When casino gambling hits the race track: Who wins, who loses?

Dr. Martin Luther King said more than once, “Laws cannot change the hearts of humans, but they can change their habits.” He probably did not have in mind casino gambling, but more than forty years after he spoke his profound words, gambling is the lesson de jour.

Gambling (or “gaming” as its proponents like to call it when they refer to it as being sanitized), is in many ways a zero sum game. The total amount of money that exchanges hands in a given geographic area is considered to be flat; i.e. essentially the same, regardless of how many outlets there are for legalized gambling. Yes, there are proportions that determine how much money government authorities receive, owners of the “enterprises” receive, and the more paltry amounts that the few winners of the “games” win. As the St. Louis Post-Dispatch reported on Sunday, June 10, 2012,

It’s called “cannibalization”— an economic term referring to businesses that grow solely at the expense of other businesses in a stagnant market. Virtually everyone in Illinois’ debate over gambling expansion agrees that some of that will occur in the Metro East if Fairmount Park [a horse-racing track] is allowed to host slots.

This is the current issue in Illinois: Should slot machines be allowed at Fairmount Park horse racing park in Collinsville – about 15 miles east of St. Louis? If so, it will be a cash cow for a horse racing track and a loss for the “boats in a moat” on the Mississippi and other rivers in Illinois. As Kevin McDermott continues to say in the Post-Dispatch, “It’s just going to take more money away from the existing casinos, and there’s not going to be that much of a net gain to the state.”

It’s possible that the demand for legal gambling was established long before “gaming” was ever made legal. One of the arguments advanced for legalizing gambling was that it already existed illegally in the form of the numbers game. It was fraught with violence, fraud, and abuse of minorities, women, and children. In a sense, legalizing gambling made sense, just as it would to permit the use and distribution of marijuana and possibly other drugs that are currently illegal. If that were to occur, there is no magic formula that the demand for marijuana and other drugs would go up. The main difference would be that it would be utilized in a way that avoided the harm and chaos of having it processed through the legal system.

As things stand now with gambling, the following is certain: (a) the owners of casinos make money, unless the supply of outlets becomes so large that the initial oligopoly that exists is significantly reduced, (b) the government collects taxes on money spent at casinos, though rarely is it used for education as initially promised, and (c) players lose money because the house is stacked against them. This situation is no different than it was when gambling was illegal.

The bill in Illinois to permit slot machines at Fairmount Park has not yet been signed by Governor Pat Quinn. He is of a mixed mind regarding the issue. He does not want the concentration of power at Fairmount and potentially other horse racing tracks, and he also wants to protect the financial viability of existing casinos.  On the other hand, Illinois is like most other states and is running a financial deficit. In a simplistic formula, the money from gambling would help the state meet outstanding financial obligations without raising taxes and potentially without cutting services.

When it came to civil rights, Dr. King was correct that laws could change people’s habits, at least prior to the renaissance of the states’ rights movement in the U.S. But the habit of gambling in the U.S. seems to be rather permanent, whether legal or not. The solutions to the problems are not easy. We teach our students about the risks of gambling about as well as we teach sex education. Abstinence without reasonable alternative approaches doesn’t work. Whatever happens in Illinois and elsewhere in the country, the winners will only be temporary, and they will never be the public. Truly a shame.