Place Your Bets, America

July 9, 1999 • Commentary
By Guy Calvert

Place your bets, America. The National Gambling Impact Study Commission has released its final report. After two years of open deliberation, the question is not so much what it will propose or whether or not Congress and the states will go along with it all. Those who happen to enjoy the occasional wager can only hope not.

Congress established the commission in 1996 to tally up the “social costs” of gambling and examine a range of regulatory options. The commission was also to review the costs of such regulation, but on this subject it has so far said rather little. Instead, we can expect much handwringing over compulsive gambling, together with a laundry list of fresh regulations to keep us all on our toes.

Two of the most sweeping recommendations are also the most disturbing — a ban on political campaign contributions from gambling interests and a ban on all gambling over the Internet. As for the real disease plaguing the gambling industry — government corruption — the first would at best treat the symptoms, and the second is very much at the source of the problem. Take the Internet proposal first. In their preliminary recommendations, the commissioners cite the dangers of “bringing gambling into the home of every family with a computer.” Of course, whatever the perils of Internet wagering, the nature of the medium suggests that a ban would likely be futile. Not to mention completely over the top. Concerned parents need do little more than keep their credit cards secure and out of the hands of their children; if that seems too hard, then the Internet looms as the least of their problems.

All in all, it is hardly obvious how Internet gambling presents a greater threat to society than does any other sort of gambling venture. And picking on Internet gambling in particular will likely stir suspicions. Proponents of Internet gaming will surely question the impartiality of the commission, a majority of whose nine members were either bound up with their bricks‐​and‐​mortar casino competitors — traditional and tribal casinos — or represented the unionized employees of such competitors or else were dyed‐​in‐​the‐​wool opponents of any kind of gambling.

Justified or not, this is precisely the sort of grievance that, little by little, is bringing the gambling industry into disrepute — and government officials along with it. Did former Louisiana governor Edwin Edwards take money and gifts in exchange for casino licenses? Did Secretary of the Interior Bruce Babbitt deny a casino license to the Wisconsin Chippewa tribes because of pressure from a competing casino interest — one which, it just so happens, had generously donated a six‐​figure sum to the Democratic National Committee? The courts will decide, but in any case it is questionable that government licensure is doing anything to shore up the integrity of the industry. Quite the opposite. The whole process must at least be perceived as a grubby exercise in political back scratching and suppressing competition.

Indeed, the commissioners’ proposed ban on political contributions is tacit admission, in case anyone still doubted it, that the licensure process is particularly vulnerable to this kind of corruption. Can’t brush off those pesky competitors? Just speak to your friendly congressperson. And leave your donation at the door. Who knows, you might even hit the jackpot and win a voice on an influential congressional panel. So it goes when government piles on the regulations and then holds open the door to those seeking differential gains through political means. But a ban on political contributions, leaving aside its highly suspect constitutionality, simply misses the point.

Which is, quite simply, that government licensure is as unnecessary as it is undesirable. While a high standard of gaming integrity is in everyone’s interest, it is best accomplished voluntarily, by way of private accreditation through independent third parties. This is hardly a radical idea. Along with other vendors of entertainment services, authors, playwrights, moviemakers and restaurateurs routinely submit their products to independent review. So do manufacturers of electrical and other products, for whom quality assurance can be obtained from several private sources, including the familiar, not‐​for‐​profit Underwriters Laboratory. And so too, for that matter, do many vendors of Internet gaming.

That widespread legalization has dispelled mob influence is beyond dispute. Whether strict government oversight played an important role is debatable. Today casinos are typically owned and managed by publicly traded companies, answerable to the market discipline imposed by ordinary shareholders in denim rather than the old‐​fashioned intimidation of men in dark suits. The best policy for lawmakers is an abiding commitment to stay out of the gambling business, and let the chips fall where they may.

About the Author
Guy Calvert, a mathematician, is the author of Cato Policy Analysis no. 349, Gambling America: Balancing the Risks of Gambling and its Regulation.