XII. Outlook and Options

It is difficult to forecast what will happen with gambling in California. After years of an almost unbroken string of growing gambling participation and opportunities, two events have intervened to bring the trend to a halt.

Added to this is the possible creation of a gaming commission to regulate cardrooms. What effect that might have on the industry is difficult to say.

Another emerging development that may have an impact on California is:

Gambling may be changing radically for other reasons. Minnesota announced a joint plan to allow gambling at home. Massachusetts also tried a one-year experiment with a telephone lottery system. There is considerable discussion of at home betting on the Internet.1 Reportedly current Internet gaming operations are quite profitable.2 Although illegal in the United States, they are legal in their offshore havens, typically in the Caribbean. If the casinos are outside of the United States it is difficult to prohibit or regulate play. For right now the volume of play is limited because of problems of legality, security and trust.

Nevertheless, there are some successful examples. There is a lottery based in Liechtenstein that is on the World Wide Web. Tickets are purchased with credit cards. It is one example of many that include betting on racing and casino games. Because of the ease of setting up a site the number may grow to thousands soon. In some sense, it is merely an outgrowth of an already existing in-home gambling market through the telephone and cable television. In the United States, it is limited to some off-track betting. Because of the rigorous requirements, it is small.

As gambling seems to find new areas for its growth, airlines have weighed in. British Air is putting gaming machines on their international flights from London to non-U.S. destinations. It is banned on all flights that originate or end at a U.S. destination. The FAA did a study and found that if gambling was offered on foreign carriers only it could be a $500 million market.

Although the extent and types of gambling in and around California may be changing, it is clear that gambling has already made a major presence in the state. Following is a list of options for the state to consider adopting to deal with some of the impacts and issues raised by gambling. These are only options and not recommendations. The California Research Bureau does not develop recommendations, merely options for policy makers.

Options

Research Options

Although this paper covers a lot of material, it is evident that there are many things that are unknown about the impacts of gambling, especially as they relate to California. Major issues related to gambling that need more research include pathological and problem gambling, underage gambling, economic impacts, public finance, and crime. Other states are in a similar situation and have tried to resolve the problem in various ways.

"Right now, we in Oregon do not know if we have created a monster. Nor do we know the real cost of state-run gambling, social and economic. But we do know we are going to pay the price."3

Regulatory Options

This paper discusses the regulatory regimens in different states. There are marked differences between states. At one extreme are Utah and Hawaii, where no gambling is legal. At the other extreme is Nevada, where casino gambling is allowed at many locations throughout the state, but of course still subject to state and local regulation.

Most states with as much gambling as California have a greater state regulatory presence, including a gaming commission of some kind. California could increase regulation of gambling several different ways.

Publicly-traded companies are subject to requirements of both federal law and the listing stock exchange. These requirements for audits can eliminate some of the criminal activity that can occur in connection with gambling establishments. Also, these companies have greater access to funding from banks and other mainstream business sources.

In some sense, California law is less strict than Nevada's. Nevada prohibits all gambling unless specifically authorized. California law allows gambling except when prohibited. As a result, the prohibitions contained in California law can be ineffective as new variants of the prohibited activity are developed. Twenty-one is outlawed, but the game of 22 can be played.

Pathological Gambling

Pathological gambling is a serious medical condition that with the proper intervention can lead to recovery for the individual.

There is disagreement over how best to help the pathological gambler. There are examples of public policies that have been adopted in other areas.

In California, gambling debts cannot be enforced by the courts. There is disagreement over whether this is wise public policy that protects the pathological gambler or poor public policy that encourages loan-sharking.

Economic Development

Gambling facilities are often used to promote economic development.

Underage Gambling

Crime

Indian Gaming

This has been a rapidly growing area without significant state involvement. Some states have increased their say over Indian gaming through state-tribal compacts. The compacts have been agreed to in part because of widespread concern that Indian gambling is not adequately regulated, although tribal leaders disagree.

Fiscal Impacts

Lottery Advertising

There is controversy over how lotteries advertise. Critics charge that the advertisements are misleading, suggesting that the lottery is an easy path to riches and promotes a society that believes that you can get something for nothing. Some states have tried to regulate the content of advertisements, the most recent being New York which makes its advertisements portray winners more honestly. It should be pointed out that advertising does help sales which in turn provides funds for California public education.

Recent court cases and Attorney General opinions have sharply reduced the ability of the lottery to raise money.

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