“Gambling has an almost uniquely corrupting influence on governments…”
That arresting line introduced a recent article from The Dispatch. It pointed out that many governments “count on gambling to produce a fairly reliable stream of revenue.”
An Atmosphere of Attractive Risks
Evidence of state-sponsored and tolerated gambling is everywhere. Among the fifty states, only Mississippi, Utah, Nevada, Hawaii and Alaska have no state-sponsored lottery scheme. Of course, two of those states hardly count as “holdouts.” Mississippi allows casinos to set up in so-called riverboats. Nevada features almost every other form of gambling throughout the state, not just in Las Vegas.
In states that sponsor lotteries, convenience stores and gas stations prominently display “instant win” or “scratch off” tickets. Kiosks printing tickets for larger stakes games share counter space with cash registers. Advertisements blare from radios and televisions, conveying the message, “You can’t win if you don’t play!”
However, many do not realize that state-sponsored gambling is a recent development.
State Lottery Schemes
Indeed, until the late sixties, gambling was uncommon—and often underground. That subterranean ambiance was sometimes literal, as with many heavily regulated Catholic parish basement Bingo games.
The term was more figurative when describing illegal “numbers games” that proliferated in many big cities. Other than these and “penny a point” poker and bridge games among friends in private homes, gambling was uncommon everywhere but Nevada.
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The first states to have state-run lotteries were New Hampshire (1963), New York (1966) and New Jersey (1969). According to the book For a Dollar and a Dream: State Lotteries in Modern America, New Hampshire and New York initially enjoyed little success. New Jersey made its games easier to play and marketed them more successfully, but still did not produce the revenues that lawmakers thought might come.
The dam burst when the “rust belt” states suffered through the early seventies. As once-healthy heavy industries deteriorated, northeastern and midwest states searched for ways to refill their coffers and meet the higher costs of social welfare programs. Connecticut, Pennsylvania and Massachusetts started their lotteries in 1971. Michigan and Maryland jumped on in 1972. Ohio, Rhode Island, Maine and Illinois joined the game in 1973.
Voluntary Taxes
From the politicians’ point of view, the best thing about lotteries was their popularity. While the amounts obtained were almost always disappointing, lawmakers could treat those revenues as easy money. Millions were happy to contribute their dollars to the state in return for an infinitesimally slight chance at winning. Those who didn’t want to play could just stay home and ignore the whole thing.
From that basis, opportunities to gamble increased. In 1978, the run-down Atlantic City, New Jersey, welcomed its first casino, an opening bid to become the Las Vegas of the East Coast. The following year, the Seminole Indians opened a “high stakes bingo parlor” on tribal land near Fort Lauderdale. At the time, local officials resisted, but the reservations lay outside their jurisdictions. Other Indian nations later set up gambling operations on their reservations.
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Gradually, many states adopted an “if you can’t beat ‘em, join ’em” attitude and allowed casinos to operate in their states. Twenty-four states now allow some form of commercial gambling casinos to operate.
The Rapid Spread of Sports Gambling
The most recent development is using the Internet to gamble on sporting events. The Supreme Court gave this activity a “green light” in 2018, overturning the “Professional and Amateur Sports Protection Act.” Congress passed the law in 1992 to insulate sports other than horse and dog racing from the pernicious effects of gambling. However, in the case of Murphy v. NCAA, the Court concluded that the law violated the Tenth Amendment. From that point on, states could make such gambling legal. Investopedia reports that thirty-eight states and the District of Columbia now allow it.
According to the American Gaming Association (AGA), revenues from these “sportsbooks” hit $7.5 billion in 2022, up 75 percent over 2021. Yahoo Finance reposts that the 2023 total was $10.9 billion, an additional 44.5 percent over 2022.
Throughout this process, every level of government gets some percentage of this gambling money. These revenue sources range from local property taxes to electrical and water usage fees, corporate and individual income taxes, excise taxes on alcohol consumption, special taxes on hotel room occupancy and many others.
Do the Social Costs Eliminate the Profits?
However, not all of the news is good. The Guardian reports that New Jersey’s gambling revenues are “roughly equal” to their related social costs.
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“NERA [National Economic Research Associates] estimated that online casinos in New Jersey contributed $385m in net taxes in 2022, up from $42m just five years beforehand. But using a UK study by the London-based National Institute for Economic and Social Research on problem gambling and rerunning its calculations for New Jersey, NERA concluded the state could face $350m in social costs—including healthcare, welfare, homelessness and criminal justice—from issues linked to digital gambling.”
Assigning exact figures to widely variable causes like homelessness and criminal justice is always speculative. The amount that a single homeless person costs the state or the number of New Jersians who committed crimes because they lost their money gambling is subject to wide disparities. However hard to quantify, such connections could, and probably do, exist.
There are alarm bells that online sports gambling appeals to a younger audience than other forms of gaming, such as slot machines. The aforementioned Dispatch article makes a valid and disturbing point.
“Some states allow sports betting by 18-year-olds even as the case for limiting things such as alcohol and handguns to those 21 and up is evident to many observers. But, here’s the thing: If we really wanted to “follow the science,” as everybody likes to say, we wouldn’t raise the age for gambling (or alcohol or, you know, voting) to 21 but to something more like 25, when the prefrontal cortex finally gets its act together.”
Promoting Unsolvable Problems
The problem is not limited to the young. A Connecticut-based website, CT Mirror, recently carried some harrowing statistics related to “problem gamblers”—those with “impaired control over their gambling.”
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“Anywhere from 51% to 71% of problem gamblers reported having financial concerns, borrowing a significant amount of money or selling possessions because of their gambling habits. Bankruptcy filings occurred 13.5% to 15.7% of the time. Mental stress was reported among 69.9% of respondents with suicide attempts being reported 1.4% to 8.4% of the time.”
Obviously, not every person who buys a lottery ticket or bets on a basketball game becomes a problem gambler.
However, the trends related to younger people increasingly engaged in internet sports gambling indicate that the situation is probably deteriorating. The states that make gambling appear attractive and profit from its popularity should, at the very least, carefully consider if the “cure” for monetary shortfalls isn’t worse than the disease.
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