Gambling in American History

The Kefauver Committee is the popular name of the U.S. Senate Special Committee to Investigate Organized Crime in Interstate Commerce.  The committee, which met in 1950 and 1951, was the first federal entity to make a comprehensive study of organized criminal activity in the United States. The investigations concentrated much attention upon gambling. The idea of a Senate investigating committee came from Estes Kefauver, a first-term senator from Tennessee. Kefauver’s initiative came as a reaction to reports of several state and local crime commissions that had met in the postwar years. These local investigatory efforts had found that criminal organizations experienced great growth during the World War II years. They had moved from their Prohibition-era bootlegging activities to gambling, narcotics, and prostitution activities. They did so at a time when the nation’s collective attention was focused upon world events.
The crime commissions’ reports were accompanied by a widely reported series of sensational newspaper investigations and stories. It seemed to Kefauver that the national public was making a call for action. The ambitious senator had served as a member of the U.S. House of Representatives for five terms before winning election to the Senate in 1948. His election resulted from a bitter fight against a corrupt political machine that had dominated Tennessee politics for decades.
During 1949, Kefauver developed the idea that the federal government should follow the lead of the local commissions and have its own study of crime. On 5 January 1950, he introduced Senate Resolution 202 in order to create a new subcommittee of the Judiciary Committee on which he served. After jurisdictional objections from the leader of the Commerce Committee, the resolution was amended, and an independent special investigating committee was approved on 3 May 1950. Five senators were selected to be members by Vice President Alben Barkley (president of the Senate). The members included Democrats Kefauver, Herbert O’Conor (Maryland), and Lester Hunt (Wyoming) and Republicans Alexander Wiley (Wisconsin) and Charles Tobey (New Hampshire).
The committee gained widespread national attention for its televised hearings. Kefauver achieved celebrity status and soon afterwards launched a presidential campaign. He failed in attempts to get the presidential nomination of the Democratic party in 1952, but in 1956 he was nominated for the vice presidency on the unsuccessful ticket with presidential candidate Adlai Stevenson.
The committee held its hearings in a Senate office building in Washington, D.C., and in thirteen other cities, including Las Vegas, Miami, New York City, New Orleans, Kansas City, Detroit, and Los Angeles. Over 600 witnesses testified. These included federal, state, and local officials as well as many persons who participated in gambling enterprises both legal and illegal. Among these were members of the Desert Inn Group of Las Vegas, including Moe Dalitz and Wilbur Clark. Several thousands of pages of testimony were recorded.
The committee issued its report on 17 April 1951.  The committee concluded that “organized criminal gangs operating in interstate commerce are firmly entrenched in our large cities in the operation of many different gambling enterprises… as well as other rackets…”. The committee found that there was a “sinister criminal organization known as the Mafia” that was operating throughout the country. Gambling profits were considered the “principal support” for the criminal gangs. The committee strongly opposed legalization of gambling, as they found that the “caliber of men who dominate the business of gambling in the state of Nevada is on par” with those operating illegal establishments. The committee members concluded that “as a case history of legalized gambling, Nevada speaks eloquently in the negative” (94). The committee wrote: “It seems clear to the committee that too many of the men running gambling operations in Nevada are either members of existing out-of-state gambling syndicates or have had histories of close association with the underworld characters who operate those syndicates”. They criticized Nevada’s licensing system for not resulting in the exclusion of undesirables but rather seeming only to give the individuals a “cloak of respectability”.
The committee’s report included twenty-two recommendations for federal government action and seven for state and local governments. The federal recommendations included (1) the creation of a racket squad in the Justice Department; (2) the establishment of a Federal Crime Commission in the executive branch; (3) a continuing study by the committee of interstate criminal organizations and support of social studies related to crime; and (4) new legislative initiatives, to be suggested by the committee. The committee also applauded the establishment of a special fraud squad in the Bureau of Internal Revenue (now the Internal Revenue Service) to deal with taxation of illegal gamblers and other gangsters. It was recommended that casinos be required to keep daily records of wins and losses of gamblers and provide the records to the bureau. Officials of the bureau should have access to casino records at all times. The transmission of wagers and of betting information interstate by means of telephone, telegraph, or radio and television should be prohibited.
While the committee was meeting, the Johnson Act was passed. It prohibited the transportation of slot machines across state lines for illegal uses. The committee recommended that the prohibition be extended to other gambling devices such as roulette wheels and punchboards. Congress also increased the federal slot machine licensing tax to $250 for each machine. The tax had been established in 1941 and levied at an annual rate of $150.
State and local governments were urged to appoint committees to study the problem of organized crime in their jurisdictions, with special grand juries having extensive powers appointed in communities with wide-open illegal gambling. Greater cooperation among police agencies was suggested. Each jurisdiction was also asked to consider depriving businesses of licenses if illegal gambling was taking place on their premises. Several additional recommendations were urged upon both federal and state authorities in areas of criminal activity that did not involve gambling.
The committee had impacts beyond the presidential campaigns of Estes Kefauver. As a result of the hearings, many persons were charged with being guilty of committing contempt of the Senate for their misinformation. The report of the committee listed thirty-three notorious individuals who were cited for contempt and other charges as a result of the hearings. Additionally, many states followed recommendations and set up their own committees and commissions where they had not done so before. Through the 1950s many local gambling establishments across the country were closed down – in some places one by one, in other places en masse.
The effects on Nevada gaming were mixed. The efforts of other states to crack down on gambling pushed many illegal operators in other jurisdictions to Nevada. The state also experienced growth, as it became known as the singular place where many casinos could operate openly. Also, the attention of the committee influenced the state to improve its gaming regulatory structures with the creation of a specialized Gaming Control Board in 1955 and the Nevada Gaming Commission in 1959. Also influential in pushing regulatory improvements in the state were the work of the McClellan Committee and the administration of Gov. Grant Sawyer. <