Gambling in American History

A variety of gambling activities is permitted in Peru, including horse racing, cockfighting, lotteries, and casinos – the last becoming legal only in 1992. At that time the country of nearly 25 million persons was in the midst of a violent struggle with revolutionary guerrillas. The economy was on the edge of collapse with unmanageable inflation. Things turned around in the past decade. What was once a hostile atmosphere for casino operations is now a strong market in a stable political and economic situation under the leadership of former president Alberto Fujimori.
The Peru casino law requires that full casinos must be located in one of ten tourist zones. They receive ten-year renewable licenses, and they pay taxes of 20% on their gross gaming wins.
The capital city of Lima has about 80% of the casino action in the country. The city has eight full casinos, and another forty are located around the country. Most of them are privately owned, although the government owns some. There are also separate slot machine parlors. In all there are over 5,500 total machines in Lima, including a Megabucks system linking 300 machines and offering prizes in excess of $100,000.
Whereas an overall political and economic stability helps the gaming industry in general, continuing disputes over whether the national or the local law applies to the slot machine parlors has caused much confusion. In 1996 the national government set forth new rules that resulted in the closings of over half of the slot parlors. The rules required casinos to have at least 120 machines each and to guarantee 85 percent payouts; they were not allowed to have machines over five years old. Many parlors could not comply and closed. Others went to court and got injunctions against enforcement of the new national rules. They continue to operate while others seek to follow the rules, and the market continues to be in disarray.
Growth of the Peruvian casino industry is unlikely, as the markets are near saturation at the moment. It is estimated that over 90 percent of the play comes from local residents and not from tourists, a situation that does not allow for casinos to contribute to the economic development of a country. <

Pennsylvania has had a wide variety of legalized gambling activities for many decades. But even before wagering on harness racing and thoroughbred racing was authorized in the 1930s, there was an established illegal network of numbers games and casino games. A lottery was established in 1971, and charity bingo was given the stamp of approval by government in 1981. Illegal numbers gambling persisted. This was evidenced by the “666” scandal that touched the state’s legal lottery in 1979. A Pittsburgh television station that announced lottery results controlled the Ping-Pong balls used for the state lottery’s numbers game. A dishonest person approached the television announcer and made an offer that should have been refused. But instead the television announcer allowed the dishonest person access to the lottery balls; that person then applied weights (using a paint substance) to all but the fours and sixes. A network of confederates then traversed the state making bets on all three-number combinations of fours and sixes. There were eight such combinations. Unfortunately, 666 came up. This is a very popular number for bettors in that it has biblical significance. Not only the network of dishonest people but also the general population bet heavily on the number. But the population bet on the numbers with illegal gamblers as well; and the illegal gamblers used the state-selected number as their winning number. The state and the illegal game lost more money to winners on that day than they had ever lost before or since that time. The illegal gamblers became suspicious, as there were rumors that people were betting heavily on certain numbers in certain locations. In a case of good and evil working together to protect the integrity of the game, the illegal numbers organization launched its own investigation, tracked down people in the network, and then informed the state police, who in turn were led to the television announcer. He and the others received prison sentences for their involvement. There were two consequences of the “666” scandal that merit consideration. First, there was no state oversight of the rigged game; after all the state ran the game. After cheating was discovered, there was no attempt to close down the game. The numbers game continued without any interruption. Second, the state made no attempt to reimburse the losing players who were cheated in the scandal.
From the moment legal casinos opened in Atlantic City, Pennsylvania could feel the dollars flowing out of the state. Entrepreneurs found it easy to convince many government officials that Pennsylvania had to legalize casinos in order to keep gambling revenues in the state. There were several campaigns for casinos in the 1980s and 1990s. The first major effort focused upon establishing casinos in three Pocono Mountains resort area.
Caesars World was a campaign sponsor, as they had purchased four resort properties in the area. Wayne Newton also owned a Pocono property. Several polls and advisory votes were taken in the region, and in all cases the residents rejected the idea. The governor also offered his opposition. Legislative bills for casino failed in 1981, 1982, and 1983.  In the early 1990s, following Iowa’s lead, several bills were introduced to permit riverboat casinos. One plan had 20 boats in the state, with from 5 to 10 in Philadelphia, 5 in Pittsburgh, 2 in Erie, and others in the northeast part of the state. The plan failed to get a floor vote in either house of the legislature. In 1999 the boat plan was attached to a plan for slot machines in bars and taverns and at tracks. The governor said he would approve the bills if the legislature called for a popular referendum. Three bills appeared headed for passage, calling for three separate statewide votes. Opponents, however, maneuvered votes to defeat the measure, and Pennsylvania exited the century with no casinos or machine gaming. <

Edward Pendleton was a nineteenth-century gambling service provider for the nation’s leaders. To get an idea of what he provided, just suppose that the mid-1990s proposal for a legalized casino within the jurisdiction of the District of Columbia had passed. Imagine that congressmen, cabinet members, Supreme Court justices, maybe the president himself, could come to the casino and be wined and dined, then offered credit for gambling at the tables. Imagine lobbyists circulating within the facility the day before a major vote in Congress or a major decision by the court. Imagine the opportunities to buy favors, to line the pockets of the mighty in exchange for policy outcomes. Well, it is not necessary to imagine. You need only read a history of Edward Pendleton and his Palace of Fortune located within walking distance of the houses of government in the District of Columbia through the 1830s, 1840s, and 1850s. The facility at 14th and Pennsylvania Avenue, two blocks from the White House, became the favorite of the ruling classes. The president of the United States, James Buchanan, was a regular at the faro bank. The nation’s most important policymakers would wager at Pendleton’s faro bank and inevitably lose.  They would then become indebted to the casino owner. He, of course, was a lobbyist. Actually, win or lose, he came out ahead. It is reported that in the twenty-six years that Pendleton ran the Palace of Fortune he was responsible for the passage of hundreds of bills, most of which were private bills providing favors for selected citizens. The casino was extremely luxurious, as the owner became a very rich man.
The casino was also the meeting place where abolitionists and slave-owning senators could come together on neutral ground. Many of the compromises that kept the Civil War from erupting until 1861 may have been reached over the tables of the Palace.
Pendleton married the daughter of one of the leading city architects of the District of Columbia. The couple became a dominant part of the social scene, well respected, as many other gamblers were not in other venues. When Edward Pendleton died in 1858 at the age of sixty-eight, his funeral was attended by the president and most leaders of Congress. <

Pari-mutuel wagering systems are used for almost all horse-race and dog-race betting, as well as for betting on jai alai games in the United States. The system allows for player-banked betting with all bets pooled and prizes awarded from the pool. Winning bets on other racing events are also determined on a pari-mutuel basis. In Japan, the system is used to award prizes to winners of wagers on motorboat and bicycle races. In Oregon, sports betting card bets are distributed to winners on this basis also. The state permits players to pick four winners of football games on a single card. The state takes 50 percent of all the money played and then divides the remainder among those who picked four winners. The California lottery actually uses a pari-mutuel system for its pick-three numbers game in order to avoid exposure to high risks because many players’ favorite numbers are the same favorite numbers.  Whenever there is a pari-mutuel system, the organization running the system takes a percentage of the pool before bets are redistributed from the losers to the winners.
Although the pari-mutuel system is built on quite a simple concept, it was not a part of the betting fabric until late in the nineteenth century. It was invented in Paris, France, by Pierre Oller in 1865. Scarne’s Guide to Casino Gambling (Scarne 1978) suggests that Oller acted in response to a bookie who quoted odds on each horse before a race, but was not very good at his trade and therefore often suffered losses because too many bettors placed their wagers on the winning horses. The bookie asked Oller if he could figure out a way in which the bookie could take bets without ever having to suffer losses – the gambler’s eternal dream. Oller found a way: take bets but announce odds only after all bets were taken. Oller invented what became known as a totalizator. His tallying machine would add up all the bets on each horse, compare them, and then determine odds. All the odds could then be cut a set percentage to ensure a profit for the bookie. Soon a ticket machine was added to a totalizator device, and with the passing of time, more advanced machines made the bet-taking process more efficient and allowed tracks to consider changing their betting structures to the pari-mutuel system. As they did so, the tracks themselves became the operators of the betting on horse racing.
It is suggested that the system became known as pari-mutuel as a shorter reference to Paris Mutuel. The totalizator was first used at North American tracks in 1933; as horse-race betting was revived in more and more jurisdictions during the 1930s and afterwards, the pari-mutuel system totally displaced other betting systems.
A simple example of how a pari-mutuel wager works might find that all bettors wagered $100,000 on a race. Horse Surething attracted $30,000 of the bets in the eight-horse field. The track calculated all bets, totaled them, and then subtracted 18 percent as its fee. Actually this 18 percent, or $18,000, was divided three ways – $6,000 to the government as a tax, $6,000 to the track owners, and $6,000 as a prize for the winning horse. Sure enough it was Surething. All the people who bet on Surething were winners. Together they shared the $82,000 that was left in the pool of betting money. For example, if 500 people bet $100,000 on the race, and of these 50 bet on Surething to win, the 50 would share the $82,000 prize. They would share it in proportion to the amount they had bet. If collectively the 50 persons had bet $50,000 on Surething to win, each $1 they had bet would be rewarded with a prize of $1.64. A typical $2 bet would receive a return of $3.28, and a person who made a $1,000 bet would receive $1,640 in return. In actuality the $2 bettor would receive $3.20, because the track always rounds down to the nearest ten cents. The eight cents is called the breakage. Money from breakage is usually assigned to some party that takes money from the 18 percent (the track, horse owners, government).
In racing there are many kinds of bets (see Horse Racing). There are the straight bets – betting that the horse will come in first (win), first or second (place), or first, second, or third (show). There are also exotic bets, such as the daily double (winners of the first two races) or the exacta (picking the first-place and second-place winners in a race). For each kind of bet – show, exacta, daily double – there is a separate pool, and winners are paid from that pool alone. The betting arrangements can get very complicated, but modern computers can calculate results instantaneously, whereas in the past, several minutes would pass before a winner would know how much the winning prize was.
In the past, offtrack betting houses – such as the casinos in Las Vegas – would not participate in the pari-mutuel pools. Rather, they would simply pay the track odds and keep the takeout percentage (18%). In doing so they would put themselves at risk, as they were running a banking game. Now all participate with the tracks in the pari-mutuel system, as the offtrack bets are thrown into the same pool as the track bets. In exchange for being able to avoid the risk of being a house banker, however, the offtrack facility, such as the Las Vegas casino, gets to receive only a very small portion of the action wagered at their facility – 5 or 6% rather than the theoretical 18 percent they would have received if their bettors made wagers in the same proportion as those at the track. <

Paraguay, perhaps the most remote country in South America, is a landlocked country surrounded by Argentina, Bolivia, and Brazil. It is a founding member of the Southern Cone Common Market (MERCOSUR). The other members of MERCOSUR are Argentina, Brazil, and Uruguay. The four countries of MERCOSUR have eliminated import tariffs and have a free exchange of goods, services, capital, and labor. Paraguay has about 5.5 million inhabitants residing in an area of about 157 thousand square miles.
Paraguay permits almost all forms of gambling, including horse racing, lotteries, cockfighting, bingo games and casinos. Casinos have been located in all the major urban areas of the country: Asuncon, Ciudad del Este, and Pedro Juan Caballero (Greater Asuncon area). Paraguay also has small gaming casinos operated by local owners holding government licenses. With the exception of the operations in Asuncon, the capital of Paraguay, the casinos are very small. The Ita Ramada was the leading facility prior to the overthrow of Pres. Alfredo Stroessner in 1989. Soon afterward it became overshadowed by the casino at the Asuncon Yacht Club.
Casino gambling began under the regulation of the national government in 1943 when a casino opened in a hotel in downtown Asuncion. The casino owner, Sr. Valentino, formed a corporation that later developed the Ita Enramada Hotel and Casino resort complex on the Paraguay River in suburban Asuncon. The casino relocated to the Ita Enramada facility in 1975.
The Asuncon casino operated under a long-term concession granted by the government of President Stroessner. Valentino’s wife, Dora Valentino, maintained operations after his death. She also owned the casino at Ciudad Puerto Presidente Stroessner (now Ciudad del Este), the Paraguayan border city near Iguazu Falls, the Brazilian city of Iguazu Falls, and the Argentinian city of Port Iguazu (which has a casino). The Valentino company also held concessions to operate a weekly national lottery game, a quinela game, and bingo in Asuncon. The Catholic University has operated the sports pool (PROBE), and horse-race betting has been under the control of other private operators. Small casinos in other communities have been operated by local owners holding government concessions.
The Valentino company’s monopoly over major gaming activities received a serious setback after President Stroessner was deposed in February 1989. Dora Valentino’s concession for the casino at the Hotel Acaray in Ciudad del Este expired. Unexpectedly, it was not renewed, and the concession was awarded to a group of Brazilian businessmen. They moved the casino to the Club Rio Del Este in downtown Ciudad del Este. That casino closed. The Acaray Palace Hotel and Casino is again open, but under new owners who also operate the Amambay Suites Hotel across the street from the Acaray.
Dora Valentino began constructing a $30 million, 250-room resort hotel just north of the city near a proposed major international airport. The foundation and shell of what could have become the largest hotel in the nation was built. Intentions were to move the casino to the facility. Construction halted, however, when casino plans stalled. The government had given only one casino concession for each region. Obtaining another concession in Ciudad del Este proved a difficult process. As the new hotel is technically outside the city and within the Hernandez region, Dora Valentino has claimed that the area is eligible for a second casino.
While the Valentino company argued for a second casino in the Ciudad del Este area its competitors won the right to have a second and third casino (besides the Ita Enramada Casino) in Asuncon. Another casino is at the Asuncon Yacht Club (the Paraguayan Hotel and Casino and Yacht and Golf Club). The Asuncon Yacht Club Casino has outclassed the Ita Enramada Casino.  The Ita Enramada Casino is eight miles downriver from downtown Asuncon on the Paraguyan River. The Asuncon Yacht Club Casino is also on the Paraguyan River about four miles downriver from downtown Asuncon. Concessions for the casinos were extended in 1995.
Besides the casinos at Asuncon and Ciudad del Este, the cities of San Bernardino and Pedro Juan Caballero have casinos. The San Bernardino Hotel and Casino is in San Bernardino on Lake Ypacarai. The La Siesta Hotel and Casino is in Pedro Juan Caballero, a city on the Brazilian border, opposite the City of Ponta Pora, Brazil. The Amambay Casino is on the outskirts of Pedro Juan Caballero, and the La Siesta Casino is in the downtown area of the city. In addition, there is a bingo casino in the city of Encarnaci-n, which is in southern Paraguay on the Argentina border, opposite Posadas, Argentina.

Panama has had a national lottery and casino gambling during most of its history as a nation. The Republic of Panama gained its independent status in 1903 following a separatist revolution from Colombia, which was supported by the United States. The US then negotiated for rights to dig the Panama Canal and control its operations. A Canal Zone area was put under the American flag, and U.S. military bases were located in the zone. The U.S. presence as well as canal activities has brought people from all over the world to Panama, and the country looked to these people to support casino activities. The lottery, however, has been marketed to local residents, and it has served a social welfare function – first, by giving jobs to many persons who sell tickets and administer operations, and second, by dedicating its profits to programs to help the poor.
The U.S. military left the Canal Zone and invaded the governmental center in Panama City in 1989 in order to capture Pres. Manual Noriega because of his involvement in the drug trade.  That invasion involved a major firefight and the loss of hundreds of lives. Along with the invasion, the United States imposed an embargo on Panama. The hostile policies had the effect of killing any tourist-type activity for many years. On 1 January 2000, the US gave up control over the operations of the Panama Canal and by that time had withdrawn almost all its military from Panama. The withdrawal removed much of the market that had existed for casino gaming in the earlier years. Panama has readjusted with new government initiatives for redeveloping a new tourism opportunities. Casino gaming has returned to the tourist package, and the government has authorized new casinos with private ownership.
The first casinos in Panama were also under private control. Several gaming rooms were opened in the Old Balboa Gardens region of Panama City. They offered dice, roulette, and blackjack games. In the early 1940s, several gaming establishments came to the Plaza Cinco de Mayo in Panama City and to the city of Colon, where the canal meets the Caribbean Sea. After a government change in 1945, all casinos were placed under central ownership of three Panamanians who won a government concession for the activity. In the early 1950s the government permitted several casino gaming activities to be held for the benefit of the Red Cross and other charities. The private and charity gaming ventures came to an end in 1956 when the national government took over the casinos.
A national casino administration was established within the Ministry of Finance and Treasury. Its goal was to enhance tourism and to generate greater revenue from tourists as well as from Americans stationed in Panama and other businesspersons coming to the country. The national policy was directed at the placement of casinos in hotels. In the late 1950s casino activity began in the El Panama, Continental, Granada, and Siesta hotels. In 1965 a new national law reorganized the casinos, permitting their location in hotels located in cities over 200,000 population with a capital value of $1.5 million. The law also authorized slot machine–only casinos in other locations. At the time of the U.S. invasion, the government operated ten full-scale casinos in six Panama City hotels, two in Colon hotels, and one each in the city of David and on Contradora Island (which was exempt from the population requirement). Six Panama City hotels had slot machine–only casinos as did three shopping centers, three airport locations, a bar, bowling alley, and five smaller cities. The full casinos offered blackjack, roulette, craps, and poker games, as well as slot machines.
According to my interview with gaming board officials in Panama City on 27 December 1998, in 1997 the government shifted its policies, realizing that its casino administration did not have the resources to fully develop the industry for tourism. Privatization was authorized. Bids were accepted from thirteen prequalified companies to run the casinos. Three companies were granted licenses to run casinos for twenty years. At that time licenses may be renewed. The casino facilities must be located in new five-star (and old four-star) hotels that have 300 rooms. The facilities may be open twenty-four hours a day. They must have security cameras, and new slot machines must be centrally linked together on computer systems. The casinos must advertise the tourist aspects of their facilities. In addition to annual licensing fees, the casinos pay a tax equaling 20% of their win. Slot machine–only casinos pay a tax of 25%.
Today, Crown Casinos runs casinos at the Granada, Continental (slot machines only), and Caesars Park hotels in Panama City. The Thunderbird, a Vancouver, British Columbia–based company, has casinos at the El Panama and Solon hotels in Panama City, as well as the Washington hotels in Colon and David. A third corporation runs separate slot machine parlors and has slot machines in the Panama City airport. <

See Japan and Pachinko. <

See Japan and Pachinko. <

Pres. Richard Nixon signed the Organized Crime Control Act of 1970 into law on 15 October. The act was in reality a long list of ideas rather than a comprehensive coherent package of tools with which to deal with organized crime. Some called it “a smorgasbord of legal odds and ends” and a series of “nuts and bolts” for dealing with crime.
Among the matters of concern in the act was gambling. The act provided federal tools for enforcing state provisions on gambling under certain conditions. Penalties were provided for persons who financed, owned, managed, supervised, or directed an illegal gambling enterprise. The illegal enterprises had to involve five or more persons who acted contrary to state and local law to participate in gambling over a period of thirty days or more with revenues involved exceeding $2,000 for a single day. If two people conspired to break a state law on gambling and one was a public official, the federal government was also empowered to take action against the offenders. The act also authorized the appointment of the Commission on the Review of National Policy toward Gambling, which was appointed in 1974 and made a report of its findings in 1976.

Oregon has authorized several forms of gambling activities. I have gathered information on these activities during several visits to the state, including participation in a faculty seminar, “Oregon Games: Don’t Leave It to Chance”, at the School of Urban Studies and Planning, Portland State University, on 14 November 1997.
In 1984 the voters approved a lottery by a margin of 66% to 34%. The lottery started operations in 1985. The lottery was conducted with traditional lottery games at first. In 1989 the lottery was then modified to include betting on sports events through parlay cards, and it was later modified for making wagers at video lottery terminals. The state of Oregon is one of only four states that is permitted to have sports betting. All bets are made on parlay cards, which require the player to pick winners of at least four games. Point spreads are indicated on the cards for football and basketball games. The winnings are paid on a pari-mutuel basis. Proceeds from the sports betting are dedicated to university athletic programs.
The state has also permitted card games with financial prizes to be played among players in bars, restaurants, and fraternal clubs (the various establishments may not be participants in the game) and bingo games to be conducted by charitable organizations. Oregon also has had horseracing with pari-mutuel betting for several decades.
These gaming authorizations provided the legal foundation for Native American tribes in Oregon to negotiate agreements with the state so that they could offer casino-type games. The authority for Native American gaming is granted in accordance with the Indian Gaming Regulatory Act of 1988. Seven tribes started casinos with machine gaming and bingo in their facilities. Agreements were amended to allow blackjack games. The casinos are operated by the Grande Ronde Indian Community (Grande Ronde), Umatilla Indian Reservation (Pendleton), Warm Springs Reservation (Warm Springs), Klamath Tribes (Chiloquin), Coquille Indian Tribe (North Bend), Cow Creek Band of Umpqua Indians (Canyonville) and Siletz Indians (Lincoln City).
Two of the tribes have negotiated agreements that permit them to offer all games that are authorized by the Nevada Gaming Control Board for Nevada commercial casinos.  These are the Grand Ronde and the Cow Creek. In exchange for this privilege to have all games, the tribal organizations agreed to provide a community assistance fund equal to 6% of the gaming revenues for local areas. The other tribes are positioned to negotiate for such agreements if they wish to do so. All the tribes pay the state fees to cover the costs of regulating the games.