Policy Analysis No. 349

Gambling America: Balancing the Risks of Gambling and Its Regulation

By Guy Calvert
June 18, 1999

Executive Summary

Americans, it would seem, are all gamblers now. Opportunities abound, from state and interstate lotteries to the traditional contests of horses and greyhounds and in all manner of casinos—Indian or commercial, on land or on water, or just online. But while more and more consumers embrace their freedom to wager, a determined few are agitating to turn back the clock.

Stepping into the fray, Congress has established the National Gambling Impact Study Commission to tally up the “social costs” of gambling and examine a range of regulatory options. The commissioners were also to review the costs of regulation, which presumably calls for thorough consideration of the nongovernmental alternatives. But strikingly, in this regard, they failed. Moreover, these proceedings obscure the important point that gambling, for the vast majority of people, is simply a matter of fun, a voluntary and harmless pursuit that many find rewarding. In moderation, it is neither less wholesome nor less rational than other sources of entertainment, such as television, the opera, or competitive sports.

A high standard of gaming integrity is in everyone’s interest. But that is best accomplished voluntarily, by way of private accreditation through independent third parties. The federal government should therefore resist pressure to involve itself further in gambling. And the states too must recognize that prohibition, even in the form of government licensing and oversight, substitutes corruption for enterprise. They should fully expose gambling to the rigors of the market, beginning with the lotteries. It is time for states to relinquish their monopolies.

Confronting uncertainty, taking or hedging risks, presents decisions that are the staple of life and the key to prosperity. There may be risks inherent to gambling, but we should remember that government intervention entails risk too. A coercive effort to eliminate or reduce gambling must compete with that most formidable opponent, human nature. Lawmakers too need to balance the risks.

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Guy Calvert, a quantitative analyst at a Wall Street firm, holds a D.Phil. in mathematics from Oxford University.