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Gambling in America

chapter 6
GAMBLING IN AMERICA

Historically, gambling has been a popular form of recreation in North America. George Washington liked to play cards, and Benjamin Franklin printed and sold playing cards. Americans were so fond of card games that when the British Stamp Act of 1765 put a one-shilling tax on playing cards, people became extremely upset. In fact, anger about the Stamp Act and a tax on tea contributed to support for the American Revolution. During the colonial period, lotteries (a system of raising money by selling numbered tickets and distributing prizes to the holders of numbers drawn at random) were used to raise money to establish the colony of Virginia. In 1777 the Continental Congress held a $5 million lottery to pay for the Revolutionary War.

By the 1800s Americans were known for their gambling. Visitors to this country said it was impossible to talk to a person from Kentucky without hearing the phrase, "I'll bet you!" Large riverboats that traveled up and down the Mississippi and Ohio Rivers carrying passengers or freight almost always had a casino where gamblers played cards and other games of chance. Along the Mississippi River was New Orleans, Louisiana, a city famous for gambling. After the Civil War, adventurers went searching for gold and silver in the West, and virtually every mining town had a few gambling casinos.

Beginning in the 1870s, however, most forms of gambling and all lotteries were outlawed by states, following a scandal in the Louisiana lottery. This state lottery had operated nationwide, and the scandal involved bribery of state and federal officials. In 1890 Congress outlawed the use of the mail for lotteries, and in 1895 it forbade shipments of lottery tickets across state lines.

Although gambling has always been popular in the United States, many people have opposed it because they believed gambling was immoral and posed a threat to both individuals and the community. Some people that became addicted to gambling lost their homes, families, and careers. Furthermore, during the Prohibition Era (1920–33), when alcohol was outlawed, organized crime moved into the profitable worlds of alcoholic beverages and gambling. Although legal gambling has since regained respectability and is viewed by many Americans as an acceptable activity, the association with organized crime and corruption still taints the activity in the minds of others.

Lotteries began a revival in 1964 when New Hampshire created a state lottery. New York followed suit in 1966. From 1970 to 1975 ten more states established them. In 2004 thirty-eight states and Washington, D.C., operated lotteries.

TYPES OF LEGAL GAMBLING

There are six primary forms of legal gambling in the United States: bingo, lotteries, pari-mutuel betting, off-track betting, organized poker playing, and casinos. Bingo is the most common form of legalized gambling. Lotteries operate in thirty-eight states, Washington, D.C., Puerto Rico, and the Virgin Islands. Forty-three states, Puerto Rico, and the Virgin Islands permit Thoroughbred racing. Poker "card rooms" operate legally in sixteen states. A total of eleven states offer legal casino gambling—ranging from floating riverboats to large commercially run casinos such as those found in Las Vegas or Atlantic City, New Jersey. Twenty-eight states also have Native American gambling facilities, which range from bingo and card-playing operations to full-scale casinos.

HOW AMERICANS GAMBLE THEIR MONEY

In 2002 the U.S. gaming industry had gross revenues of approximately $68.7 billion, according to research cited by the American Gaming Association from industry analysts Christiansen Capital Advisors LLC. More than half of this figure came from casino gambling, $28.1 billion of which was from commercial ventures and $14.2 billion of which was from Indian reservation casinos. Lotteries took in another $18.6 billion, and the rest came from smaller categories, including pari-mutuel betting, with an estimated $4 billion; charitable games and bingo, $2.6 billion; card rooms, $972.5 million; and legal bookmaking, $116.2 million. The total amount Americans wager legally each year has been estimated at more than $800 billion, with illegal gambling through office pools and other unregulated activities put as high as $380 billion by the National Gambling Impact Study Commission Report of 1999.

In a December 2003 poll, the Gallup Organization found that 49% of Americans polled said they had bought a state lottery ticket during the preceding twelve months, while 30% had visited a casino, 15% had participated in an office pool, 14% had played a video poker machine, and 10% said they had bet on professional sports. (See Figure 6.1.) When compared with data collected in 1989 and 1990, the number of casino players had increased by 50%, while those who bet on horse races and college or pro sports had fallen by more than half, bingo players had dropped by almost two-thirds, and the number who bet on boxing matches had fallen by three-fourths.

CASINO GAMBLING

Technically, a casino is any room or rooms in which gaming is conducted. When most Americans think of casinos, they picture lavish hotel and entertainment complexes, such as those in Las Vegas or Atlantic City, New Jersey. Before 1990 only Nevada and Atlantic City permitted casinos, but the 1990s saw regulations eased as states and municipalities sought the jobs and tax revenues that casinos could generate. In 2004 eleven states had commercially run casinos, twenty-eight had casinos operated by Native American tribes, and six had casinos at racetracks. Two additional states, Maine and New York, were planning to introduce the latter. The 443 commercial casinos ranged from large land-based facilities in Nevada, Michigan, New Jersey, and Louisiana to limited-stakes sites in South Dakota (maximum bet: $100) and Colorado (maximum bet: $5), to riverboat casinos in Indiana, Illinois, Missouri, Kansas, Mississippi, and Louisiana.

Gambling in Nevada

Nevada is the home of the nation's gambling capital, Las Vegas, and has more casinos statewide than any other—more than half the commercial casinos in the United States (256). Gambling was legalized in Nevada in 1931, giving the state a huge head start over relative upstarts New Jersey (1976), Louisiana (1991), and Michigan (1996) in allowing full-scale land-based commercial casinos. In 2003 the state's casinos employed 192,812 people and took in $9.6 billion in gross revenues from 48.6 million visitors. Casinos are located throughout the state, with many found on the border of California.

FIGURE 6.1

Although its clientele does include a few wealthy "high rollers," as well as many avid small-stakes gamblers, visitors to Las Vegas are increasingly families drawn by the wide range of entertainment options, reasonably priced buffet dinners, and over-the-top architecture featuring the likes of an imitation Statue of Liberty and Eiffel Tower. Though the city was once America's primary gambling destination, with the growing legalization of various forms of gambling around the country, as well as the proliferation of Native American casinos, Las Vegas has been forced to seek new ways to entice customers.

In addition to attracting visitors with gambling, in 2004 the city offered seventeen performance halls with 1,700 seats or more and featured live performances by such celebrity performers as Céline Dion and Elton John. According to a 2004 press release from Enhanced Air Technologies, a firm based in British Columbia, at least one major Las Vegas casino also pumps synthetic human pheromones into the air to increase business. The company claims its "Commercaire" pheromone instills a sense of comfort and security in humans, which makes them feel more at ease and increases the likelihood of repeat visits.

Riverboat and Cruise Gambling

Some people gamble on riverboats (either excursion boats or stationary barges) or on cruises. First introduced in Iowa in 1991, the modern riverboat is little more than a floating casino. By 2002 revenues from riverboat gambling totaled more than $6 billion.

TABLE 6.1

Indian tribal gaming revenues, 1998–2002
Percentage of
Gaming revenue range Number of operations Revenues (in thousands) operations revenues Mean (in thousands) Median (in thousands)
Compiled from gaming operation audit reports received and entered by the National Indian Gaming Commission through June 30, 2004.
source: National Indian Gaming Commision Tribal Gaming Revenues, National Indian Gaming Commission, http://www.nigc.gov/nigc/nigcControl?option=TRIBAL_REVENUE (accessed July 15, 2004)
Gaming operations with fiscal years ending in 2003
$100 million and over4310,714,58113%64%249,176184,332
$50 million to $100 million352,459,69811%15%70,27765,416
$25 million to $50 million551,984,67317%12%36,08537,029
$10 million to $25 million671,144,77920%7%17,08616,894
$3 million to $10 million57350,39817%2%6,1475,819
Under $3 million7376,01922%0%1,041833
Total 330 16,730,148
Gaming operations with fiscal years ending in 2002
$100 million and over419,510,66012%65%231,967179,101
$50 million to $100 million241,694,6067%12%70,60965,577
$25 million to $50 million551,978,51916%13%35,97638,984
$10 million to $25 million651,067,51319%7%16,42316,570
$3 million to $10 million63386,39918%3%6,1335,373
Under $3 million10078,35929%1%784461
Total 348 14,716,056
Gaming operations with fiscal years ending in 2001
$100 million and over398,398,52312%65%215,347158,836
$50 million to $100 million191,415,7556%11%74,51379,083
$25 million to $50 million431,528,61113%12%35,54934,264
$10 million to $25 million58997,54618%8%17,19916,328
$3 million to $10 million57385,65417%3%6,7667,292
Under $3 million11496,25735%1%844575
Total 330 12,822,346
Gaming operations with fiscal years ending in 2000
$100 million and over316,606,28410%60%213,106141,684
$50 million to $100 million241,693,5108%15%70,56373,314
$25 million to $50 million411,360,77713%12%33,19029,944
$10 million to $25 million50856,46416%8%17,12917,335
$3 million to $10 million55350,11018%3%6,3666,250
Under $3 million11091,54535%1%832541
Total 311 10,958,690
Gaming operations with fiscal years ending in 1999
$100 million and over285,845,7879%60%208,778136,897
$50 million to $100 million191,323,9956%14%69,68470,412
$25 million to $50 million331,193,04911%12%36,15335,990
$10 million to $25 million591,028,83419%10%17,43817,562
$3 million to $10 million54322,26817%3%5,9685,764
Under $3 million11786,90738%1%537395
Total 310 9,800,840

Although cruise lines emphasize that gambling is just one of many attractions to be enjoyed on their excursions, virtually all major cruise lines provide gambling. Many cruises, however, have a limit of $100 to $200 to control losses. "Cruises to nowhere," or day trips, are gambling opportunities available at coastal ports in Florida, Texas, New York, and Georgia. These ships travel three to twelve miles into international waters, where neither state nor federal gambling laws apply. Between 1985 and 2002 the day-cruise gambling industry more than doubled, growing from ten to twenty-five vessels.

Casino Gambling on Native American Reservations

The Indian Gaming Act of 1988 (PL 100-497) permitted Native American tribes to introduce gambling on their reservations. By 2003, 377 Native American gambling facilities were operating in twenty-eight states, ranging in size from bingo halls to full-scale casinos. Approximately 65% of the 341 federally recognized Indian tribes in the lower forty-eight states had revenues from gaming. Data from the National Indian Gaming Commission showed that total tribal gaming revenue grew from $9.8 billion in 1999 to $16.7 billion in 2003. (See Table 6.1.)

Gambling revenue helped provide employment for an estimated 205,000 Native Americans and non-Indians in gaming facilities, ancillary restaurants, and hotels, and brought in funds for housing, education, health care, and other reservation needs. Some tribes also distributed per capita payments to each member of the tribe from their gaming earnings. In 2003 this was

TABLE 6.2

Number of adults who gambled in a casino in the last 12 months, 2002
*The percentage of adults who gambled at least once in a casino in the last 12 months
source: "Adults Who Gambled in a Casino in the Last 12 Months," in Profile of the American Casino Gambler, Harrah's Entertainment, 2003, http://www.harrahs.com/about_us/survey/index.html (accessed September 10, 2004). Data from Harrah's Entertainment, Inc., NFO WorldGroup, and U.S. Census Bureau.
U.S. adult population (age 21+)197.1 million
Casino gamblers51.2 million
Casino participation rate*26%
Average trip frequency5.8 trips/year
Casino trips297.2 million

done by seventy-three of the 224 tribal governments involved in gaming.

In 2000, according to the U.S. Census Bureau, the average per capita income of Native Americans on gaming reservations was nearly double that of those living on nongaming reservations, $14,737 to $7,781. Income on gaming reservations was also growing faster—it had gone up by 50.7% when compared with 1990, versus an increase of 16.4% for those on nongaming reservations. Unemployment rates on gaming reservations dropped by 17% during the decade, while the rate on nongaming reservations fell by only half this amount.

WHO IS GAMBLING?

Harrah's Entertainment, Inc., operates twenty-six casinos in the United States and publishes an annual survey to identify characteristics and preferences of casino gamblers. The survey results in Profile of the American Casino Gambler: Harrah's Survey 2003 were based on three nationwide studies: "The Roper Reports," conducted by Roper ASW; and "The U.S. Gaming Panel" and "A Night in the Life of a Casino Gambler," conducted by the NFO World Group, Inc.

Harrah's reported that 26% of the U.S. population ages twenty-one and older gambled at a casino in 2002. This amounted to 51.2 million American adults, who took an average of almost six trips each to casinos per year. (See Table 6.2.) Gamblers were characterized as sharing many of the same leisure-time preferences as other Americans, but they tended to be more active during their leisure time—traveling, attending sports events, eating out, and using the Internet more than most American adults.

The Harrah's survey further showed that compared to the average American, the typical casino gambler was middle-aged, more likely to be female, and slightly better educated with a higher average household income. (See Table 6.3 and Figure 6.2.) The median household income for casino gamblers was a full 20% higher than that of the

TABLE 6.3

Age, income, and gender of casino gamblers vs. national average, 2002
Demographics U.S. population U.S. casino gamblers
source: "Age, Income and Gender of Casino Gamblers vs. National Average," in Profile of the American Casino Gambler, Harrah's Entertainment, 2003, http://www.harrahs.com/about_us/survey/index.html (accessed September 10, 2004). Data from Harrah's Entertainment, Inc., NFO WorldGroup, and U.S. Census Bureau.
Median age–age 21+4547
Median household income$42,228$50,716
Male/female ratio48/52%46/54%

average American; and 5% more casino gamblers held white-collar jobs than held white-collar jobs in the general population. (See Figure 6.3.)

Profile of the American Casino Gambler reported that casino gambling was most popular among adults ages fifty-one to sixty-five, and this group accounted for more than 30% of persons who had gambled during the twelve months prior to the survey. The second most frequent casino gamblers were persons over age sixty-six. (See Table 6.4.) One reason casino gambling was more popular among older adults may be that many have more free time and discretionary income (funds they could choose to use for recreation as opposed to life's necessities) than younger adults.

Casino participation rates rose with higher levels of income. Slightly more than one-fifth of adults with annual household incomes of less than $35,000 gambled in casinos, while more than a third of those earning more than $95,000 per year said they were casino players. (See Figure 6.4.)

There were also geographic variations in casino participation: the rates were highest in the western and north-central regions and lowest in the South. (See Figure 6.5.) The higher participation in the West was due in part to the proximity of Las Vegas with its many casinos, as well as the availability of Indian gaming in most other states in the region. The north-central region similarly offered commercial or Indian gaming in every state but Ohio. In 2002 one-third of all trips to casinos were made by residents of five states, with California at the top of the list (17% of total trips). (See Figure 6.6.) The top states in total commercial casino revenues that year were Nevada ($9.4 billion), New Jersey ($4.4 billion), Mississippi ($2.7 billion), Indiana ($2.1 billion), and Louisiana ($2 billion), according to the American Gaming Association.

Favorite Casino Games

According to the 2003 Harrah's survey, Americans greatly preferred slot machines and other electronic gaming

FIGURE 6.2

devices to table games such as blackjack, roulette, and craps. Nearly three-quarters of the games played were slots or video poker, with quarter slots the most popular denomination. The preference for slots and electronic gaming machines increased with age: more than three-quarters (78%) of casino players older than sixty-six favored machines over table games. Surprisingly, younger players who grew up playing video games were not the biggest fans of slots and electronic gambling devices, as they were more likely than older adults to prefer table games.

The Harrah's study also indicated that in 2003 women were far more likely than men to play slot machines and other electronic games: 81% of women favored slots and electronic gaming and just 8% played table games. Although more men played slots and machines than played table games (67% versus 20%), men were more than twice as likely as women to play blackjack, roulette, or craps.

BINGO AND OTHER CHARITY-SPONSORED GAMES

Charitable gambling is permitted in all states except Arkansas, Hawaii, Tennessee, and Utah. In 2002 it constituted almost 4% of the total amount wagered on legalized gambling in the United States, according to Christiansen Capital Advisors LLC. Of this total, bingo accounted for close to half. Charity games included bingo, raffles, casino nights, and jar tickets, among others. Bingo sessions were a common form of fund-raising by charitable organizations, such as churches, synagogues, and service clubs. It was a relatively inexpensive social and recreational pursuit;

TABLE 6.4

Casino participation rate by age, 2002
source: "Age Differences in Casino Participation," in Profile of the American Casino Gambler, Harrah's Entertainment, 2003, http://www.harrahs.com/about_us/survey/index.html (accessed September 10, 2004). Data from Harrah's Entertainment, Inc., NFO WorldGroup, and U.S. Census Bureau.
21–35 years old25%
36–5025%
51–65 years old30%
66 and above27%

FIGURE 6.3

however, industry observers believed that bingo was declining in terms of both popularity and revenues.

PARI-MUTUEL WAGERING

Pari-mutuel wagering combines wagers into a common pool. Sports in which pari-mutuel wagering takes place are horse racing, greyhound racing, and jai alai. Winners are paid according to odds calculated with reference to the amounts bet on each contestant. In 2002 parimutuel wagering represented about 6% of the gaming industry. From 1974 to 2000 the overall trends in parimutuel wagering included an increase in horse racing and decreases in greyhound racing and jai alai.

Horse Racing

The largest sector in pari-mutuel wagering is horse racing. Horse racing has a long history in America. The

FIGURE 6.4

first American horse race took place in New York in the late 1660s. Several larger tracks, such as Churchill Downs, in Louisville, Kentucky, have been in operation since the 1800s.

Many Americans enjoy going to the racetrack for entertainment, some to enjoy the beautiful animals, and many more to gamble. Horse racing is a popular spectator sport, although it has declined significantly in popularity relative to other forms of gambling.

Even though the amount wagered on racing grew between 1974 and 2000, when the figures were adjusted for inflation, there was a noticeable decline. Although there are approximately 150 racetracks in America, most betting takes place off-site. Satellite broadcasting makes it possible to simultaneously broadcast races between racetracks or at off-track betting sites where there are no races. In addition, at-home pari-mutuel betting is now possible via the Internet, and several companies provide twenty-four-hour racing channels. There are also Internet simulcasts. Whereas in 1991 more than half of horse-racing wagers were made at the track, by 2003 just 15% of the $15.1 billion in bets handled were placed live, and less than 20% of the one thousand wagering sites nationwide were racetracks themselves, according to the National Thoroughbred Racing Association (NTRA).

The types of wagers placed have changed over time. Before the 1970s the "straight" wager (betting on a horse to either win, place, or show—finish first, second, or third) dominated, but in 2003 only a third of the parimutuel "handle" (the total amount wagered) came from this type of bet. So-called "exotic" bets made up the other two-thirds of wagers. These consisted of either intrarace exotics (Trifecta, Superfecta, Exacta—in which the exact order of winning horses must be selected), which made up 58%, or inter-race exotics (Daily Double, Pick Three, Pick Six, and the like—in which winners of multiple races must be chosen), which made up 9%.

Account wagering was also possible in nine states. Patrons were permitted to set up accounts at racetracks and, in eight of those states, could phone in their bets from anywhere. Pari-mutuel wagering on horse races was legal in forty-three states and generated about $4 billion in gross revenue in 2002, according to Christiansen Capital Advisors LLC.

There are three major forms of horse racing: Thoroughbred, harness, and quarter-horse. In the United States, Thoroughbred was, by far, the most popular, followed by harness and then quarter-horse racing. For example, in 2000 nearly half (4,032) of the 8,475 live races run in California were Thoroughbred, while in Florida, more than half the races were Thoroughbred.

According to the NTRA, interest among Americans in the sport has been growing, with the horse-racing fan base rising from 31.2% in 1999 to 35.6% in 2003. This was attributed in part to the success of the film Seabiscuit, which told the story of a legendary racehorse. In the month after the film's release, betting at American racetracks increased by 5.5%.

Greyhound Racing—the Sport of Queens

Once a favorite pastime of Queen Elizabeth I of England, dog racing became known as the "Sport of Queens." Originally, a hare would be released and a pair of greyhounds set in pursuit. In the early 1900s a mechanical lure replaced the hare, eliminating the killing of the rabbit.

The first American greyhound racetrack with a mechanical hare opened in Emeryville, California, in 1919. In 2004 fewer than fifty tracks were operating in fifteen states, more than a third of which were located in Florida. Most other states had between one and three each.

A typical greyhound racing program featured thirteen races, each with eight dogs. Races were run on 5/16, 3/8, 7/16, and 9/16 mile courses. A typical race on a 5/16-mile course lasted thirty-one seconds, and the dogs reached speeds of up to forty-five miles per hour. Like horse tracks, dog tracks have turned to simulcasting and off-track betting.

The animal rights movement has protested the sport, claiming the dogs are mistreated and that many are killed by breeders who keep only the fastest ones from a litter. Although the claims have led many track owners to improve conditions, animal rights activists have persuaded some legislators to ban racing or rescind existing permits. The declining financial condition of many tracks is, however, the primary reason that so many have closed.

FIGURE 6.5

Jai Alai

Jai alai is a fast-paced game in which the players, using a large curved basket strapped to their arms, whip a small ball made of goatskin against the three walls and floor of a huge playing court (fronton). Jai alai was invented in the seventeenth century in the Basque regions of Spain and France. Although the game is popular in Latin America, its popularity has been declining in the United States. In 2004 it was legal in only three states: Florida, Rhode Island, and Connecticut.

By 2004 Connecticut and Rhode Island no longer had any jai alai frontons. Florida once had ten, but by 2004 only five remained. The future of the sport in the United States was uncertain. Lotteries and cruises (many of which offered casino gambling) had taken considerable business away from the frontons. Most jai alai frontons offered simulcasting of horse races, which gave gamblers an additional wagering opportunity. Because of their deteriorating financial condition, in 2004 legislation was introduced in Florida that would allow frontons to reduce their playing schedules from a hundred days to forty while continuing to keep their intertrack wagering licenses.

Problems for Pari-Mutuels

Because of the increased availability of other forms of gambling, pari-mutuels were facing hard times. Off-track betting and simulcasting had helped, but many owners of racetracks and frontons said more was needed for them to stay competitive. Track owners wanted to install video poker machines and other electronic gambling devices (EGDs) as an additional source of revenue. As of 2004 Delaware, Rhode Island, Iowa, Louisiana, New Mexico, and West Virginia permitted EGDs at racetracks. This was a highly controversial issue: According to the National Coalition against Legalized Gambling, attempts to legalize EGDs at racetracks were defeated in twelve states between 1995 and 2003.

LOTTERIES

A lottery is a game in which people purchase numbered tickets in hopes of winning a prize. A person wins if the number on his or her ticket is the one drawn from a pool of all the tickets purchased for that event. In the case of instant lotteries, a bettor wins if the ticket contains a predetermined winning number. Raffles are a form of lottery in which the prize is usually goods rather than cash.

FIGURE 6.6

Lotteries are created and run by government bodies. In 2004 thirty-eight states, Washington, D.C., Puerto Rico, and the Virgin Islands had operating lotteries. Lottery revenues may go into the general fund of the state or may be earmarked for particular purposes, such as education, parks, or police pension funds. Developments in technology and communications have created many possible ways to conduct lotteries. There are five principal types of lottery games:

  • Instant games, in which the player scratches a coating off the ticket to find out whether and what he or she has won
  • Daily numbers games, in which the player picks a combination of numbers
  • Lotto, or a variation of it, in which numbers are chosen from a large set of possibilities with winners selected periodically—Powerball is a popular lottery of this type
  • Video keno, in which the player chooses numbers with drawings held very frequently—sometimes as often as several times an hour
  • EGDs, which allow bettors to play a game, such as video poker, and receive an immediate payout

As more and more states have introduced lotteries to raise money for government, people have had the opportunity to do more gambling. State lottery tickets are sold in grocery stores, convenience stores, gas stations, and many other places. When the winnings become unusually large or when two or three states get together for a big lottery jackpot, the lines to buy lottery tickets can be long.

Some states were also looking at the possibility of online lottery ticket sales. In 2004 the Georgia House of Representatives passed a bill allowing online lottery ticket sales of up to $5 per day per person, though it was uncertain whether this law would be upheld if challenged in court.

According to the North American Association of State and Provincial Lotteries, in 2003 Americans bet $45.3 billion on lotteries, up from $38.9 billion in 2001. Per capita sales grew from $150 in 1997 to $175 in 2003. Although lottery sales were increasing each year, the number of Americans who played lotteries was declining, according to a 2003 Gallup poll. In 1999 57% said they had bought a ticket during the preceding year, but in 2003 just 49% said they had.

In general, poor people play lottery games less frequently than middle- and high-income groups. The lottery appeals to young people more than to older people. Most people who play the game report playing it regularly.

A number of studies have shown that while the poor tend to spend a higher percentage of their income on lotteries than do middle- or high-income persons, the lotteries tend to benefit high-income persons because they make greater use of the sporting and cultural organizations that receive lottery funds. Critics of lotteries have observed that if lotteries were considered a tax they would be seen as unfair, taxing the poor disproportionately for the benefit of the better-off.

Furthermore, detractors have also contended that lotteries are generally inefficient. Less than 40% of the funds they generated were returned to the causes they were meant to support, and about 47% was distributed as prize money. The remainder was used up for administration and promotion. Despite their inefficiency and relatively modest returns, governments have favored lotteries because those who buy the tickets do so voluntarily.

ELECTRONIC GAMBLING DEVICES

Electronic gambling devices (EGDs) include standalone slot machines, video poker, video keno, and other types of gambling games. Because EGDs are portable, they make gambling possible at locations that, unlike racetracks or casinos, are not dedicated to the business of gambling. Bars, truck stops, convenience stores, and other locations that did not formerly offer gambling have begun to feature EGDs. Some states, such as Louisiana, Montana, and South Carolina, have permitted private businesses to operate EGDs. In other states, such as Oregon and California, EGDs have been operated by the state lottery.

In addition to legal EGDs, in other states there are many illegal EGDs, or "gray machines," so called because they exist in a gray area of the law. Basically, if such a machine is used for amusement and no proceeds are paid out, then gambling laws have not been broken. Nevertheless, according to the 1999 National Gambling Impact Study Commission Report, many establishments with these machines have surreptitiously paid winners. Gray machines are reportedly common in bars and fraternal organizations in many states. The report estimated that there were fifteen thousand to thirty thousand gray machines in West Virginia, ten thousand each in New Jersey and Alabama, and as many as sixty-five thousand in Illinois.

EGDs are highly regulated and are constructed to higher standards than electronic voting machines, according to a 2004 New York Times report. In Nevada, for example, the state must be provided with copies of all gambling software, and inspectors frequently spot-check machines to be sure they contain the version of the software on file. Machines must be able to withstand a twenty-thousand-volt shock, among other hazards, and manufacturers have to be certified by the state Gaming Control Board and all of their employees subjected to background checks. Gamblers who have a problem with a machine are entitled to an immediate investigation, and the state board keeps investigators on duty around the clock to respond to reports of problems.

Opponents of EGDs have expressed concerns that the easily accessible devices may encourage the unhealthy gambling practices that can result in addiction. They have also cautioned that EGDs provide immediate, intense, and potentially prolonged gambling experiences and that consumers unfamiliar with gambling may be encouraged to wager recklessly.

SPORTS GAMBLING

The only states where legal betting on sports took place as of 2004 were Nevada and Oregon. In Nevada in 2003 there were 142 legal sports books that permitted wagering on professional and amateur sports. Bettors had to be over twenty-one years of age and physically present to wager. It was also possible to bet on sports via the Oregon lottery, which offered a game called "Sports Action" in which players could win money based on the number of correct winners they picked from a weekend's National Football League games.

Championship games, such as the Super Bowl or the World Series, were some of the most popular sporting events on which people bet, though one-third of bets were placed on college sporting events. Nevada did not allow betting on high school or Olympic events.

In addition to this legalized sports gambling, an unknown number of people participated in illegal gambling in 2004, such as office pools. Estimates of illegal sport betting have ranged from $80 billion to $380 billion annually. Furthermore, some Americans crossed the Mexican border to gamble or traveled to the Caribbean or Central America, where sports gambling was legal.

Does Gambling Threaten College Athletics?

Wagering on college sports is a hotly contested issue. A poll conducted by the Gallup Organization in March 2002 found that Americans were divided about whether gambling on college athletics should be made illegal throughout the country. Nearly half the surveyed respondents (49%) thought betting on college sports should be illegal and 47% felt it should be allowed.

The National Collegiate Athletic Association (NCAA) has been staunchly opposed to sports wagering because the organization contends that it attracts organized crime and has the potential to undermine the integrity of college sports contests. In its position paper, the NCAA stated that "sports wagering demeans the competition and competitors alike by a message that is contrary to the purposes and meaning of sport. Sports competition should be appreciated for the inherent benefits related to participation of student-athletes, coaches and institutions in fair contests, not the amount of money wagered on the outcome of the competition."

INTERNET GAMBLING

Internet gambling first appeared on the World Wide Web in the summer of 1995. By May 1998, according to the 1999 National Gambling Impact Study Commission Report, there were ninety online casinos, thirty-nine lotteries, eight bingos, and fifty-three sports books. In 2003 the River City Group, a research organization specializing in online gaming, estimated that there were over 810 casino-style gambling Web sites and more than 440 sports betting sites. Christiansen Capital Advisors LLC (CCA) projected that global Internet betting would increase from an estimated $5.7 billion in 2003 to nearly $10 billion in 2005. CCA estimated that 45% of the approximately twelve million 2003 online casino customers were from the United States. A survey by Inland Entertainment Corp. of five hundred online gamblers found that 86% were male, 20% were aged eighteen to twenty-five, 31% were twenty-six to thirty-four, 29% were thirty-five to forty-four, and 20% were over forty-five.

The primary legal obstacle to Internet gambling has been the 1961 Interstate Wireline Act (18 U.S.C. section 1084), which makes it illegal to offer or take bets from gamblers over phone lines or through other wired devices unless otherwise authorized by a particular state. Other federal legislation has become stalled in Congress. The Internet Gambling Prohibition Act, introduced in 1997, was passed by the Senate in 1998 but was held up in the House during 1999 because some legislators felt it might adversely affect other forms of e-commerce. Despite many revisions and amendments, the House rejected the act on July 18, 2000, leaving operators of online gambling businesses elated by the outcome. In 2003 the House of Representatives passed a bill to ban the use of financial instruments for the purpose of online gambling, but the necessary Senate passage of a similar measure was not immediately forthcoming.

While more than fifty global jurisdictions have allowed some form of Internet wagering, by 2004 the states of Illinois, Louisiana, Michigan, Oregon, and South Dakota had all passed laws prohibiting it, and attorneys general in other states had brought lawsuits against Internet gambling businesses using existing legislation. The Department of Justice has arrested or caused arrest warrants to be issued for dozens of Internet gambling operators, and several have been indicted.

Many countries, as well as the U.S. Department of Justice, have expressed concerns about the enforceability of any kind of Internet gambling prohibition. Most Internet gambling businesses were operating offshore and were licensed by foreign governments. In 2004, in response to a complaint filed by the Caribbean island nation of Antigua and Barbuda, the World Trade Organization (WTO) issued an interim ruling that found the U.S. government's efforts to curb Internet gambling were in violation of WTO commercial services agreements.

WHEN RECREATION BECOMES ADDICTION

Although gambling is simply one form of recreation and fun for many people, studies have shown that for 4% to 6% of gamblers it can become a compulsion or addiction. This behavior may cause them to gamble away their paychecks and go deeply into debt. It may harm marriages and relationships with children, other relatives, and friends.

The overwhelming majority of problem gamblers are male, and most are bright, scoring well above average or high on intelligence quotient tests. For many, gambling had begun during the early teen years. They usually excelled at trading stocks, commodities, futures, options, and bonds and at games requiring skill, such as blackjack and poker. Problem gamblers have been described as controlling, risk-taking, self-involved, sociable, and in need of approval, affirmation, and confirmation.

A review of fourteen U.S. and six Canadian gambling studies on adolescents found that from 1990 to 2000 the number of teens aged twelve to seventeen reporting serious gambling problems increased from 10% to 15%. Teens' involvement in gambling was believed to be greater than their use of tobacco, hard liquor, and marijuana. Furthermore, gambling affected children as well as teens. In 2000 a majority of twelve-year-olds had had at least one experience with gambling.

Problem gambling is not new—the first Gamblers Anonymous group was started in 1949. In 1972 the National Council on Problem Gambling (NCPG) was founded, and in 1975 the first nationwide study was conducted to determine the scope of the problem. Maryland opened the first state-funded treatment program in 1979.

In 1980 the American Psychiatric Association accepted pathological gambling as a "disorder of impulse control," describing it as an illness that is chronic and progressive but one that can be diagnosed and treated. There are three phases in the progression of gambling addiction:

  • The winning phase—Gamblers experience a big win or a series of wins that give them unreasonable confidence and optimism that their winning streak will continue. During this phase they often increase the amounts of their wagers.
  • The losing phase—When they are losing, gamblers often start to gamble alone, borrow money, and become irritable and withdrawn, especially when they are unable to pay off debts. Many accelerate their gambling in an effort to win back their losses.
  • The desperation phase—During this phase, more time is spent gambling. The gamblers often blame others for their problems and alienate family and friends. Some may even engage in illegal activities to finance their gambling. They may feel hopeless, attempt suicide, abuse alcohol and/or other drugs, or suffer an emotional breakdown.

A national survey conducted by the NCPG found that during 1998 about $20 million in public and private funds was spent on problem gambling programs. The programs included prevention, employee education and training, research, and treatment. In 2000 the NCPG established the National Problem Gambling Helpline (1-800-522-4700), which received almost 116,000 calls during its first year.

Does Internet Gambling Encourage Addiction?

Some researchers and industry observers have stated the belief that the Internet may attract problem gamblers, especially those who are trying to hide their gambling addiction. Others have been concerned because the anonymity offered by the Internet creates the potential for children and teens, posing as adults, to gamble.

George T. Ladd and Nancy M. Petry, in "Disordered Gambling among University-Based Medical and Dental Patients: A Focus on Internet Gambling" (Psychology of Addictive Behaviors, March 2002), determined that while Internet gambling was the least common activity reported by problem gamblers (about 8%), persons with Internet gambling experience had the most severe problems with gambling addiction.

Only 22% of the participants without any Internet gambling experience had problems, compared to 74% of those who used the Web. Internet gamblers were younger, more likely to be unmarried, and tended to have less education and income than persons who did not use the Internet to gamble.

Ladd and Petry cautioned that "the availability of Internet gambling may draw individuals who seek out isolated and anonymous contexts for their gambling behaviors. Accessibility and use of Internet gambling opportunities are likely to increase with the explosive growth of the Internet."

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