The Encyclopedia of Libertarianism

Gambling

Most Americans appear to enjoy gambling. Opportunities abound, ranging from state and interstate lotteries, to traditional contests of horses and greyhounds, to all manner of casinos, whether on land or water or on the Internet. However, although more and more consumers embrace this new freedom to wager, others insist that there is cause for serious concern. Fearing an outbreak of compulsive gambling, they have lobbied lawmakers to intervene to prevent a further proliferation of gambling outlets and to roll back those that currently exist. Their lobbying has raised a number of questions, among them: Should gambling be permitted at all? If so, which forms of gambling are acceptable? Finally, if gambling is to be tolerated, should it be regulated and how?

Legalized gambling has become one of those polarizing issues that drive many thoughtful individuals to examine their underlying beliefs regarding freedom of the individual. Some, such as the Cato Institute’s Tom W. Bell, have argued that “our rights to peaceably dispose of our property include the right to gamble, online or off.” Others, worried about personal corruption through compulsive gambling, have urged “a strategy of containment to minimize the moral risks of gambling for individuals and society.” Fed up with the liberal attitude toward gambling adopted by many states, this group recently elevated their campaign to the federal level. Accordingly, in 1997, the 104th Congress established the National Gambling Impact Study Commission (NGISC) to “conduct a comprehensive study of the social and economic impacts of gambling in the United States.” Two years later, the NGISC recommended a “pause in the expansion of gambling.”

This controversy is nothing new. Both in America and throughout the world, gambling has a long and colorful history. Historians Lisa Morris and Alan Block have shown that, in the United States, gambling was legalized in the lower Mississippi Valley, and “until the 1840s professional, organized gambling was primarily carried out on steamboats plying the Mississippi and Ohio Rivers and the Great Lakes.” By midcentury, the locus of organized gambling moved to the West and particularly northern California, where it was vitalized by the Gold Rush.

Later, despite Prohibition—or perhaps because of it—underworld gambling operations thrived on land, spawning “a series of infamous ‘crime towns.’” Lotteries date back to ancient times, and in the 16th century, Queen Elizabeth I chartered the first English lottery. In colonial America and following independence, lotteries prospered as a much-promoted and voluntary means to supplement the public coffers. However, as a steady procession of public scandals took their toll, the 19th century witnessed a political backlash against lotteries that culminated in their universal prohibition. The legal lottery did not return until 1963, when New Hampshire introduced a state lottery. Between 1965 and 1993, no less than 35 states and the District of Columbia introduced state lottery monopolies.

The historical tug of war between gambling proponents and detractors continues. Today, an overwhelming majority of states enthusiastically promote homegrown lotteries, and a renewed interest in casino gaming is flourishing. According to a recent Harrah’s survey, fully 32% of U.S. households gambled at a casino in 1996. Those households that did gamble averaged 4.8 visits, for an overall total of 176 million visits. This figure is up by 14% from 1995.

The rapid increase in popularity of gambling has led to a sense of emergency among its opponents, who have pressed their case on several fronts. The various state lotteries have been almost universally denounced as immoral and economically harmful. Although state officials undoubtedly enjoy the additional revenue, critics have argued that “losses fall disproportionately on some of the more vulnerable members of society.” Meanwhile, casinos are accused of displacing—even cannibalizing—rival service and entertainment businesses, such as hotels, restaurants, and theme parks. Worse, it is alleged, this displacement is achieved by ruthlessly exploiting the addictions of compulsive gamblers, thereby causing financial distress, destabilizing families, and fueling welfare dependence and crime.

Many of these charges lack merit. Cannibalization appears to mean little more than vigorous competition. Additionally, many of the crime statistics that underlie the claim that gambling breeds crime have been based on dubious measurements. For example, early analysis of Atlantic City crime figures shortly after the arrival of casinos suggested that per capita crime had markedly increased. However, these crime statistics failed to take account of the swelling local population due to casino-related tourism; the effect was that estimates of crime were heavily inflated. When the crime statistics for Atlantic City were readjusted to take account of this and other elementary crime-reporting errors, the resulting crime levels were unremarkable.

Still, nobody denies that there are those who, for whatever reason, gamble in ways that have a negative impact on themselves or others. Although the severe cases are thought to be uncommon, the actual numbers are often elusive. Again, for the most part, measurement and classification problems haunt efforts to reliably estimate prevalence. Indeed, there is no clear consensus on what sort of behavior should be labeled compulsive or problem gambling. Nor is it clear that problem gambling, however it is defined, has been exacerbated by legalization. One study on gambling behavior in Connecticut found that “probable pathological gambling rates may actually have fallen … and have certainly not risen, during a period [1991–1996] in which one of the largest casinos in the world [Foxwoods] was opened in the state.”

Moreover, to the extent that compulsive gamblers behave badly toward others, it is not always due to gambling. Ronald A. Reno estimates that “one to three percent of the adult population are pathological gamblers,” but notes, “about half of compulsive gamblers experience problems with alcohol and substance abuse,” which constitutes an important confounding factor.

However, from time to time, truly pathological gambling can result in genuine human misery. Of course, the same—or worse—is true of alcohol abuse and a number of other legal activities. As in the case of alcoholism, the question is whether problem gambling is better addressed on a voluntary basis, rather than through prohibiting the activity entirely. Self-help programs, such as Gamblers Anonymous (GA), insist that treatment, at least, must be voluntary. As the GA literature makes clear, the

compulsive gambler needs to be willing to accept the fact that he or she is in the grip of a progressive illness and has a desire to get well. Our experience has shown that the Gamblers Anonymous program will … never work for the person who will not face squarely the facts about this illness.

In any case, lawmakers in a free society must ask not simply whether the choice to gamble is harmful solely to the gambler, but whether this choice clearly involuntarily harms others. Negative neighborhood effects may on occasion be just grounds for government to step in, at least in instances where the intervention can be shown to be effective and where it does not lead to other, more harmful effects. But this is rarely the case. Historically, gambling prohibitions have done more harm than good. As Reuven and Gabrielle Brenner note, when

a comprehensive law prohibiting all forms of gambling was passed in Nevada in 1909 … the result was that government revenues from licensing were lost, a large number of games were played, and corruption and “protection” became widespread, bribes coming to seem like little more than a form of license.

The repeal of this law in 1930 changed all of that. The impact of legalization was that eventually the gambling industry in Nevada, which features a massive corporate structure, was characterized by honesty toward its customers.

In another example cited by Brenner et al., “New York’s legislature in 1960 passed a series of new antigambling laws whose purpose was to facilitate convictions and, by increased penalties, to have a detrimental effect on gambling.” But the results were disappointing. Gambling and the organized crime associated with it persisted, but few convictions were obtained. If it had a significant effect, it was on the police, for whom, the Knapp Commission found, gamblers’ protection money was the main source of bribes. A typical policeman on the gambling squad was able to get $300 to $1,500 per month, and his or her superiors got additional sums.

That widespread gambling legalization has substantially decreased mob influence in the gambling industry is beyond dispute. Whether government oversight played an important role is debatable. This question is important because, naturally enough, industry representatives are eager to deal with any concerns the public might have about the honesty of their enterprises. Although concern about mob influence has led some to call for more strenuous government licensure and oversight of the entire industry, such an approach is certainly not without cost nor is there any indication that it is needed. By artificially raising the cost of entry to the casino industry, licensure serves to protect current industry participants from new competition. Moreover, to the extent that a license becomes a valuable commodity, public officials overseeing the licensing process are easily put in a compromising position. If the intent of government licensure is to shore up the integrity of the industry, it is not doing a terribly good job, as critics of former Louisiana Governor Edwin W. Edwards—convicted of taking gifts in exchange for casino licenses—would attest. But if not licensure, then what? One alternative, already adopted by many Internet casinos (understandably eager to assure Web surfers of their reputation for fair play), is to retain the services of a private, third-party accreditation agency.

A final word on the lotteries: In nearly all states, lotteries have been revived as jealously guarded government monopolies. Across America, they have been lauded as a secure and voluntary source of state revenue. But lottery players are generally older, poorer, and less educated than the average American, or even the average casino patron, leading to outcries of exploitation in some quarters. Lottery critics then divide into two camps—those who would do away with lotteries altogether and those who would open them up to competition from private operators. As one critic observed:

For once, responsible politicians need not design new programs, draft new regulations, or create new bureaucracies to achieve some immediate progress—they need only terminate any involvement they may have as operators of state lotteries.


Further Readings

American Legislative Exchange Council. Harrah’s Survey of Casino Entertainment, 1997. Available from http://www.harrahs.com/survey/ce97/ce97_index.html

Brenner, Reuven, and Gabrielle A Brenner. Gambling and Speculation. Cambridge: Cambridge University Press, 1990.

Detlefson, Robert R. Anti-Gambling Politics—Time to Reshuffle the Deck. Washington, DC: Competitive Enterprise Institute, 1996.

Galston, William A., and David Wasserman. “Gambling Away Our Moral Capital.” The Public Interest 123 (Spring 1996): 69.

Goodman, Robert. The Luck Business: The Devastating Consequences and Broken Promises of America’s Gambling Explosion. New York: Free Press, 1995.

Margolis, Jeremy. Casinos and Crime: An Analysis of the Evidence. Chicago: Altheimer & Gray, 1997.

Morris, Lisa, and Alan Block. “Organized Crime and Casinos: An International Phenomenon.” Gambling: Public Policies and the Social Sciences. William R. Eadington and Judy A. Cornelius, eds. Reno, NV: Institute for the Study of Gambling and Commercial Gaming, 1997. 664.

Reno, Ronald A. “The Diceman Cometh.” Policy Review(March–April 1996): 42.

Summers, Susan Robinson, David S. Honeyman, and James L. Wattenbarger. “The Resource Suppression and Redistribution Effects of an Earmarked State Lottery.” Gambling: Public Policies and the Social Sciences. William R. Eadington and Judy A. Cornelius, eds. Reno, NV: Institute for the Study of Gambling and Commercial Gaming, 1997. 537.

WEFA Group. “A Study Concerning the Effects of Legalized Gambling on the Citizens of the State of Connecticut.” Prepared for State of Connecticut, Department of Revenue Services, Division of Special Revenue, June 1997, 9.

Originally published .