Predatory gambling is NOT the Friday night poker with friends. Or the March Madness Bracket. Or buying a square in the Super Bowl office pool. Or the bingo night at a local Catholic church. Or a wager on the golf course with the guys from work.
These informal events are examples of social gambling. There is no “house” skimming a large profit, guaranteeing the participant will inevitably lose over the long-term. No one is wagering continuously at rapid speeds of every five seconds, for hour after hour. Very few people feel an intense “buzz” or high from the experience. There’s no aggressive and deceptive marketing to get people to gamble more often with bigger sums of money. No one is lending or borrowing cash to participate or ends up losing their entire pay check. It doesn’t go on 24 hours day, every day of the week, year round. And it doesn’t require the majority of Americans who rarely gamble to subsidize it with any of their own money.
Predatory gambling is when state governments partner with powerful corporate gambling interests to use commercialized gambling – gambling being run as a business – to exploit citizens and their communities. Unlike any other business, in commercialized gambling there is a predatory and adversarial relationship between the gambling operator and its customer, the gambler. They are trying to take you down.
Putting it another way, predatory gambling is the product of combining a known dangerous and addictive product with a fraudulent and manipulative financial scheme.
What separates commercialized gambling from every other business, including other vices like alcohol and tobacco, is it’s a big con game. It’s a form of consumer financial fraud in the family of price-gouging and false advertising.
If you pay for a pizza, a ticket to a sporting event, or a glass of wine, that’s what you receive in return. It’s a one-for-one exchange. In commercialized gambling, what you receive is a financial exchange offering the lure that you might win money. But this financial exchange is mathematically stacked against you so inevitably you will lose your money in the end, especially if you keep gambling. Citizens are conned into thinking they can win money on games that are designed to get them fleeced in the end. Success only comes at someone else’s expense.
This con is the reason why commercialized gambling is still illegal unless you partner with state government. None of us can run our own state lottery. None of us can run our own casino or online gambling business unless we’re in partnership with the state.
The most revealing truth about the con behind commercialized gambling is that nearly all of the people who profit from regional casinos, lotteries, and online gambling, along with the public officials who lobby to bring them in, don’t gamble themselves. We have awarded these individuals special status by inducting them into “The Hypocrite Hall of Fame.”
The most profitable form of the con for gambling operators (and the most dangerous and financially harmful to the user) is rapid-play gambling games like slot machine-style games, in-play betting, and lottery scratch tickets. These games are designed mathematically so users are certain to lose their money the longer they play. (See image on left.)
Image credit: Natasha Dow Schull, PhD, Addiction By Design, Machine Gambling in Las Vegas, available at http://press.princeton.edu/titles/9156.html
Over the last fifty years, gambling has been transformed from a private and local activity into the public voice of American government, such that ever increasing appeals to gamble, and ever-expanding opportunities to gamble, now constitute the main ways that our government communicates with us on a daily basis.
Hardcore forms of gambling are being pushed in several different forms. They include online sports gambling, state lotteries, regional casinos, and video gambling machine venues, all of it offered at virtually every hour of the day in almost an unlimited amount of locations.
Gambling operators, their partners in government, and industry lobbyists like to call it “regulated gaming.” But for the rest of us, the only term that accurately describes it is predatory gambling.
The legalization of commercialized gambling has failed and it’s led to bad outcomes for the American people. It’s the nation’s most-neglected major problem here’s why:
In 1969, New Jersey congressman Cornelius Gallagher wrote that if the Garden State enacted a lottery “we could abandon all taxation in New Jersey and increase every service in our state four times over.”
Today, New Jersey has a state lottery, several casinos, online casino gambling, and commercialized sports betting. Yet the state is in the worst fiscal condition of any U.S. state, ranking 49th in the nation in Truth in Accounting’s 2024 Financial State of the States report on the fiscal condition of states.
New Jersey exemplifies how commercialized gambling has been a spectacular failure as a revenue source. It’s proven to be THE biggest budget gimmick and the calling card of anti-reform politicians of both political parties across the U.S.
Yet gambling lobbyists and some public officials continue to tout commercialized gambling as a way to raise tax revenue. But history has shown repeatedly that this argument is either overstated or wrong. According to the landmark report on public revenues from gambling by the Rockefeller Institute of Government at State University of New York-Albany, states creating new revenue streams from gambling may see momentary bumps in tax income but “in the long-run, the growth in state revenues from gambling activities slows or even reverses and declines.”
That’s because income from commercialized gambling does not grow over time like general tax revenue and expenditures on education and other programs will grow more rapidly than gambling revenue. As a result, new gambling operations that are intended to pay for normal increases in state spending add to, rather than ease, long-term budget imbalances.
Many states tout lotteries as a way “to improve education” yet these states have not seen significant improvement in their education rankings over the last two decades.
Beyond its obvious status as a budgetary shell game, commercialized gambling incurs major social costs that end up footed by all taxpayers. It leads to increases in rates of personal bankruptcy and provides new avenues for crime and money laundering. Gambling operators don’t pay for the harms they cause families, businesses, and communities. Taxpayers do.
The cycle works this way: states promote commercialized gambling causing lower-income Americans to lose life-changing sums of money, who then get some of the money back by relying on more financial help to stay afloat from their government, which then puts the burden on all taxpayers to pay the cost.
Also troubling for taxpayers, gambling operators are not allowed to fail by the state. For example, when casinos come up short, states usually provide new infusions of money, reduced taxes, reduced funding for gambling addiction measures, or other concessions such as lifting smoking bans and loss limits, in order to sustain revenues and profitability. Public tax dollars too often prop up gambling operators.
The almost sole focus of commercialized gambling promoted by states has been to maximize profits, not to protect the public interest.
The business model for all forms of commercialized gambling depends on blatantly exploiting the financially desperate and the addicted. It cannot survive without these citizens.
The New York Times reported that state lotteries extract between 70%-80% of their profits from just 10% of the players.
Electronic gambling machines are the most lucrative form of gambling marketed by local casinos and some state lotteries. They extract 60% of their profits from gambling-addicted citizens.
For online gambling operators, a Wall Street Journal investigation revealed that 70% of online gambling profits were coming from 1/2 of 1% of those using the app.
“No taxation without representation” was one of America’s founding principles. After 50 years of state governments using commercialized gambling to exploit and defraud their own citizens to extract as much money as possible, the time has come to add the principle of “no taxation by exploitation” beneath it.
The way we raise money to pay for our government says as much about our democratic principles and values as the way we spend it.
To all the non-gamblers out there, “You Pay Even If You Don’t Play.”
Two-thirds of citizens rarely or never gamble. But they end up paying higher taxes for less services and worse state budget problems over the long term. They foot the bill for the inevitable budget deficits produced by commercialized gambling.
One reason it contributes to budget deficits over the long-term is the crazy cycle that commercialized gambling creates: Americans lose more than $150 billion of personal wealth on gambling every year; tens of millions of citizens experience the life-changing harm that commercialized gambling inflicts like domestic violence, bankruptcy, divorce, and child abuse (social costs that you the taxpayer pay for, not the gambling operator); these citizens end up needing financial help and other benefits from the government just to stay afloat; and then the government sends the bill for the cost of these benefits to all taxpayers. It’s rinse, wash, and repeat. Gambling operators reap huge profits on every spin of this cycle yet pay for none of the harm they cause.
Lastly, all the citizens who don’t gamble also pay another way. Commercialized gambling lowers our national standard of living because it’s a sterile transfer of money from millions of ordinary people’s pockets into a small number of other people’s pockets, producing nothing new and nothing of lasting value. Its economic impact is similar to throwing your money on the street so someone else can pick it up – it redistributes wealth without creating it. Because this nonproductive activity nevertheless uses up time and resources, we experience a reduced national standard of living, a consequence that impacts all of us.
Speculating and investing don’t mean the same thing. Most often, investing is the act of buying and holding an asset for the long-term (at least for one year.) The primary difference between investing and speculating is the amount of risk undertaken. High-risk speculation is essentially gambling, whereas lower-risk investing uses a basis of fundamentals and analysis.
Whenever a person spends money with the expectation that the action will return a profit, they are investing. The decision to spend is usually based on sound, reasonable judgment that there’s a good probability of success.
But what if the same person spends money on something that shows a high probability of failure? In this case, they are speculating. The success or failure depends primarily on chance, or on uncontrollable external forces or events.
Because of the high risk involved, someone putting their money into something like derivatives or day trading would in most cases fall under the category of speculating or gambling.
But while there may be some risk associated by investing in shares in the traditional stock market for the long-term, that is where the analogy to gambling ends.
And the gambling operators themselves know it. With the zeal of a teetotaler, nearly all of the people who profit from commercialized gambling, and the public officials who lobby to bring them in, don’t gamble themselves. Yet they put their money into assets like stocks and real estate. Why?
Because it’s a statistical certainty that the vast majority of people will lose money gambling on on state lotteries, regional casinos and online gambling. The longer and more frequently you wager against the house, the more you’re going to lose. It’s a sure thing. That’s what the phrase “The House always wins” really means.
In sharp contrast, the Annualized S&P 500 Average Return including dividends reinvested was 10.97% between 1970 and 2024, for an astounding 54 year total return of 30,074%. While the S & P 500 can and has gone down in some of those years, and that people can and do lose money speculating and trying to time the market, the record of steady, conservative stock market investing is excellent.
In addition, commercialized gambling operators hire the brightest people they can find (e.g. odds-makers, computer programming whizzes, sophisticated marketers) for the specific purpose of taking as much money as possible from customers. On the other hand, the investment industry hires the smartest and best-performing analysts it can find in order to help make money for customers. It’s about as different as it can get.
Watch Warren Buffett, one of the world’s greatest stock market investors ever, describe why commercialized gambling promoted by states should be rolled back.
The primary source of information for the size and scope of illegal sports gambling in the U.S. has been the American Gambling Association, the national lobbying organization for gambling operators who have a vested financial interest in seeing commercialized gambling metastasize.
No American jurisdiction has EVER documented a decline in illegal gambling after states began sponsoring gambling, regardless whether it’s lotteries, casinos or internet gambling.
Common sense tells you that if the illegal sports gambling operators supposedly cannot be controlled right now, as the big commercial gambling operators claim, then how can you control and regulate the gambling operators you license? If you can’t shut down the illegal sports gambling operators now, how would you possibly shut down licensed operators who don’t follow the rules?
When gambling operators call for “regulation,” what they really mean is government granting monopolies and awarding regulatory advantages to favored firms.
There are a number of other reasons why Illegal gambling tends to increase when states sanction commercialized gambling:
Lastly, it’s revealing to contrast legal commercialized gambling operators with illegal gambling operators. No illegal gambling operator is putting liens on the homes of citizens to collect gambling losses, like legal operators do. No illegal operator sends free gambling wagers by direct mail to your house to lure you back to the local casino, like legal operators do. No illegal operator is pushing $100 lottery scratch tickets, seven days a week, in economically-depressed communities, like state lotteries do. No illegal operators are running gambling ads during live broadcasts of sporting events with such intensity that one out of every five ads is to place a bet. No illegal operator is sponsoring pro sports teams like the legal operators do in the U.S.
The criminalization of for-profit lotteries, casino-style gambling, and commercialized sports gambling was successfully practiced for a large portion of American history. This does not mean illegal gambling was absent from society, but public institutions did their best to contain it. They did not incentivize citizens to lose their money gambling.
In reality, commercialized gambling seem purpose-built for organized crime. For those running a human sex trafficking ring or selling fetanyl in a community, they take their illicit profits and then launder their dirty cash by buying a share in a winning lottery ticket, running it through slot machines at local casinos, or washing it through the apps of online gambling companies. Once the money has been laundered, the criminals pay taxes on what they claimed were “gambling winnings” and put the rest of the money into buying legitimate assets like real estate or stocks.
No group has suffered more because of government-sanctioned gambling than America’s youth.
When The New York Times asked a slot machine designer at International Gaming Technology if he ever plays the machines he builds, “he acted as if I had insulted him. ‘Slots are for losers,’ he spat.”
The actions of the IGT employee are not an isolated case. Commercialized gambling is the only business where most of the people who profit from it and promote it don’t do it and don’t want to live near it.
These hypocrites cause life-changing financial losses for millions of American citizens. People like Sandy Hall, who had the courage to be interviewed as part of a 60 Minutes investigation into slot machines. Her life was reduced to almost nothing because of slots.
See our head-shaking list of gambling operators and public officials who don’t gamble themselves but they want you to do it: The Hypocrite Hall of Fame.
Let people gamble if they want, you may say. But we already have the freedom to gamble. Many Americans participate in office pools for the Super Bowl, NCAA March Madness brackets, a Friday night poker game, or make casual wagers on the golf course with their friends.
Government is not simply permitting private, consensual behavior as some public officials who support state-sanctioned gambling attempt to argue. If it was their true intent, then this purpose could be achieved by allowing small, unlicensed games and keeping gambling private and local. Such an approach would be in line with the most effective and appropriate state stance toward gambling which is not encouragement, but rather containment.
This is a big government program that actively advertises more and more extreme forms of gambling at higher and higher wagering amounts in our communities. It also grants monopolies and awards regulatory advantages to favored firms.
State government shouldn’t be telling people how to live by encouraging them to gamble on state lotteries or at regional casinos, especially on games they are guaranteed statistically to get fleeced.
And in the process, they are violating the rights and freedoms of the two-thirds of the public who almost never gamble yet are being forced to foot the bill for the lower standard of living and budget deficits that state-sanctioned gambling leaves behind.
One can be a libertarian on this, while at the same time, believing that we cross an unacceptable ethical line when we go from allowing individuals to gamble to allowing our government to set up a massive marketing and distribution scheme urging people to do so.
Regional casinos are a naked money grab disguised as economic development.
Let’s contrast it with any other business that sells a product or a service. Take a blanket-selling business, for example. If you go out to buy a blanket for you or your family, other people don’t have to give up their blankets for you to get one. But imagine a blanket-selling business where in order for a few people to get a blanket, mostly everyone else had to turn in their own blankets and go without. And many people actually ended up owing blankets.
The primary winner in a blanket-selling business such as this are the people who operate the blanket redistribution scheme. It’s an exchange where, over a period of time, they are guaranteed statistically to end up with all the blankets.
Despite the inherent predatory and dishonest nature of the scheme, it escapes from being shut down because the blanket sellers provide state governments a percentage of their bounty. In fact, only those who partner with states are allowed to run the scheme and they’re usually handed regional monopolies to do it.
Those who never buy a blanket also lose. They end up paying extra for those who gave up their blankets and now need help. They also have to subsidize the state budget problems that result when the gimmick revenues inevitably dry up.
This is the essence of the commercialized gambling scheme.
The analogy underscores how the economic impact of commercialized gambling is similar to throwing your money on the street so that someone else can pick it up — it’s redistributing wealth without creating it.
The casino lobby feeds on the job insecurity of Americans because people, whether gambling or seeking employment, have fewer viable ways to make good money.
By relying on slot machines and other forms of gambling as its primary revenue source, a casino may employ some citizens but it doesn’t produce economic growth.
Any activity the state puts money into will stimulate the economy. Government can stimulate the economy with good things, things that help people build wealth.
We are told one of the primary rationales for state-sanctioned casinos is to “create jobs” but facts show that casinos leave behind far more gambling addicts than jobs. In state after state, the total enrollment of citizens in the state’s voluntary Self-Exclusion Program was considerably higher in the amount of people who work in the states, Casinos, including part-time jobs.
Thousands more gambling addicts have banned themselves from regional casinos because their lives have been ruined than there are people who work inside the casinos.
But that figure is literally the tip of the iceberg. The actual amount of gambling addicts created by state-sanctioned casinos is far greater than the number of citizens who have self-excluded. That’s because only about 10% of people experiencing problems with gambling seek help from problem gambling services- 90% never even come forward for help.
Casinos are addict creators, not job creators.
State-sanctioned casinos also create unfairness for other businesses. When casino lobbyists call for a “limited number of casinos” to be allowed into a state, what they are really doing is attempting to rig the system to hand out special privileges to a few powerful political insiders at the expense of everyone else. Government, in this case, is not merely permitting private, consensual behavior. It is granting monopolies and awarding regulatory advantages to favored firms.
What makes commercialized gambling different than every other business, including the alcohol industry, is gambling is a big con game based on financial fraud and exploitation. Citizens are conned into thinking they can win money on games that are designed, in the end, to get them fleeced.
If you pay for a beer or a glass of wine, that’s what you receive in return. It’s a one-for-one exchange. In commercialized gambling, what you receive is a financial exchange offering the lure that you might win money. But this financial exchange is mathematically rigged against you so inevitably you will lose your money in the end, especially if you keep gambling.
Slot machines, lottery tickets, and other commercialized gambling games are forms of fraud, similar to false advertising and price-gouging. Gambling operators use these games to prey upon the inevitable failure of citizens and separate them from their money. And they make you feel good about losing it.
Commercialized gambling is THE signature issue of anti-reform politicians from both political parties across the United States.
Instead of providing solutions to their state’s problems, these politicians placed the interests of powerful corporate gambling operators over the interests of ordinary citizens.
They passed the buck on difficult fiscal choices by promoting the biggest public budget gimmick there is: government-sponsored, commercialized gambling.
But just as importantly, it is also political reformers from both parties who are the ones calling for predatory gambling to be phased out.
This explains why Stop Predatory Gambling is one of the most politically diverse organizations in the United States, one in which citizens of all political stripes work side-by-side.
For a number of important reasons, commercialized gambling should provoke outrage in those who believe in free markets or consider themselves genuine libertarians:
Early American lotteries: there was no other form of taxation that existed back then.
A typical colonial lottery was instituted to finance specific public works projects, such as bridges or roads, and participation was seen more as a charitable contribution (like today’s raffle) than a form of gambling.
They were also public-spirited and progressive, unlike current state lotteries.
Present-day lotteries:
