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Casino Gambling

The amount of growth that the gambling industry can achieve in the future will depend a great deal on the gambling strategy that the state employs to ensure continued play and support by the public. Hence, the survival of gambling is really in the hands of public policy makers and the private entrepreneurs they will employ to implement these policies and strategies.

There are basically three gambling strategies that public policy makers can formulate and implement. These strategies are not mutually exclusive (i.e., states will most likely use a combination of these strategies), but one of these strategies will form the basis on which other gambling ventures can be added. These strategies are (1) status quo, (2) expand and privatize, and (3) sweepstakes niche. The rest of this section will examine the implications of each of these strategic options.

Status Quo
Status quo is essentially an exit strategy out of the gambling industry by state officials. Certainly, lottery officials could main- tain instant games, but the other two types of lottery games would eventually die out. What would happen to sales of instant games is also quite uncertain, especially if neighboring states pursued an aggressive gambling posture.

The advantage of this status quo strategy is that it is by far the least controversial of the three proposed strategies. Lottery games are considered benign forms of gambling that even the most fierce critics of state-sponsored gambling admit are essentially nonaddictive. Lottery games are certainly the most tolerated form of gambling and therefore the type that legislators find the most appealing.

However, the disadvantage of this type of gambling strategy is quite simply that legislators would need to find additional revenues to support the good causes that the lottery currently funds. In other words, if public policy makers in a given state elected to use this status quo strategy, there appears to be a heavy political price to be paid in the form of enacting new taxes.

Expand and Privatize
The goal of this strategy is to establish gambling as a consistent source of revenue for the state, and it is the one that most states seem to have chosen as their gambling strategy. To achieve this goal, it necessarily entails that new forms of gambling are established, since lottery games cannot maintain themselves, much less provide new revenue. Chapter 5 examined the effects that these additional forms of gambling--such as keno, video poker, OTB, video lottery, and casino and riverboat gambling--had on existing lottery games. Although some of these new gambling ventures did cannibalize existing lottery games, there was an overall increase in gambling revenue even when cannibalization of lottery games occurred ( Boston Globe, August 22, 1993, p. 1 ).

Yet as we saw in Chapter 6, where we chronicled the events that led to Massachusetts's successful adoption of keno, the forces that were marshaled to support keno can be assembled in the future to support other gambling activities such as OTB, casino gambling, and riverboat gambling. It appears that the state legislatures cannot have enough of a good thing. In the search for more revenue, the sponsoring of more gambling opportunities for its citizens seems the easiest and least costly way (at least politically) of raising revenue.

But as the state legalizes more and more types of gambling, the questions of who should be operating these activities and what sorts of risk the state should be taking in sponsoring these gambling activities become interesting public policy questions. In Chapter 7, it was pointed out that the solution to both of these questions appears to be the privatization of gambling, especially casino and riverboat gambling. This solution seems to provide state legislatures with an ideal solution for two reasons: (1) It brings in a steady stream of revenue with no risk, and (2) it utilizes a process that has been warmly received by the public since it is viewed as one way of eliminating inefficient and costly government agencies. Private investors will open the OTB parlors and casinos, and the state will merely regulate their activities while using the state's share of wages for various good works.

While this scenario sounds reassuring, there are two problems that advocates of the privatization of gambling need to take into account. First, the historical argument against the future of gambling might have some basis if privatization is indeed the future of gambling in the United States. The history of private lotteries in the United States is quite disastrous, with the Louisiana lottery as the prime example of the corruption and greed associated with gambling operated for the state by private investors. It is hard to imagine how public officials would deal with the outcry against gambling once a private group was convicted of operating fixed gambling tables or slot machines. The easy solution to this problem for legislators would be to further regulate or abolish any form of gaming that seems to be prone to this sort of activity. Obviously, if there were a series of gambling scandals, then the public outcry would force the states to reconsider their legalized gambling activities.

The other problem with privatizing gambling is simply that it could be "too much of a good thing." Presently, Atlantic City and Las Vegas are the two centers of legalized, privatized casino activity. But even with just these two sites operating in the United States, both are experiencing an "overcapacity" problem, with three Atlantic City casinos declaring bankruptcy. One must wonder just how profitable casino gambling would be if numerous other cities and states permitted casino gambling. For although the appetite for gambling seems to be endless, it is obviously a market that some say is already oversaturated.

It also should be pointed out that the casino gambling business seems to be changing drastically for two reasons. First, popularity of the various games is changing. In 1983, the amount of casino revenue that could be attributed to slot machine players was slightly over 25 percent. In 1993, almost 70 percent of all casino revenue came from the tingle and bells of the "slots." This drastic change in the preference of casino players for nontable games such as the slots and video poker has had a drastic effect on the operation of casino gambling. The amount of space given traditional table games such as blackjack, roulette, and craps has been drastically reduced to less than 30 percent of the space devoted to casino gambling. In other words, the typical casino player is no longer interested in the so-called skilled table games but wants the simple pleasure provided by pulling a slot machine. There are slot machines for every taste, ranging from $0.05-a-pull slots to $500a-pull slots. Of course, the prizes and jackpots also range from $100 to those progressive slot machines that can pay prizes in the millions. But why would patrons continue to find casino gambling attractive if their local lottery commission could provide them such options as video lottery that could easily simulate the slot machine experience? The answer is that the "new" casino is one where the whole family can come ( Casino Player, December 1993).

Besides this change in the games that attract casino players, there has been a change in the marketing of casino gambling. Las Vegas, which is still the capital of casino gambling, has recently experienced a total renewal of its image. The marketing strategy employed by Las Vegas today is that it can provide fun for the whole family--for example, a $475 million Treasure Island and the $1 billion MGM Grand Hotel, which has an adjacent amusement park with seven rides and eight theme areas on thirty-three acres. To compete for the casino gambling dollar, casino operators will have to be able to attract the entire family. Hence, if a state decides to legalize casino gambling, it will need to provide its casino developers with a gimmick to attract families and conventioneers.

One thing that can be said safely is that future casinos will not be nearly as profitable as those that were operating alone in the early 1980s. The pot of gambling gold is proving to be much harder to grasp than most state legislators realize. However, despite these cautions, there can be little doubt that the privatization of gambling is sure to be a path that most states will follow in their search for additional "painless" revenue.

Sweepstakes Niche
A niche type of strategy that uses "sweepstakes games" as its primary gambling attraction has been employed quite successfully by European governments for many years. It differs from the typical state lottery in the United States in three respects: (1) The games are played much less frequently, usually coinciding with a major civil or religious holiday; (2) the prizes are much more substantial than those paid by U.S. state lotteries; and (3) the goal of these sweepstakes games is to fund a specific charity or cause.

This niche sweepstakes strategy would seem to respond to many of the critics of state-sponsored lotteries in the United States on a number of issues. Since these sweepstakes games would be played much less frequently, the addictive nature of gambling ought to be much less of a problem. Second, the proceeds of the sweepstakes games are designated well in advance to fund a specific charity, or good cause. No longer would the state have to be concerned with the product life cycle effect on its present lottery operations. Finally, lottery proceeds would no longer be going to the state treasury or be used to support education, health, or other uses that demand constant state attention. Hence, there would no longer be any need to constantly institute new types of lotteries or venture into other types of gambling to fund existing state responsibilities or to make further contributions to the state's treasury.

However, this sweepstakes concept would not prevent the current trend of privatization of gambling, especially casino gambling. But as was pointed out earlier, permitting this type of gambling is virtually risk free for the state. How successful the various casinos will be is quite questionable. Again, it would seem that the number of patrons and the amount of money that a casino would attract are limited and can only be divided in so many ways. Obviously, states could opt not to permit casino gambling. But the pressure that would be on state legislators to allow casino gambling appears to grow as neighboring states permit casinos to operate to attract patrons from outside their own states.

It would appear that the most viable strategy for states to adopt is this sweepstakes niche strategy along with privatization of other forms of gambling. However, this sweepstakes strategy cannot be adopted overnight and without some interesting political difficulties. Presently, several smaller lotteries are banding together in order to play a "super" lotto game known as "Powerball." The strategy behind this game is actually the same one being used by California, Florida, and New York--that is, hope that the weekly jackpots aren't hit so that the jackpots build up in order to raise more interest and attract more players. Obviously, these states have to give up a bit of their autonomy in joining this "lottery consortium" as well as dividing the jackpot along betting lines. The one negative development to the sweepstakes strategy is that it makes lottery revenue quite unpredictable and still doesn't solve the product life cycle question completely.

So how would this sweepstakes concept be instituted? A combination of federal and state cooperation would be needed. A national U.S. sweepstakes like the ones held in most European countries would certainly have no problem creating huge jackpot payoffs. Sweepstakes created for various good causes could be played once or even twice a year. Perhaps states in a particular region would be permitted to hold sweepstakes to support funding to recover from natural disasters such as hurricanes and floods. This sweepstakes solution to the gambling problem contains more than a bit of irony. After the Civil War, the federal government banned states from sponsoring lotteries and essentially banned gambling throughout the United States. It now appears that the federal government will have to enter the lottery business to prevent states from being forced to compete with one another for every available gambling dollar. Just as the federal government forced state governments to enter the gambling business to fund programs in the less painful manner, now the federal government will most likely have to enter the gambling arena to establish some rationality to the gambling industry throughout the country.

How soon the federal government will enter the sweepstakes/lottery business is a bit difficult to forecast, but it would seem that the forces leading to this development are mounting. The first attempt at instituting a national sweepstakes was filed in Congress in 1989. The revenue from this sweepstakes game was to be used to reduce the federal deficit. While this measure never got out of committee, there have been several other attempts since 1989 to start a national sweepstakes, with each of these succeeding attempts gaining much more support. The most viable national sweepstakes proposal has been connected to the national health care issue, where proceeds from the sweepstakes would be used to fund basic medical research. It will be interesting to see what "good" cause is the eventual beneficiary of the first national sweepstakes. Of course, the effect that these national sweepstakes could have on state lottery games could be devastating to state finances. Hence, it would appear that the federal government will have to devise a way to share the proceeds of a national lottery with state governments to compensate them for the loss of lottery revenue. A new sort of revenue sharing appears to be coming to the states from the federal government.

CONCLUSION
Rose's prediction of gambling's demise by 2029 appears to be a bit premature. Admittedly, the future structure of the gambling industry will certainly be far different than it is today. The present gambling industry is dominated by state lottery games and an increasing number of states that have or will legalize casino and riverboat gambling. There has also been increased activity in keno, video poker, and OTB as well as sports gambling. There is little doubt that in the future casino gambling, legalized sports betting, OTB, and video poker will dominate the gambling industry, in both percentage of income and number of players. This change will take place for two reasons: First, the traditional lottery games will eventually die out, just as most brand names do. It is something that American marketers are currently experiencing even with brands that have commanded great loyalty from their customers, for example, Marlboro cigarettes ( The Economist, September 7, 1991, p. 67). Second, the state's endless search for more revenue will doom the traditional lottery. It simply will not be able to provide the state with enough revenue; so the state will turn to other forms of gambling such as sweepstakes, casino gambling, OTB, and sports betting that can provide this revenue.

The strategy that the states will employ to achieve this new structure for the gambling industry will be privatization. The role of the state or government in general will change radically from owning and operating lotteries to regulating the various private gambling enterprises. This privatization strategy is one where the state takes no risk in operating these gambling establishments but will willingly take a rather substantial share of the gambling pot. Politically, this privatization of gambling allows the state to remove itself from the gambling arena. No longer can the critics of gambling accuse the state of fostering vice. The state merely is regulating and profiting from an activity that obviously the majority of Americans now approve. Hence, the economic and political consequences appear to be positive in both the short run and the long run. The criteria for a successful privatization that were given in Chapter 7 appear to be fulfilled and the stage set for a new era of legalized, privatized gambling.

However, the ties between privatization and gambling cannot be limited to just those that are economic and political. The social acceptability of gambling signals a shift in the morality by which Americans sanction acceptable behavior. The rationale used by public policy makers to justify both of these trends (namely, gambling and privatization) in public policy has profound implications for the conduct of public policy in general. It is finally being acknowledged at all levels of American society. The following quote from Time is quite instructive:

If it is now acceptable for the whole family to come along to Las Vegas, that's because the values of America have changed, not those of Las Vegas. Deviancy really has been defined down. The new hang-loose allAmerican embrace of Las Vegas is either a sign that Americans have liberated themselves from troublesome old repressions and moralist hypocrisies, or else one more symptom of the decline of Western civilization. Or maybe both. ( Time, January 10, 1994, p. 51)

In Chapter 3, it was shown that the rise of gambling activity corresponds to a rise in the ethics of tolerance. During the past thirty years, tolerance has become the highest civic virtue since it makes living in a pluralistic society possible. We have witnessed societies such as the former Soviet Union, China, Cuba, and Iran where there is no tolerance for any diversity. The preceding examples of conformist societies have convinced Americans that they certainly want to avoid this type of conformist ethic. It was in reaction to this conformist ethic that the ethics of tolerance was formulated. We should tolerate any action by an individual as long as that action enables that individual to be "true" to one's self and doesn't violate the self of another individual. This ethical principle represents the triumph of the self over all other moral considerations. Nor is this self the one that was advocated by Immanuel Kant, where the self is conceived as having to obey practical reasoning that can be used universally ( Kant, 1964). Rather, the self that the ethics of tolerance promotes is the temporary self where long-term consequences are ignored so that the individual retains his or her autonomy. Just as American businesspersons have been criticized for focusing too much on short-term financial goals, it appears that U.S. public policy makers have also fallen into this trap of short termism. For this adoption of the ethics of tolerance, with its focus of tolerating activities in order to maintain the short-term peace, will have very interesting consequences for the type of society that the United States will be for the foreseeable future.

Unrestricted gambling has become morally acceptable (i.e., tolerated) in the United States only in association with the idea that there cannot be any society-wide objective moral norms. To tolerate other opinions or life-styles, morality has become a subjective preference, not an objective requirement; and the further we carry this line of reasoning, the more acceptable gambling becomes, since it is merely a subjective choice of the individual. Since the individual gambler is not hurting anyone else, then it is quite acceptable for the state to profit from this activity.

Furthermore, this connection between the privatization movement and the rise of gambling also coincides with the gradual diminution of concern that public policy makers have for the welfare and the rights of the lower classes and with a corresponding preoccupation that these same public policy makers have for preserving individual rights and a conception of the self. This new understanding of the goal of public policy results in the minimal state, and this minimal state has in turn spawned a conception of the self that is similarly minimal.

The continuing support that public policy makers give to gambling merely confirms the present U.S. cultural tendency to withdraw from public action into a cocoon of privacy. This preoccupation with the self or privacy poses some real challenges to the whole system of values and obligations that has historically been the basis of community and family life. Letting people be "free" to do what they want as long as they do not hurt others is hardly the type of ethic needed when U.S. society seems to be so desperately in need of a unifying communitarian spirit. Needless to say, this is not a call to subjugate the self or individual freedom totally under the banner of communitarian need. But certainly this study of the rise of gambling in the United States points out a real need for American society to develop an ethic that can be used to establish a series of objective norms that can be used to referee between the legitimate needs of society and the yearnings of the self.

Chapter 2 examines the scope of lottery activity throughout Europe, but one is particularly struck to the extent that lotteries have sprung up in eastern Europe and Russia. Needless to say, there is a bit of irony involved. Most of the countries have just emerged from a system of government where gambling was prohibited because Communist authorities maintained that there was no need for a bourgeois tactic such as a lottery to raise funds for social needs. The state would provide for the needs of workers and the poor. It was a system of government where the individual was totally subservient to the state, but in the end, it was a system that did not work.

It is also fascinating to witness how China has started to sponsor lottery games as it increasingly moves toward developing a market economy. It certainly appears that lotteries and legalized gambling are an integral part of any democratic system! Lotteries and gambling provide to these democratic governments the funds so that the state can take care of those who cannot take care of themselves.

But perhaps there is a positive side to the gambling craze that now infects almost every part of the world. Since taxpayers throughout the world seem to be joining their American counterparts in denouncing government spending, lotteries and legalized gambling seem to provide an outlet for individuals to show their concern about the plight of the unfortunate. Spain's massive lottery network certainly gives Spaniards a dual reason for playing the lottery: (1) a chance to become quite wealthy and (2) a chance to support a worthy cause. While critics of state-sponsored gambling have been especially critical of the advertising tactic of giving bettors unrealistic hopes of new-found riches, there could be a positive side to state-sponsored lotteries, sweepstakes, and gambling: The advertising needed to stroke an interest in these games will help to keep the plight of the unfortunate in the public eye. Given the proclivities of American society to isolate those segments of society that cause the majority to be uncomfortable, this possible role for gambling is quite worthy--even more so than the possible funds that gambling could raise for the poor and unfortunate of American society.

Indeed, gambling does appear to have become an integral part of American society and, for that matter, an integral part of most democracies throughout the world. Gambling is here to stay, although the current structure of state-controlled gambling will change, with most gambling activity gradually falling into private hands. The state will maintain control over such games as sweepstakes and establish regulatory power over legalized gaming operations. Whether or not the spread and acceptance of gambling as a form of entertainment will continue at its present rapid pace depends on the continued public acceptance of an ethic that places an absolute premium on the expression of the self over any claim for communitarian need. It is this glorification of the self that makes gambling not only a possibility but a necessity for the foreseeable future.

While the rise of lotteries and gambling has and will have many implications for American society as well as many other societies throughout the world, perhaps its greatest challenge to these societies is their need to restore a balance between the concerns of those who support the ethics of tolerance and those who support the ethics of sacrifice. The ability of a society to balance these moral viewpoints is the hallmark of a healthy and vibrant democratic system--a system that the world so desperately seeks as it is about to enter the twenty-first century.