US States Throwing The Dice: Is Gambling a Good Business Bet?

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New gambling businesses being proposed range from resort-style casinos to state lottery systems, live racing and the familiar slot and blackjack tables. (Photo: Stock.xchng)
New gambling businesses being proposed range from resort-style casinos to state lottery systems, live racing and the familiar slot and blackjack tables. (Photo: Stock.xchng)

BUSINESS

  • Cash-strapped states launch legalized gambling venues to balance their budgets
  • State-sponsored gambling raises moral and financial questions
  • Cost-benefit analysis needed to help states determine whether gambling is a good business venture but unlikely to be made available

Every US state except Hawaii and Utah has some form of legalized gambling to raise revenue, but cash-strapped states are increasingly betting that more slot machines and blackjack tables will be good bets to meet future funding needs.

“Since the national economy started its nosedive in the summer of 2008, governors and state lawmakers across the country have been pushing new and expanded gambling measures to boost revenue, either for general state coffers or particular accounts, like education funding," reports the Patriot Ledger newspaper in Boston.

New gambling business ventures being proposed range from resort-style casinos to state lottery systems, live racing and the familiar slot and blackjack tables.

Many officials around the country are convinced that a dire fiscal situation warrants legalizing forms of gambling now barred in their states, says the Huffington Post.

Since 1931, the granddaddy of gambling has been the state of Nevada, with its wide array of legalized gambling. In the process, Las Vegas has become virtually synomonous with wagering. Relative newcomer Atlantic City, New Jersey, threw the dice on gambling in 1976 but with far less success than Vegas.

With a favorable US Supreme Court decision in 1987, many Native American tribes started building their own casinos on tribal lands to raise revenues. Because they are considered sovereign nations, they are generally exempt from state laws. Almost all states have legalized gambling in the form of state-run lotteries, and non-profits host Bingo virtually everywhere.

State-Sponsored Gambling Scope Raised

State-sponsored gambling is nothing new, but the scope and variety of it has been expanding. Even online gambling is being looked at by states. Some states are discussing the legalization of online poker with an eye on taxing winnings, just as they are taxed in brick-and-mortar casinos.

But many such moves have taken on a much larger scope in the past few years. In Florida, for example, a Malaysian-based company called Genting’s acquired land (including the old Miami Herald newspaper office) to build a $4 billion, 5,200-room casino hotel well in advance of the state legislature’s approval. Disney and many tourist interests staunchly oppose adding more gambling to the state’s current lottery system and Indian-owned gaming ventures.

There are various moral objections to gambling, but perhaps a more immediate question is whether more of it will help restore the health of ailing state governments. Critics question whether the government should encourage gambling. Apart from the purely moral argument, the thousands of jobs and millions in income raised by gambling does not really reflect its real cost, according to critics.

The first practical question is raised by theHuffington Post: “Will the overall cost of legalizing more gambling in (states) exceed the overall benefits?”

Social costs associated with gambling include addiction, bankruptcy and family hardships. “It’s the equivalent of opening a lottery retailer in every home, office and dorm room in America,” Les Bernal, executive director of the Stop Predatory Gambling Foundation, told the New York Times.

Legalization advocates in turn argue that because of the states' urgent need for revenue to help fund law enforcement, firefighting, education, road construction and other vital public services, the total benefits of loosening restrictions on gambling would outweigh the costs, including even the social harms.

“This response could be true, but supporting it would require rigorous and comprehensive cost-benefit analysis,” says theHuffington Post.

While any such analysis would be a valuable decision-making tool for thumbs up or down on the issue of more gambling, it is probably unlikely and perhaps impossible to quantify the social impact. So the outcome is that states will likely continue to throw the dice, and like all gamblers, hope for the best or trust their good luck.

Key Statistics – Casinos & Gambling in the US (source: MarketLine)

  • The US gaming and casino market had total gross gaming wins of nearly $89 billion last year.
  • The sector’s most lucrative market last year was casinos, with total gross gaming wins of over $30 billion. That is the equivalent to almost 34% or more than one third of the overall value.
  • For the five year period of 2010 to 2015, the casino sector is expected to accelerate with an anticipated CAGR of 4.6% for that time frame. That would drive casinos to a value of more than $111 billion by the end of 2015.

By David Wilkening for
David Wilkening is a former newspaperman who worked in Chicago, Detroit and Orlando. He now specializes in travel and real-estate business writing.

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