Chapter 2
Supply and Demand: Who Offers Gambling? Who Gambles?

SUPPLY: GAMBLING OPPORTUNITIES AND OPPORTUNISTS
DEMAND: THE GAMBLERS

Like any business in a capitalist society, the gambling industry is driven by the principles of supply and demand. Gambling proponents argue that demand drives supply. In other words, the industry grows and spreads into new markets because the public is eager to gamble. Illegal gambling has always flourished, and opinion polls show that most Americans support legal gambling opportunities, particularly lotteries and casinos.

Gambling is one of the most popular leisure activities in the country. Commercial casinos took in over $34.1 billion in 2007 (see Figure 2.1), and tribal casinos took in $26 billion, according to the National Indian Gaming Commission, in National Indian Gaming Commission Newsletter (summer 2008, http://www.nigc.gov/LinkClick.aspx?link=NIGC+Uploads%2fNewsletters%2fSummer.2008.pdf&tabid=140&mid=760). These numbers dwarf, for example, box office sales of the U.S. motion picture industry, which the Motion Picture Association of America indicates in “Research & Statistics” (2008, http://www.mpaa.org/researchStatistics.asp) earned $9.6 billion in the domestic market and $26.7 billion worldwide in 2007.

However, gambling opponents argue that supply drives demand. They surmise that people would not be tempted to gamble or to gamble as often if opportunities were not so prevalent and widespread. They see gambling as an irresistible temptation with potentially dangerous consequences. It bothers them that gambling opportunities are presented, promoted, and supported not only by the business world but also by government leaders and politicians—people who are supposed to represent the best interests of the public they serve.

Whatever the driving reason, gambling has become a big business and a popular pastime for many Americans.

SUPPLY: GAMBLING OPPORTUNITIES AND OPPORTUNISTS

A variety of gambling opportunities are available in the United States, both legal and illegal. Gambling is a moneymaking activity for corporations, small businesses, charities, governments, and in some cases, criminals. The legal gambling industry employs hundreds of thousands of people across the country. In addition, it generates business in a variety of related industries, including manufacturing companies that provide slot machines and other supplies, travel and tourism operators that provide transportation, food, and lodging for gamblers, advertising agencies that promote gambling enterprises, breeders that raise and train racehorses, and many more.

The American Gaming Association (AGA) explains in the fact sheet “Gaming Revenue: 10-Year Trends” (April 2008, http://www.americangaming.org/Industry/factsheets/statistics_detail.cfv?id=8) that the legal gambling industry's gross revenue increased from $45.1 billion in 1995 to $90.9 billion in 2006. A significant portion of this growth took place after 2000. Gross gambling revenue is the money taken in by the industry minus the winnings paid out. In other words, it is equivalent to sales. From this number, then, operating expenses such as wages, benefits, and taxes must be subtracted to gauge the profits realized by the industry. In 2008 State of the States: The AGA Survey of Casino Entertainment (2008, http://www.americangaming.org/assets/files/aga_2008_sos.pdf), the AGA estimates that the gross revenue for the commercial casino industry was about $34.1 billion in 2007; of that, $13.8 billion was paid out in wages and $5.8 billion was paid in taxes.

Casino Owners and Operators

Corporations have profited the most from legalized gambling since they took over the small casinos of Las Vegas during the late 1960s. Organized crime had been pushed out by the government, so the corporations could bring their management practices to an increasingly profitable business. They invested money in new and bigger properties in Las Vegas and throughout the state of

Nevada and then, in 1978, opened the first casino hotel in Atlantic City, New Jersey. As of 2008, most corporations in the industry owned or operated several commercial casinos. Casino City estimates in “United States Gaming Industry Overview” (2005, http://casinocitypress.com/Advertising/PocketDirectory/PGD2006_IndustryOverview Pages.pdf) that in 2005 commercial casinos and card rooms controlled 39% of the legal gambling revenue pie, compared to 28% controlled by lotteries and 25% by tribal casinos. Some companies, such as Harrah's Entertainment, also manage casinos for Native American tribes. The tribes are increasingly partnering with large, well-known corporations to take advantage of their name recognition and corporate experience.

Many of the nation's gambling properties are controlled by five well-known corporations: Harrah's Entertainment, MGM Mirage, Boyd Gaming Corporation, Penn National Gaming, and Station Casinos.

HARRAH'SENTERTAINMENT. According to Harrah's Entertainment, in Annual Report of Harrah's Entertainment, Inc., to the United States Securities and Exchange Commission (December 31, 2007, http://www.sec.gov/Archives/edgar/data/858339/000119312508043934/d10k.htm), in 2007 the company owned or managed fifty casinos in six countries, primarily in the United States and United Kingdom. Its casinos were operated primarily under the Harrah's, Caesars, and Horseshoe brand names. The company also owned the World Series of Poker tournament. It employed approximately eighty-seven thousand people and had a net revenue of $10.8 billion in 2007, up from $4.4 billion in 2004.

In Las Vegas the company owned Harrah's Las Vegas, Rio All-Suite Hotel & Casino, Caesars Palace, Bally's Las Vegas, Flamingo Las Vegas, Paris Las Vegas, Imperial Palace Hotel & Casino, and Bill's Gamblin' Hall & Saloon. Elsewhere in Nevada, the company owned Harrah's Reno, Harrah's Laughlin, Harrah's Lake Tahoe, Harveys Resort and Casino, and Bill's Casino. In Atlantic City, Harrah's owned Harrah's Atlantic City, Showboat Atlantic City, Caesars Atlantic City, and Bally's Atlantic City. The company also owned casinos in Illinois, Indiana, Iowa, Mississippi, Missouri, Louisiana, Pennsylvania, Arizona, North Carolina, and California, and in Uruguay, Canada, the United Kingdom, Egypt, and South Africa.

Harrah's was acquired by TPG Capital and Apollo Global Management in January 2008. The private acquisition meant that Harrah's stock would no longer be publicly traded.

MGM MIRAGE. MGM Mirage notes in Vision: MGM Mirage 2007 Annual Report (2007, http://library.corporate-ir.net/library/10/101/101502/items/287871/MGMM _2007_AR.pdf) that on December 31, 2007, it owned seventeen casino resorts and had 50% investments in four others. These establishments included the Bellagio, MGM Grand Las Vegas, Mandalay Bay, The Mirage, Luxor, Treasure Island, New York–New York, Excalibur, Monte Carlo, Circus Circus Las Vegas, and Slots-A-Fun, all in Las Vegas. The company also owned or partially owned casinos in Michigan, Mississippi, New Jersey, and Illinois. The company also owned several golf courses. In 2007 the company closed or sold several casino operations. In 2007 MGM Mirage employed sixty-seven thousand people and had a revenue of $7.7 billion, up from just $4 billion in 2004, an increase of 92% in that three-year period.

BOYD GAMING CORPORATION. In Boyd Gaming Annual Report 2007 (2007, http://216.139.227.101/interactive/byd2007/?zz=144), the Boyd Gaming Corporation notes that in December 2007 it owned fifteen casinos, including California Hotel and Casino, Fremont Hotel and Casino, Main Street Station Casino, Gold Coast Hotel and Casino, The Orleans Hotel and Casino, Sam's Town Hotel and Gambling Hall, Suncoast Hotel and Casino, Eldorado Casino, and Jokers Wild Casino, all in Las Vegas. The corporation also owned hotels in Indiana, Illinois, Louisiana, and New Jersey. In 2007 the company began construction on an 87-acre (35 ha) resort on the Las Vegas Strip, Echelon.

Boyd Gaming Corporation employed approximately 16,900 people in 2007. The company had a net corporate revenue of $2 billion in 2007, down from a high of $2.2 billion in 2006.

PENN NATIONAL GAMING. According to Penn National Gaming, in Annual Report of Penn National Gaming, Inc., to the United States Securities and Exchange Commission (December 31, 2007, http://www.sec.gov/Archives/edgar/data/921738/000104746908002032/a2182949z10-k.htm), in 2007 it owned eighteen gaming properties in the United States and ran one additional property in Canada. It acquired several of those establishments from Argosy Gaming Corporation in October 2005 for $2.3 billion. It owned nine riverboat casinos, including the Boomtown in Biloxi, Mississippi; Argosy Casino Alton in Illinois; Argosy Casino Riverside near Kansas City, Missouri; Hollywood Casino in Baton Rouge, Louisiana; Argosy Casino Sioux City in Iowa; Hollywood Casino Aurora in Indiana; and the Empress Casino in Joliet, Illinois. The company's land-based casinos included Bullwhackers Casino in Black Hawk, Colorado; Hollywood Slots in Bangor, Maine; Charles Town Entertainment Complex in Charles Town, West Virginia; and Hollywood Casino Bay in St. Louis, Missouri. The company also owned several racetracks.

In 2007 Penn National Gaming employed 15,289 people. The company had a net revenue of $2.4 billion in 2007, up 78% from $1.4 billion in 2005. In 2008 a merger with Fortress Investment Group and Centerbridge Partners was pending.

STATION CASINOS. Station Casinos reports in Annual Report to the Security Exchange Commission (March 5, 2008, http://phx.corporate-ir.net/phoenix.zhtml?c=103083&p=irol-sec&secCat01.1_rs=21&secCat01.1_rc=10) that in 2007 it owned at least a 50% share in nine major hotel/casino properties under the Station and Fiesta brand names, and eight smaller casino properties in the Las Vegas area. Properties owned included Palace Station Hotel & Casino, Boulder Station Hotel & Casino, Texas Station Gambling Hall & Hotel, Sunset Station Hotel & Casino, Santa Fe Station Hotel & Casino, Red Rock Casino Resort Spa, Fiesta Rancho Casino Hotel, Fiesta Henderson Casino Hotel, Wild Wild West Gambling Hall & Hotel, Wildfire Casino, Magic Star Casino, Gold Rush Casino, and Lake Mead Casino. The company also managed the Thunder Valley Casino for the United Auburn Indian Community in Lincoln, California.

On January 31, 2008, Station Casinos employed approximately 14,500 people. The company had been named as one of Fortune magazine's top one hundred companies to work for the previous four years. In November 2007 a merger was completed with FCP Acquisition Sub, with Station Casinos continuing as the surviving corporation. Following this acquisition, the company became a privately owned company. The company had a net revenue of $1.2 billion between January 1, 2007, and November 7, 2007, and an additional revenue of $210 million during the period between November 8, 2007, and December 31, 2007.

OTHER GAMBLING CORPORATIONS. Different companies play important roles in other realms of the gambling industry. Two publicly traded companies, Churchill Downs and Magna Entertainment, are major organizations in the Thoroughbred horse racing business. Churchill Downs notes in 2007 Annual Report (2008, http://www.churchilldownsincorporated.com/sites/churchilldownsincorporated.com/files/Annual%20Report%202007.pdf) that it operates tracks in Florida, Illinois, Louisiana, and Kentucky—including the famed track where the Kentucky Derby is run annually. In 2007 it had a revenue of $411 million. In 2007 Annual Report (2008, http://library.corporate-ir.net/library/98/986/98631/items/285705/MEC.2007AnnualReport.pdf), Magna Entertainment, a Canadian-based corporation, states that it operates ten racetracks throughout North America. It notes that in 2007 it had a revenue of $617.2 million.

Many corporations directly support the gambling industry by providing equipment, goods, supplies, and services. They may be members of the Gaming Standards Association, an international organization devoted to the development of uniform standards for communication and computer technology used in gambling machines. Some examples of these corporations are:

• GTECH Corporation, which introduced the first lottery terminal in 1982 and now provides technology services to lotteries in twenty-five states
• Bally Technology, which introduced its first slot machine in 1936 and is now a successful machine manufacturer and distributor
• Konami Gaming, a leading producer of high-tech video slot machines and multisite casino management systems
• WMS Gaming, which is engaged entirely in the manufacture, sale, leasing, and licensing of gambling machines

GAMBLING AS AN INVESTMENT. The investment firm MUTUALS.com sells shares in the Vice Fund, a mutual fund composed entirely of companies in the alcohol, tobacco, gambling, and defense industries. The fact sheet “Vice Fund—VICEX” (August 31, 2008, http://vicefund.com/docs/fact_sheet_august_08_vicex_web.pdf) states that as of June 2008 the fund's returns were down 20.68%.

Small Businesses

Many small casinos and racetracks, minicasinos, and card rooms around the country are owned or operated by small companies, families, and entrepreneurs. Other ways in which small businesses are engaged in or serve the gambling industry include:

• Selling lottery tickets and operating electronic gaming devices at independently owned convenience stores, markets, service stations, bars, restaurants, bowling alleys, and newsstands
• Manufacturing and distributing equipment such as slot machines, roulette wheels, lottery tickets, dice, and cards
• Providing services such as advertising, marketing, public relations, accounting, information technology, and food
• Breeding, training, and caring for horses and greyhounds

Most small businesses that offer gambling do so through lottery ticket sales or electronic gaming devices, such as slot machines. These are considered forms of convenience gambling, because patrons do not have to travel to special destinations, such as casinos and racetracks. Convenience gambling has been more controversial than destination gambling. Critics argue that allowing gambling in stores and restaurants and other places that people visit as part of their everyday routine makes it too easy for them to gamble. The same criticism is leveled against Internet gambling, which patrons can do at home.

INTERNET GAMBLING BUSINESSES. Internet gambling is illegal in the United States, so most Internet gambling sites are operated by small companies located offshore, many in the Caribbean. Little is known about these companies, which operate without regulatory oversight. However, David O. Stewart estimates in An Analysis of Internet Gambling and Its Policy Implications (2006, http://www.americangaming.org/assets/files/studies/wpaper_internet_0531.pdf) that more than twenty-five hundred Internet gambling sites operated around the world in 2005. In the fact sheet “Internet Gambling” (2007, http://www.americangaming.org/Industry/factsheets/issues_detail.cfv?id=17), the AGA reports that approximately eight million Internet gamblers in the United States generated $5.9 billion in 2005.

Criminals

Gambling has had a checkered legal history in the United States. At various times it has been legal, illegal but tolerated, or illegal and actively prosecuted. During times when gambling opportunities have been outlawed, entrepreneurs have stepped in to offer them anyway. These entrepreneurs range from mobsters running million-dollar betting rings to grandmothers running neighborhood bingo games. Either way, the illegal nature of the activity makes these entrepreneurs criminals.

Organized crime groups have often been associated with gambling, a cash business with high demand and good profits. Crime syndicates on the East Coast were among the first to see the potential of Las Vegas, invest in it, and profit from it. At times, they have infiltrated other segments of the legal gambling industry, such as horse racing. Strict regulations and crackdowns by law enforcement have been put into place to push them out. The federal Racketeer Influenced and Corrupt Organizations (RICO) Act of 1970 was designed to combat infiltration by organized crime into legitimate businesses, including gambling enterprises. Most analysts believe RICO has been largely successful at keeping mobsters from establishing or taking over legal gambling businesses.

However, even though they have been denied casino ownership and management roles, some organized crime figures have infiltrated casinos in other ways, such as through labor unions and maintenance or food services. Law enforcement officials also believe organized crime families have been involved in bribing state officials who were considering the extension or expansion of gambling options, particularly relating to electronic gambling machines.

The Nevada Gaming Commission and State Gaming Control Board maintain a list of people who are prohibited from gambling in Nevada. The List of Excluded Persons, more commonly known as “Nevada's Black Book,” includes known cheaters, crime family bosses, mob associates, and others linked in some way to organized crime. These people are considered so dangerous to the integrity of legal gambling that they are not allowed to set foot in Nevada casinos. In “GCB Excluded Person List” (June 22, 2006, http://gaming.nv.gov/loep_main.htm), the Nevada Gaming Commission and State Gaming Control Board provide photographs of these excluded people.

The most lucrative sector of the gambling industry for organized crime has been and continues to be illegal bookmaking and numbers games. Bookmaking is a gambling activity in which a bookmaker takes bets on the odds that a particular event will occur or that an event will have a particular outcome. The vast majority of bookmaking revolves around sporting events, such as college and professional football and basketball games. Such wagering is extremely popular in the United States. Because sports bookmaking is legal only in Nevada, there is a large illegal market for it across the country. Michael McCarthy reports in “Football Bettors Put Billions on the Line” (USA Today, September 7, 2005) that gaming industry and sports analysts estimate gamblers illegally wager between $100 billion and $300 billion each year on sports in the United States.

Illegal numbers games are similar to lottery games in that players wager money on particular numbers to be selected in a drawing or by other means. Illegal numbers operators thrive in many parts of the country, especially large cities—even those where legal lotteries are offered.

Not all bookmaking is done through mobsters. Many enterprising entrepreneurs run small-time illegal gambling books, mostly related to sporting events. Office pools, in which coworkers pool small wagers on sports or office events—for example, when a baby is going to be born—are common. Even though society does not generally consider private wagers and small-stakes office pools to be illegal gambling, the laws in most states do.

Despite widespread illegal gambling, few people are actually arrested for engaging in it. According to the

Federal Bureau of Investigation, in Crime in the United States 2006, authorities made only 12,307 arrests for gambling out of nearly 14.4 million total arrests in 2006. (See Table 2.1.)

Charities

Charitable gambling is the most widely practiced form of gambling in the United States. In 2008 it was legal in forty-seven states and the District of Columbia (prohibited only in Arkansas, Hawaii, and Utah). In charitable gambling, a specified portion of the money raised (minus prizes, expenses, and any state fees and taxes) goes to qualified charitable organizations. Such organizations include religious groups, fraternal organizations, veterans groups, volunteer fire departments, parent-teacher organizations, civic and cultural groups, booster clubs, and other nonprofit organizations.

Generally, a charitable organization has to have been in existence for several years and has to obtain a state license for the gambling activity. Most states will only issue licenses to organizations that have been recognized by the Internal Revenue Service as exempt from federal income tax under Tax Code section 501(c). Thousands of charitable organizations are registered to conduct gambling throughout the country.

Most charitable gambling is regulated by state governments, although not uniformly by the same department—it may be the department of revenue, the state police, the alcohol control board, or the lottery, gaming, or racing commission. Administrative fees and taxes are levied in most states. In some states charitable gambling activity is unregulated.

Typical games allowed include bingo (the most common), pull tabs (lottery tickets with tabs that gamblers pull open to reveal cash prizes), raffles, and card games such as poker or blackjack. Slot machines and table games such as roulette and craps are generally not permitted. Limits are usually placed on the size of cash prizes that can be awarded. States allow different games for charity fund-raising. For example, California only allows bingo games.

Because of the inconsistencies in state oversight, it is difficult to determine the complete extent of charitable gambling in the United States. The AGA estimates in the fact sheet “Gaming Revenue: Current-Year Data” (October 2007, http://www.americangaming.org/Industry/factsheets/statistics_detail.cfv?id=7) that revenues from charitable gaming totaled $2.2 billion in 2006.

In Charity Gaming in North America Annual Report 2006 (2007, http://www.naftm.org/vertical/Sites/%7B10B16680-A509-4D78-B468-8A1901FC0CF7%7D/uploads/%7BD4D77A5E-A85D-4F9D-A720-DAABDBE1A572% 7D.PDF), the National Association of Fundraising Ticket Manufacturers (NAFTM), a trade association representing companies that manufacture bingo paper, pull tabs, and other supplies used in the charitable gambling industry, notes that in 2006 nearly $7.2 billion was wagered on charitable gaming in the thirty-five states for which it compiled statistics and the District of Columbia. The top-five states were Minnesota ($1.3 billion), Washington ($787 million), Texas ($662 million), Kentucky ($527 million), and Indiana ($526 million). (See Table 2.2.) On average, about 73% of gross receipts went to prize payouts, 14% to expenses, and 3% to taxes and fees. (See Figure 2.2.) The remaining 10% was net profit for the charitable organizations.

According to the NAFTM, nearly all states charge licensing fees to conduct charitable gambling events. For example, South Carolina charges a onetime fee of $1,000. Other states charge a fee per event or set weekly, monthly, or yearly fees, which generally run from $10 to $100. A handful of states base licensing fees on the amount of gross receipts, so the fees can be thousands of dollars. Most states also impose a gaming tax on the

proceeds from charitable gambling and/or collect administrative fees. A majority of states allocate all or a portion of these revenues to their general funds or to the agencies that oversee charitable gambling. A few states split the money with local law enforcement agencies.

Minnesota is believed to have the highest gross receipts from charitable gambling of any state—probably half of all money wagered in the United States for this purpose. According to the Minnesota Gambling Control Board, in Annual Report of the Minnesota Gambling Control Board: Fiscal Year 2007 (2008, http://www.gcb.state.mn.us/PDF_Files/FY07.pdf), charity gambling brought in gross receipts of almost $1.3 billion during fiscal year (FY) 2007, down slightly from FY 2006. Total prizes paid out amounted to $1 billion in FY 2007, or 81.7% of gross receipts.

The Government

Federal, state, tribal, and local agencies collect money from gambling operations through the assessment of taxes and fees and, in some cases, by directly supplying gambling opportunities. Because the money raised is spent on public programs, many Americans are ultimately affected by the government's involvement in gambling. In states facing budget deficits, the expansion of gambling often seems an attractive solution. Mandy Rafool reports in “Gambling on Gaming” (State Legislatures, January 2005) that John Rogers (1940–), a representative of the Alabama House of Representatives, said, “Given the choice, people will take gambling over tax increases any day.”

THE FEDERAL GOVERNMENT. The primary means by which the federal government makes money from the gambling industry is by taxing winning gamblers and gambling operators. Gamblers must declare gambling earnings when they file their personal income taxes. They get to subtract their gambling losses, but they must keep thorough records and have receipts, if possible, to prove their losses. For racetrack gamblers, this means saving losing betting slips and keeping a gambling diary of dates, events, and amounts. Casino gamblers who join “slot clubs” can get a detailed printout of their gambling history from the casino.

Gambling operators, like all companies, are subject to corporate taxes. They are required to report winnings that meet certain criteria to the Internal Revenue Service. (See Table 2.3.) The gambling operator must withhold income tax from winnings of more than $5,000, usually at a withholding rate of 25%. However, 28% is withheld from the winnings of gamblers who do not provide the gambling operator with their Social Security number or if the winnings are from bingo, keno, or slots. Gamblers who win noncash prizes, such as cars or other merchandise, have to pay taxes on the fair market value of the item.

The federal government is also in the gambling business. Diana B. Henriques reports in “Temptation to Gamble Is Near for Troops Overseas” (New York Times, October 19, 2005) that the U.S. armed forces operated 4,150 modern video slot machines at U.S. military bases in 9 overseas countries in 2005. Revenues from the machines totaled about $120 million. Based on an average payout of 94%, the total amount wagered in military

slot machines was around $2 billion per year. In addition, the U.S. Army ran bingo games at military bases. Its revenue totaled $7 million.

STATE GOVERNMENTS. State governments make money from legal gambling enterprises operated within their borders, including lotteries, commercial casinos, horse and dog races, jai alai games, card rooms, charitable gambling, and video machine gambling. Only lotteries are operated by state governments. All other gambling options are operated by other parties. As of October 2008, there were no state-owned casinos in the United States; proposals for such establishments have been offered in several states, but all have failed to become law.

According to the North American Association of State and Provincial Lotteries, in “Sales and Profits” (2008, http://www.naspl.org/index.cfm?fuseaction=content&PageID=3&PageCategory=3), forty-two states and the District of Columbia operated lotteries in 2008; Alabama, Alaska, Arkansas, Hawaii, Mississippi, Nevada, Utah, and Wyoming did not. State lotteries had approximately $57.4 billion in sales for FY 2006 and a profit of $17.1 billion. Generally, after paying expenses and the winners and retailers who sell the tickets, states have a 30% to 40% profit to spend on government programs, such as education.

TRIBAL GOVERNMENTS. Native American tribes that have been officially recognized by the U.S. government are considered sovereign nations, which means that, to a certain extent, they govern themselves. In 1988 Congress passed the Indian Gaming Regulatory Act, which allows federally recognized tribes to open gambling establishments if the state in which they are located already permits certain types of legalized gambling.

The National Indian Gaming Commission indicates in “Indian Gaming Facts” (2008, http://www.indiangaming.org/library/indian-gaming-facts/index.shtml) that in 2006 Native American tribes operated 423 gambling locations and made $25.7 billion. Net revenues fund tribal government operations or programs, provisions for the general welfare of the tribe and its members, tribal economic development, charitable contributions, and operations of local government agencies. Tribal governments have used gambling revenues to build health clinics, schools, houses, and community centers and to provide educational scholarships and social services for their members. Tribal gaming employed 670,000 people in 2008.

LOCAL GOVERNMENTS. Local governments in some states collect taxes and fees from gambling activities operated within their jurisdictions. This is particularly true for casinos and racetracks.

New York City is particularly active in the gambling industry. The New York City Off-Track Betting Corporation was founded in 1970 to provide a legal alternative to the widespread off-track wagering that was offered by organized crime syndicates. Even though the corporation is a government entity, it operates as a private enterprise that turns profits over to state and local governments. According to the article “Off-Track Betting” (New York Times, September 30, 2008), in FY 2006 the corporation handled nearly $1.1 billion in off-track wagers.

DEMAND: THE GAMBLERS

Gambling is a leisure activity—people gamble because they enjoy it. Proponents say there is no difference between spending money at a theme park and spending it at a casino: the money is exchanged for a good time in either case. However, gambling has a powerful allure besides fun: the dream of wealth, which is a strong motivator. Some options, such as lotteries, offer the chance to risk a small investment for an enormous payoff. This potential is too appealing for many people to pass up.

Adults

In One in Six Americans Gamble on Sports (February 1, 2008, http://www.gallup.com/poll/104086/One-Six-Americans-Gamble-Sports.aspx), Jeffrey M. Jones of the Gallup Organization finds that 65% of Americans had taken part in the past year in one or more forms of eleven types of gambling mentioned in a December 2007 poll. (See Table 2.4.) Lottery play was the most popular gambling activity—nearly half (46%) of those asked had engaged in it—whereas 24% had visited a casino, 14% had participated in an office pool on a sporting event, and 12% had played a video poker machine.

Paul Taylor, Cary Funk, and Peyton Craighill of the Pew Research Center note in Gambling: As the Take Rises, So Does Public Concern (May 23, 2006, http://pewresearch.org/assets/social/pdf/Gambling.pdf) that the popularity of gambling has dropped since the Gallup Organization conducted a similar survey in 1989. Seventy-one percent of people in the Gallup survey reported gambling in 1989. However, some forms of gambling were

more popular in 2008 than in 1989, including visiting a casino and playing a video poker game. (See Table 2.5.) A higher percentage of people bet on professional sports and horseracingin 1989thanin 2008.

According to Taylor, Funk, and Craighill, in 2006 about seven out of ten (72%) men had gambled in the past year, whereas six out of ten (62%) women had. (See Table 2.6.) Those with a college education were slightly less likely to have gambled than those with only some collegeorwithahighschooldegreeorless. Theparticipation rate for people with higher incomes (greater than $100,000 per year) was higher than for other income groups. Only 59% of those making less than $30,000 per year reported gambling during the previous twelve months, compared to 79% of those making more than $100,000 per year.

Taylor, Funk, and Craighill indicate that gambling participation rates vary with religion as well. Protestants (61%) reported less gambling activity in 2006 than Catholics (77%) or those who were identified as secular (72%). (See Table 2.6.) Among Protestants, members of mainline denominations, such as Methodists, gambled far more than those who identified with evangelical denominations. Northeasterners were more active gamblers than those living in other regions of the country. A larger percentage of white people (68%) than African-Americans (62%) or Hispanics (62%) reported gambling during the previous year. Differences in participation by age were minor, although poll participants over age sixty-five were less likely to gamble than were younger people.

SENIOR CITIZENS. According to Taylor, Funk, and Craighill, 58% of people aged sixty-five and older reported gambling during 2006. Other studies show similar, or even higher rates, of participation. For example, Suzi Levens et al. reveal in “Gambling among Older, Primary-Care Patients” (American Journal of Geriatric Psychiatry,vol. 13, no. 1, January 2005) that in 2005 nearly 70% of Americans older than sixty-five reported gambling in the previous twelve months. This study, which was based on a survey of 843 elderly patients, also finds that nearly 11% of those questioned were “at risk” for problem gambling.

For older adults not at risk for gambling problems, the activity may have a positive impact. In “Health Correlates of Recreational Gambling in Older Adults” (American Journal of Psychiatry, vol. 161, no. 9, 2004), Rani A. Desai et al. indicate that a correlation exists between gambling and good health among people older than age sixty-five. The researchers do not find a similar correlation in those aged eighteen to sixty-four. The study, which is based on interviews with 2,417 older adults, focuses only on recreational gamers and does not include subjects who exhibited gambling addiction.

Young People

The minimum legal age for placing a legal bet ranges from eighteen to twenty-one, depending on the state and the activity. For example, most states limit the sale of lottery tickets to those eighteen or older, although most allow minors to receive lottery tickets as gifts. All commercial casinos have a minimum gambling age of twenty-one as set by state law. Tribal casinos are allowed to set their own minimum gambling age as long as it is at least eighteen. The minimum age to participate in charitable gambling activities, such as bingo games, is eighteen in most states. A few states allow people as young as sixteen to participate.

Each year the Annenberg Public Policy Center at the University of Pennsylvania releases the National Annenberg Risk Survey of Youth. In “Card Playing Down among College-Age Youth; Internet Gambling Also Declines” (October 18, 2007, http://www.annenbergpublicpolicycenter.org/Downloads/Releases/CardPlayingDeclinesoct18version.pdf), the center notes that card playing for money among youth aged eighteen to twenty-two had declined in 2007. The overall percentage of males of that age who reported playing cards for money each week dropped from 16.3% in 2006 to 4.4% in 2007, about the same rate reported by male high school students (5.5%). Internet gambling also declined among male eighteen- to twenty-two-year-olds: 5.8% of these youth reported gambling at least once a week on the Internet in 2006, whereas only 1.5% reported doing so in 2007.

Problem Gamblers

Problem gambling is a broad term that covers all gambling behaviors that are harmful to people in some way—financially, emotionally, socially, and/or legally. The harmful effects of problem gambling include:

• Financial difficulties, such as unpaid bills, loss of employment, large debts, and even bankruptcy
• Emotional problems, such as depression, anxiety, addictions, and thoughts of suicide
• Social problems, as evidenced by strained or broken relationships with spouses, family, friends, and coworkers
• Legal problems related to neglect of children or commission of criminal acts to obtain money

Taylor, Funk, and Craighill indicate that in 2006, 6% of those asked said gambling had been a source of problems for their family. (See Table 2.7.) This percentage was up slightly from those reported by the Gallup polling organization in 1989, 1992, and 1996, but down slightly from the percentage reported in 1999. The researchers note that there is a marked difference in answers by age. Only 5% of those aged fifty and older said gambling had been a problem for their family, compared to 12% of adults younger than fifty.

In general, scientists characterize gambling behavior by the level of harm that it causes. People who experience no harmful effects are called “nonproblem gamblers,” or social, casual, or recreational gamblers. Those who gamble regularly and may be prone to a gambling problem are called “at-risk gamblers,” and those who experience minor to moderate harm from their gambling behavior are called “problem gamblers.” Pathological gamblers are severely harmed by their gambling activities.

Scientists use a screening process to determine which category fits a particular gambler. One of the most common is the South Oaks Gambling Screen (SOGS), a sixteen-item questionnaire developed in the 1980s by

Henry Lesieur and Sheila Blume. A detailed description of the questionnaire and its development was first presented by Lesieur and Blume in “SOGS: A New Instrument for the Identification of Pathological Gamblers” (American Journal of Psychiatry, vol. 144, no. 9, 1987). The researchers used information from 1,616 subjects to develop the SOGS, including patients with substance abuse and pathological gambling problems, members of Gamblers Anonymous, university students, and hospital employees. Because the questionnaires are filled out by potential problem gamblers themselves, scores depend entirely on the truthfulness of the people answering the questions.

Another means of defining problem gamblers was created by Gamblers Anonymous, the self-help organization, which prefers the term compulsive gambling. In “Questions and Answers: About the Problem of Compulsive Gambling and the G.A. Recovery Program” (November 9, 2007,http://www.gamblersanonymous.org/qna.html), the organization explains that compulsive gamblers exhibit certain characteristic behaviors:

• An “inability and unwillingness to accept reality”
• A belief that they have a “system” that will eventually pay off
• A lot of time spent daydreaming about what they will do when they finally make a big win

• Feelings of emotional insecurity when they are not gambling
• Immaturity and a desire to escape from responsibility
• Wanting all the good things in life without expending much effort for them
• Desire to be a “big shot” in the eyes of other people

Gamblers Anonymous has a list of twenty questions that gamblers can use to determine if they have a gambling problem. (See Table 2.8.) The organization indicates that compulsive gamblers are likely to answer yes to at least seven of the questions.

PATHOLOGICAL GAMBLERS. In general, pathological gambling is a disorder characterized by irrational thinking in which people continuously (or periodically) lose control over their gambling behavior. Pathological gamblers become preoccupied with gambling, constantly thinking about their next bet or how to raise more money with which they can gamble. This behavior continues even if the gambler suffers adverse consequences, such as financial difficulties or strained relationships with family and friends.

The American Psychiatric Association (APA) officially recognized pathological gambling as a mental health disorder in 1980 and listed it in its publication Diagnostic and Statistical Manual of Mental Disorders. The SOGS questionnaire was designed to correlate with criteria provided by the APA.

In 1996 the National Center for Responsible Gaming provided a grant to researchers at Harvard Medical School to perform a large-scale study of the prevalence of problem gambling. The results were published by Howard J. Shaffer, Matthew N. Hall, and Joni Vander Bilt in Estimating the Prevalence of Disordered Gambling in the U.S. and Canada: A Meta-Analysis (1997). A meta-analysis is an analysis of previously collected data. After examining hundreds of scientific studies on gambling in the United States and Canada, the researchers developed a ranking system for problem gambling:

• Level 0—nongamblers
• Level 1—social gamblers with no gambling problems
• Level 2—problem gamblers
• Level 3—pathological gamblers

Shaffer, Hall, and Vander Bilt calculate the lifetime prevalence rate of Level 3 gambling in the adult North American population to be 1.6%.

Pathological Gambling: A Critical Review was published in 1999 by the National Academies Press. The book identifies and analyzes all available scientific research studies dealing with pathological and problem gambling. The studies are reviewed by dozens of researchers on behalf of the National Research Council, an organization administered by the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The researchers estimate that 1.5% of U.S. adults are pathological gamblers at some point in their life. In any given year, 0.9% of U.S. adults (approximately 1.8 million people) and 1.1 million adolescents aged twelve to eighteen are pathological gamblers. The following general conclusions are drawn:

• Men are more likely than women to be pathological gamblers.
• Pathological gambling often occurs concurrently with other behavioral problems, such as drug and alcohol abuse and mood and personality disorders.
• The earlier in life a person starts to gamble, the more likely he or she is to become a pathological gambler.
• Pathological gamblers are more likely than those without a gambling problem to have pathological gamblers as parents.
• Pathological gamblers who seek treatment generally get better.

However, the researchers are unable to determine from available studies whether any particular treatment technique is more effective than most others or even if some pathological gamblers are able to recover on their own. They are also unable to determine whether particular groups, such as the elderly and the poor, have disproportionately high rates of pathological gambling. The researchers conclude that further studies are needed to provide a detailed understanding of pathological gambling.

TREATMENT ORGANIZATIONS. A variety of treatment methods are available to problem gamblers through organizations and private counselors. For example, Gamblers Anonymous is open to all people who want to stop gambling. At its meetings, which are held throughout the United States, gamblers remain anonymous by using only their first name. The group method offers compulsive gamblers moral support and an accepting environment where they can talk about their past experiences and the problems that gambling creates in their life. Gambling is not treated as a vice but as a progressive illness.

Peter Ferentzy, Wayne Skinner, and Paul Antze explain in “Recovery in Gamblers Anonymous” (Journal of Gambling Issues, vol. 17, August 2006) that Gamblers Anonymous regards compulsive gamblers as people with an illness who can recover by following the organization's twelve-step recovery program. (See Table 2.9.) These steps are similar to those employed by support groups such as Alcoholics Anonymous. Even though the steps have a spiritual aspect, Gamblers Anonymous is not affiliated with any religious group or institution, and the organization is funded by donations. The premise of Gamblers Anonymous is that a recovering compulsive gambler cannot gamble at all without succumbing to the gambling compulsion, so it advocates a “cold turkey” approach to quitting (the gambler just stops gambling) rather than a gradual reduction in gambling activity.

The National Council on Problem Gambling is a nonprofit organization founded to increase public awareness about pathological gambling and to encourage the

development of educational, research, and treatment programs. It sponsors the Journal of Gambling Studies, an academic journal dedicated to scientific research. It has thirty-five state affiliate chapters and operates a confidential hotline (1-800-522-4700) for problem gamblers who need help.

The council also operates the National Certified Gambling Counselor program and offers a database of counselors throughout the United States who have completed its certification program. Other organizations that certify gambling counselors include the American Compulsive Gambling Certification Board and the American Academy of Health Care Providers in the Addictive Disorders.

TREATMENT METHODS. Many problem gamblers seek professional counseling. The most common treatment method, in both group and individual counseling sessions, is cognitive behavior therapy. The cognitive portion of the therapy focuses attention on the person's thoughts, beliefs, and assumptions about gambling. The primary goal is recognizing and changing faulty thinking patterns, such as a belief that gambling can lead to great riches. Behavior therapy focuses on changing harmful behaviors. Most counselors favor complete abstinence from gambling during treatment. For those with mild to moderate gambling problems, treatment usually involves weekly meetings with a support group and/or individual counseling sessions. Nicki Dowling, David Smith, and Trang Thomas find in “A Comparison of Individual and Group Cognitive-Behavioural Treatment for Female Pathological Gambling” (Behaviour Research and Therapy,vol.45,no.9, September 2007) that individual treatment seems to be more effective than group treatment at least among some gamblers, although Tony Toneatto and Rosa Dragonetti indicate in “Effectiveness of Community-Based Treatment for Problem Gambling: A Quasi-experimental Evaluation of Cognitive-Behavioral vs. Twelve-Step Therapy” (American Journal on Addictions, vol. 17, no. 4, July 2008) that twelve-step programs are also effective. Those with severe gambling problems usually check into addiction treatment centers to curb their addiction. Such treatment centers isolate patients from the outside world so they can focus on overcoming their addiction. Some treatment centers even forbid patients from keeping cash on them or from using laptops, phones, or any device that could allow them to gamble.

More and more, mental health professionals and gambling treatment centers are using antidepressants along with cognitive therapy to treat compulsive gambling. Researchers speculate that some compulsive gamblers experience highly elevated levels of euphoria-causing chemicals, such as dopamine, in the brain when they gamble. A number of antidepressant drugs have been proven to prevent such chemicals from interacting with the brain.

For example, in “Multicenter Investigation of the Opiod Antagonist Nalmefene in the Treatment of Pathological Gambling” (American Journal of Psychiatry, vol. 163, no. 2, 2006), Jon E. Grant et al. report that the antidepressant nalmefene significantly lowers the need to gamble among people diagnosed with compulsive gambling. Donald W. Black, Martha C. Shaw, and Jeff Allen of the University of Iowa find in “Extended Release Carbamazepine in the Treatment of Pathological Gambling: An Open-Label Study” (Progress in Neuro-Psychopharmacology and Biological Psychiatry, vol. 32, no. 5, July 1, 2008) that carbamazepine, an antiseizure drug sometimes used to treat bipolar disorder, appears to be effective in treating pathological gambling. In 2008 a number of studies were under way to test the ability of other antidepressants, such as sertraline, to suppress gambling urges.