Stop Predatory Gambling

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A Failed Government Policy

Government sponsorship of casinos and state lotteries is a major contributor to the unfairness and inequality in American life. It is an experiment that has failed.

It has failed to expand the middle class and driven citizens deeper into America’s debt culture.

Predatory gambling has created a Lottery Class in America. While most of us save and invest money in retirement accounts and 529 college funds for our kids, government is turning hundreds of thousands of people who are small earners with the potential to be small savers into a new class of habitual bettors – the Lottery Class. They represent the 1 out of 5 Americans who, according to the Consumer Federation of America, think the best way to achieve long-term financial security is to play the lottery.

A 2011 report by the Wisconsin Council on Problem Gambling (WCPG) lists the average gambling debt of the 14,380 people who called the helpline last year at nearly $44,000. And that is only for those people who called the helpline. WCPG estimates 338,000 people are compulsive or problem gamblers in Wisconsin – that’s 7% of the state’s population who are potentially facing similar levels of severe debt. That debt figure excludes the assets the gamblers already have tapped — such as annuities or 401(k)s — before maxing out credit cards or borrowing from other sources.

It has failed because overwhelming independent evidence has shown electronic gambling machines, the source for more than 70% gambling profits, are unsafe for widespread public use.

As 60 Minutes revealed in January 2011, electronic gambling machines like slots and video poker represent the purest form of predatory gambling and, not surprisingly, are the most profitable. A recent report prepared for the Ontario Problem Gambling Research Centre found that 60% of machine revenue was derived from problem gamblers.

According to the research findings of Natasha Schull, associate professor in MIT’s Program in Science, Technology, and Society and whose work was showcased in the 60 Minutes investigation, the machines are designed to get every user “to play to extinction’’ — until all their money is gone — by using technology described as a “high-tech version of loaded dice.”

Dr. Schull has testified that a slot machine is designed to be so effective at extracting money from people that it is “a product that, for all intents and purposes, approaches every player as a potential addict — in other words, someone who won’t stop playing until his or her means are depleted.” Dr. Bob Breen, the Director of the Gambling Treatment Program at Rhode Island Hospital, has been even more direct in his public comments about slot machines: “Given the right circumstances, almost anyone can get hooked on slots.”

Casinos then combine this slot machine design with state-of-the-art player tracking system technology using “loyalty cards. Leading casino businesses like Harrah’s can trace more than 75 percent of its gambling revenue back to specific customers. According to Winner Takes All, a fascinating look at the casino industry by Wall Street Journal reporter Christina Binkley, people are targeted based on factors such as how fast they play a slot machine and how much they wager, information that can be collected through their “Player’s Rewards card” because many players use these cards directly in the machine. The faster someone plays, the more likely they are to play recklessly. And reckless gamblers turn into out-of-control gamblers who make up 90% of the profits. The casino staff use statistical models to set calendars and budgets that predict when a targeted person will gamble as well as to calculate the person’s “predicted lifetime value” – the sum that each gambler is likely to lose to the slot machines over his or her lifetime.

It is time we stopped pointing fingers at the people using electronic gambling machines as the “problem” and instead, focus our attention on problem machines, problem environments and problem business practices.

It has failed because casinos and state lotteries are the most predatory business in the country today.

Casinos and state lotteries rely on a business model based on addiction and indebtedness. Eleven independent studies show that between 40%-60% of slot machine profits are taken from citizens who have become problem gamblers.Some of the predatory practices used to incite out-of-control gambling include: using mail, phone and email solicitations to offer free slot machine play; giving visitors interest-free loans known as “markers” that are gambled away inside the casino; aggressively targeting people who use casino ATMs because they demonstrated a weakness to chase their losses; using “hosts” who are in constant contact with heavy gamblers away from the casino to lure them right back; enlisting “Luck Ambassadors”- casino employees who hand out small cash vouchers to losing gamblers identified by the player tracking system in an attempt to uplift their spirits and keep them in front of the gambling machine in real time on the casino floor; and providing gamblers free alcohol, free meals and free lodging.

State lotteries make 80% of their profits from 10% of its users.

It has failed to validate the myth that people will gamble anyway and money will be recaptured from going out-of-state.

Many public officials rationalize their support for predatory gambling by saying people will gamble anyway and they are already traveling to a neighboring state to do it. While that may be true for a few, the evidence is irrefutable that gambling interests in partnership with our government have turned a nation of small savers into a nation of indebted habitual bettors. In 1982, citizens spent $4.2 billion at casinos and $2.2 billion on lottery tickets for a total of $6.4 billion. In 2008, citizens spent more than $120 billion – $32.54 billion at non-tribal casinos, $26.7 billion at Indian casinos and almost $61 billion on the state lottery.

The  “going-out-of-state” argument has been and always will be a public relations tactic to allow casinos and lotteries to avoid intense scrutiny.

During the Pennsylvania Gaming Congress & Mid-Atlantic Racing Forum in early 2011, Ron Baumann, general manager of Harrah’s Chester Casino, said the customers in his database visited an average of 4.5 times a week. That’s almost 250 times a year! Robert J. DeSalvio, president of Sands Casino Resort in Bethlehem, acknowledged similar if slightly lower numbers. Wendy Hamilton, general manager of SugarHouse Casino in Philadelphia, said that a “large number” of her casino’s customers came “three, four, five times a week.”

When less predatory gambling is available, people lose less money and gambling problems are less. For example, South Dakota outlawed video slot machines for 100 days and the number of gambling addicts treated each month dropped by 93.5%.

Predatory gambling has failed because serious gambling-related problems are now an epidemic among America’s youth.

Serious gambling-related problems has emerged as an epidemic among America’s youth. Today, at least one out of every five young people has a serious gambling-related problem, up from one out of every ten in 1988.

Predatory gambling has failed as a form of harmless entertainment.

Advocates of the predatory gambling trade say it’s no different than other forms of entertainment. Yet a recent study commissioned by the New Hampshire Gaming Study Commission found that the introduction of a casino to the state would result in 1,200 additional crimes to the state involving money, automobile theft, burglary, and larceny. Because of these crimes and the expected rise in bankruptcies, home foreclosures, and suicide, the Commission also discovered that the introduction would cost the state nearly $70 million more than it would take in from revenue.

While predatory gambling has proven to be harmful, advocates continue to describe it the same as “drinking wine, going out to a restaurant or going to the movies.” Yet the owner of the vineyard drinks the wine he makes. The owner of the restaurant eats the food he serves. The movie actress watches the movies she makes. This is the only product or service where most of the people who own it and promote it, including public officials, don’t use it and don’t want to live near it.

The reality is people going to the movies, restaurants, plays, and sporting events don’t have a highly increased level of bankruptcy, criminal activity, spousal abuse, drug addiction or suicide. Gambling addicts do.

Predatory gambling has failed because it has turned many citizens who have never before committed a crime into criminals.

Desperate to “chase” and recover gambling losses, pathological gamblers often turn to crime. Fraud and embezzlement become common among formerly hard-working and highly trusted people because two out of three citizens have done something illegal to obtain the money to feed their gambling addiction, many of whom have never had any kind of criminal record before. There are now millions of gambling addicts across the country – in Wisconsin alone, 7% of its citizens are now problem gamblers.

Predatory gambling has failed as a form of limited and efficient government.

States have high costs for every dollar raised through predatory gambling. Further, the state lottery and casinos have become the most visible face of state government for many citizens – diminishing the dignity of the state and its traditions of service to citizens.

Taylor Branch, the Pulitzer Prize-winning historian of the Civil Rights Movement and biographer of Martin Luther King, described the government program of predatory gambling this way: “State-sponsored predatory gambling is essentially a corruption of democracy because it violates the most basic premises that make democracy unique: that you can be self-governing, you can be honest and open about your disagreements as well as your agreements, and that you trust other people that you are in this together. That’s what a compact of citizens is. And the first-step away from it is to play each other for suckers. We’re going to trick them into thinking they are going to get rich but they are really going to be paying my taxes.”

Predatory gambling has failed to protect the personal freedom of millions of Americans.

Predatory gambling operators and some public officials peddle the myth that casinos and lotteries represent “personal freedom,” attempting to elude charges of exploitation by pleading it is a “voluntary” act.” But the predatory gambling business model is dependent on addicted or heavily indebted citizens and it only works if our government, in its role as promoter and regulator, takes away the freedom of millions of Americans. By definition, someone who is an addict or someone who is deep in debt is not free. They have lost their free will and their freedom to choose. In a country where everyone is considered equal, where all blood is royal, how can the state actively promote a government program that renders some of our fellow citizens as expendable? John Stuart Mill, the father of the libertarian vision, famously wrote that each individual has the right to act as he wants so long as these actions do not harm others. Today, no business in America is doing more to harm others than the predatory gambling trade.

Predatory gambling has failed to gain strong public support.

The predatory gambling lobby promotes the illusion that public opinion supports their business by pointing to polls paid for by predatory gambling interests. Yet independent surveys reveal the opposite is true. A 2010 national survey on predatory gambling by PublicMind, Fairleigh Dickinson University’s research center, found that a majority of Americans believe casinos hurt local communities and among those who live within 30 miles of a casino, nearly one out of two people said casinos have a negative impact. And a 2010 poll in USA Today showed that casinos rank at the top of the list next to garbage dumps for most unpopular projects with 73% of the citizens in opposition.

Predatory gambling has failed to diminish organized crime.

No jurisdiction has EVER documented a decline in illegal gambling following the introduction of legalized gambling. In fact, illegal gambling tends to increase for a number of reasons. “We loved legalized gambling,” said former Chicago mob casino boss William Jahoda. “It created more customers for us.” Untaxed illegal operators can offer better odds, bigger payoffs and loans that legal operations cannot. Once gamblers start betting legally, they become less averse to gambling in unlicensed establishments. Law enforcement in gambling states view illegal gambling as a state revenue issue rather than a criminal activity, making enforcement less of a priority. Lastly, when commercial interests gained control of the casino business from organized crime, they obtained the ability and the license to abuse and destroy customers to an extent that was not possible when casinos were run by criminals.

Predatory gambling has failed to show it is the same as legalizing alcohol.

Drinking a glass of wine or a can of beer is far different than buying a $20 lottery scratch ticket or playing a slot machine. No sip of a Miller Lite has ever offered the false promise of “life-changing jackpots.” While alcohol can be habit-forming, no one has ever compared the potency of its high or the speed at which it addicts people to cocaine – like it has been proved with an intense gambling experience. One out of five Americans don’t think the best way to achieve long-term financial security is to drink Budweiser. Most tellingly of all, the vineyard owner drinks his own wine – most predatory gambling operators don’t gamble. Unlike the prohibition of alcohol, which most regard as a failure, the criminalization of casino gambling was successfully practiced for most of the 20th century.

Predatory gambling has failed to generate genuine economic growth.

Predatory gambling is a something-for-nothing scheme that veils the most cut-throat business in the country. It milks existing wealth instead of creating new wealth because it is a business based on people losing money.

The failed energy giant Enron, the subprime lender Countrywide Financial and jailed investment manager Bernie Madoff are all examples of businesses that employed people and made a lot of money. But hardly anyone believes these kinds of business practices are the right direction for the state and for the country. After a decade of housing bubbles and financial speculation, the days of phony prosperity are over.

Predatory gambling operators push the “jobs” story line for their public relations but no one defends these jobs as jobs with justice because they can’t. These are jobs with injustice. We are going to have to get out of this economic crisis the old-fashioned way–by digging inside ourselves and getting back to basics: improving U.S. productivity, saving more, reducing our debt, strengthening our families, studying harder and inventing more products and services to export.

Predatory gambling has failed as a revenue source for state governments.

There is overwhelming evidence proving the government program of predatory gambling has failed as a revenue source for our society. Despite promising it would fund public education, the California state lottery provides only 1.3% of the state’s entire education budget. States with lotteries and casinos have not lowered their taxes and according to the recent national report by The Rockefeller Institute, it has made their budget problems even worse. Predatory gambling costs more than the revenue it brings in, leaving those citizens who rarely gamble to pay the bill. Each compulsive gambler costs the economy between $14,006 and $22,077 per year, which is why in its recent independent study about the costs of predatory gambling, the 2010 New Hampshire Gambling Commission showed taxpayers will need to fork over an additional $68 million in taxes to cover the social costs of one proposed casino, 24% more than state government will receive in revenue. These numbers are only for one casino – there are now almost 900 casinos in America. It helps explain one of the reasons why casino states like California, New York, Pennsylvania, Illinois and Nevada face enormous budget deficits.

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