren’t the cash cows once assumed. Revenues are declining in some locations, particularly in spots where neighboring states have gone into the gambling business.

In March, for example, Missouri lawmakers scrambled to find a solution for funding shortfalls for public schools and state-operated veterans’ nursing homes due to decreased takings at Missouri’s 13 casinos.  

“The more casinos there are in an area, the less of a need people have to drive elsewhere to gamble,” says Paul Davies, research fellow with the Institute of American Values. “Each state is becoming more dependent on local residents.”

A majority of states — 26 — now have casinos. Since New Hampshire established the first modern lottery 50 years ago, 43 other states have followed suit.


DESPERATE MEASURES

Delaware is an example of a state that has gone from unbridled enthusiasm to anxious desperation. Initially, the state hauled in hefty profits after legalizing slot machines and racetracks in 1995. But now that nearby Pennsylvania, New York, and West Virginia have sanctioned betting, few out-of-state residents travel to the three gambling venues in tiny Delaware.

Davies notes that at one point 8 percent of Delaware’s state budget stemmed from casinos. When the revenues inevitably began to dip, Davies says the state responded with more gambling choices: additional slot machines, sports betting, and ultimately online gambling.

Last year, Delaware authorized an $8 million bailout for its casinos to prop up the industry to which it’s now addicted.

When Delaware restaurants and bars lost business because of the inexpensive buffets and free beer at casinos, the state legislature legalized keno machines in those establishments as well.

“If you live in Delaware, you can pretty much gamble anytime, any place,” says Davies, who lives in nearby Philadelphia. “You don’t even have to go outside your house; you can gamble from your iPad or iPhone.”

New Jersey is in a similar dilemma, Davies says, with revenues down at Atlantic City’s 11 casinos by 40 percent because of increased competition from neighboring New York and Pennsylvania — the latter being the state that generates the most commercial casino tax revenue in the nation.

Last November, the Garden State launched Internet gambling in an effort to aid brick-and-mortar casinos struggling with deteriorating revenues. New Jersey levies a 15 percent tax on online gambling revenue, compared to 8 percent from casino structures. New Jersey has revised projected revenues because of lower-than-expected gambling taxes.


INTERNET GAMBLING

Since last year, three states — Nevada, New Jersey and Delaware — have sanctioned online gambling as a result of the U.S. Department of Justice clearing the path previously permitting only offshore wagering. The federal government now allows states to provide for Internet gambling as long as it doesn’t involve sports betting over a wire transmission. H2 Gambling Capital, a consulting firm, predicts 17 states will authorize Internet gambling by 2017.

In testimony before the U.S. House Committee on Energy and Commerce last December, American Gaming Association CEO Geoff Freeman declared online gambling a fixed part of the future.

“Americans will always gamble — offline, online or in whatever new form will be created tomorrow,” Freeman predicted.

Rachel A. Volberg, a problem gambling epidemiologist who is president of Gemini Research in Northampton, Mass., says currently only 1 to 2 percent of U.S. adults gamble online.

“There is always the issue that if you increase the availability of a particular form of gambling new people will be attracted,” says Volberg, author of When the Chips Are Down: Problem Gambling in America. “Or those who already are regular gamblers may take up this new mode of gambling and, for a variety of reasons, begin to encounter difficulties.”

Brick-and-mortar casinos are split on whether to embrace online gambling. Some owners are fearful of losing business, while others see it as an opportunity to lure new customers who get hooked at home.

Certainly if Congress decides that every state may sponsor Internet gambling, it would revolutionize the target population. The majority of casino patrons are older than 50; online players are much younger.

Davies contends the free games now available on social networking sites such as Facebook in which no money is exchanged are laying the groundwork for online gambling.

“The games are designed to get people, especially kids, addicted,” Davies says. “Once they are legalized, companies will flip a switch to take credit cards.”


NEW METHODS

Casino games have changed with the times, in large part to spur more betting. Around 85 percent of casino revenues are derived from slot machines, which are hardly the clunky one-arm bandits of yesteryear.

“Slot machines are now highly sophisticated computers with push buttons so multiple bets can be made in rapid-fire succession,” Davies says. “They are designed to get people to play for long periods.”

“Internet gambling leads to addiction faster and with greater certainty than other forms of gambling,” says Earl L. Grinols, distinguished professor of economics at Baylor University in Waco, Texas. “People also can lose a lot of money quickly.”

Grinols, author of Gambling in America: Costs and Benefits, says there are additional threats from online gambling. Large amounts of money can be easily laundered, he says, which can boost organized crime or terrorists.

Whereas betting is physically observable at brick-and-mortar casinos, electronic gambling has no such safeguard.

“The amount of fraud that can be perpetrated through online gambling is enormous,” Grinols says. “It’s virtually impossible to track, monitor or prevent.”

For the individual playing, the peril of playing via electronic machines is that the identity of other participants is hidden. For instance, Grinols notes someone playing four-handed online poker could be the victim of three other people who have schemed together to steal his money; or it might be a lone card player pretending to be three players in order to bilk the unsuspecting participant.


PROBLEM GAMBLERS

Repeatedly in the past 20 years research has shown casinos really won’t stay open without business from those roughly 10 percent of customers who can’t stop gambling.

“Between one-third and one-half of revenues casinos take in come from problem and pathological gamblers,” Grinols says.

The stakes are higher for online players because games can be accessed through computers, portable tablet devices and smartphones.

For problem gamblers, around-the-clock access to betting could mean money earmarked for hospital bills or car payments is quickly forfeited to online wagering.

“When gambling is made easier and more convenient it means new addicts and more addicts,” Davies says.

“There is easier access and greater convenience with online gambling because you don’t have to leave your home or office,” Volberg says. “But because there are no other people in the environment there is greater isolation. There aren’t any social cues that the person might be spending too much time at the activity.”

BENEFITS VS. COSTS

States sometimes justify being involved in promoting lotteries and casinos by touting that profits and taxes pay for everything from teacher salaries to additional police officers.

But Grinols points out much of the revenue generated by gambling doesn’t provide a ripple effect to benefit other businesses or society at large.

“When gambling merely transfers dollars from one pocket to another without creating a tangible product, we are made poorer,” Grinols says.

Grinols conducted the first full-blown cost-benefit analysis of gambling and determined that for every dollar of benefits generated by gambling, more than three additional dollars of cost are lost.

The dollars disappear because, among other things, problem gamblers steal money to cover bets, lose their jobs because of absences, and undergo mental health treatment related to stress. Family costs include higher rates of domestic violence, child abuse, and divorce among gambling addicts.

So while states claim gambling boosts the economy, in reality more money must be spent on social services to help gambling addicts recover from economic, emotional and physical turmoil.


SATURATED MARKETS

Only Hawaii and Utah have no forms of legalized gambling. The American Gaming Association reports that 53 percent of Americans buy lottery tickets and 32 percent engage in casino gambling.

However, state lawmakers desperate for funds are learning that gambling isn’t a bottomless fount. Last year the consulting firm Spectrum Gaming Group told Florida lawmakers gambling is so ubiquitous in the Sunshine State the economic boost by two new “destination” casinos would be fairly negligible on the state’s economy. Rather than primarily attracting out-of-state tourists spending in Florida casinos, the consultants found Floridians accounted for 93 percent of the revenue collected by the state’s slot machines at pari-mutuel sites and Indian casinos.  

In March, consultants Union Gaming Analytics hired by the Iowa Racing and Gaming Commission recommended the state should focus on reinvesting in its 20 existing casinos rather than licensing any new operations. New casinos would merely siphon off revenues from casinos already operating, the firm predicted.

“It’s disturbing that states are involved in partnering with businesses that have a business model goal of getting people to play until they are wiped out financially,” Davies says. “It’s bad for states to bet against their citizens and try to strip their wealth from them.”


JOHN W. KENNEDY is news editor of the Pentecostal Evangel.

 


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