Gambling in American History

West Virginia
The West Virginia legislature authorized an experimental installation of video gaming machines – keno machines, poker machines, and machines with symbols – at Mountaineer horse-racing track beginning on 9 June 1990. At first only seventy machines were installed. During the experimental time the number grew to 400 in 1994. Most were keno machines. The first machines had payouts of 88.6 percent. During a three-year experimental period, the lottery agreed not to put machines in other locations. Now machines are at other tracks. According to information in International Gaming and Wagering Business in June 1994, the track was able to keep 70 percent of the revenues, and 30% went to the state.

Rhode Island
The second state to have machines was Rhode Island. The machines were authorized for Lincoln Greyhound Park and a jai alai fronton. Operations started in September 1992. The greyhound facility soon dropped the word greyhound from its name and directed most of its advertising toward machine-playing customers. By mid-1994 there were 1,281 machines at the track. They were video machines, which in initial years won profits of $31,912 per machine per year. At first, 33 percent went to the track and 10% went to purses for the dog races, according to information in International Gaming and Wagering Business in January 1995. Later the state took 33 percent, the track took 60 percent, and 7 percent went to purses.
In late 1993 Rhode Island added “reel” machines to the mix, as it was felt that the players should have the same variety of machines that was offered by a casino in nearby Connecticut.
“The introduction of VLTs stopped the bleeding,” according to Dan Bucci, vice president and general manager of the track. In July 1994, he commented in International Gaming and Wagering Business that “we’re living proof it can help. But I’m not sure gaming machines are a panacea. If there’s a magic bullet out there for all of racing’s problems, I don’t know what it is”. He commented that “it’s a lot harder to create new pari-mutuel patrons than it is to create new machine patrons”.

Louisiana
Although Louisiana has a long history of gaming, legal gaming machines appeared only in the 1990s. Pari-mutuel racing was well established when a state lottery was authorized in 1989. Tracks were affected by the new competition, and they immediately began to lobby for machines. VLTs were authorized for truck stops, restaurants and bars, and racetracks in 1992. Tracks were allowed to have an unlimited number of machines. The advantage of having machines was short lived, as tracks had to compete with fifteen newly licensed casino boats.
One track with machines was Louisiana Downs near Shreveport. The general manager of the track, Ray Tromba, commented that “it [the installation of 700 machines] was hopefully a way to help the race track be more of an entertainment facility; for the first two years it worked extremely well”. Attendance at the track went up. Purses were raised and used to attract better horses for races. The patrons enjoyed the better races. Eighteen percent of the machine revenue was authorized for purses. Tromba maintained that “pari-mutuel can stand on its own if it’s a good enough product that people will want to wager on it, it’s as simple as that. This is not rocket science” (McQueen 1998, 59).

Delaware
Delaware authorized all types of slot machines and other gaming machines for its tracks in 1995 (McQueen 1996). Delaware Park offered the machines first, but according to information in International Gaming and Wagering Business in October 1996, that track was soon followed by Harrington Raceway and Midway. Delaware Park pursued a strategy somewhat different from that elsewhere (Rhode Island, Iowa), as it sought to make a strong separation between the machine gaming and the track wagering. According to marketing director Steven Kallens, track efforts to bring slot players to the track windows were simply unsuccessful. “People got too confused. It was clear we had a pretty dedicated group of slot players with no interest in racing”. But perhaps the situation was made to be that way. An unused 60,000-square-foot section of the grandstand was converted to slots. No racing monitors were placed in the room, and players had to go to another room to make racing wagers.

Iowa
Like Delaware, Iowa authorized slot machines (as well as VLTs) for its tracks right from the start of racino operations.  Local approvals were given for the operations. The Prairie Meadows horse track in Altoona near Des Moines was the first to open in 1995. Machines are also at two dog tracks, the biggest one in Council Bluffs. Prairie Meadows has 1,164 machines. Without a doubt, they have turned the finances of the facility around.
The Prairie Meadows racetrack opened in 1989, but the opening preceded the state’s approval of riverboat casinos by only months. In 1991, as the boats opened, the last races were held, and the track entered bankruptcy protection. There were no races in 1992. In 1993 a short calendar with a mixture of thoroughbreds and quarter horses was held, but it was not successful. By then a large Native American casino had opened its doors only sixty miles away in Tama. Machines made all the difference. With their installation, racing began anew in 1995, but it was machines that led the way. The 1995 revenues consisted of $118 million from the machines, $4.9 million from on-track race betting, and $25.8 million from simulcasting (McQueen 1996).
Iowa’s Prairie Meadows has tried very hard to involve the machine players in track wagering, although the track racing has not become a self-supporting cost center. Machines have horse racing themes. One block of quarter machines is called Quarter Horses. The slot players can see track events from the slot area. Staff members circulate among slot players promoting racing and answering questions about race wagering. The players can also make bets to the staff directly while sitting at their machine locations. According to media director Steve Berry, slot players are also able to win free pari-mutuel tickets (McQueen 1996).
Of the retained revenues, $14 million is put into purses for horse races. Purses were only $1 million in 1994 prior to the introduction of slots. As a result of the increased purses, the quality of racing is improving, and simulcast revenues are up 4–5 percent. Attendance is approximately 10,000 a day, and handle has increased 16%. No other horse track in the Midwest has done as well as Prairie Meadows.

New Mexico
In 1998, the state of New Mexico agreed to let tracks have machines as long as they could all be tied together in a slot information network. The track gives 25% of the revenue directly to the state and gives 20 percent to horsemen through race purses. The track keeps 55 percent. Machines are permitted to run twelve hours a day, every day – as long as the track offers some racing products.
There are four tracks in the state with machines. On 4 May 1999, Ruidoso Downs, less than half an hour away from the large Native American casino of the Mescalero Apache tribe, was permitted to start operating 300 machines. Of the machines, 70 percent are traditional reel-type slot machines, and 30 percent are video gaming devices. The machines are played with coins, and they distribute coins to winners. The track has simulcast racing each day of the year, so the slot machines are available to players 365 days. Live racing – thoroughbred and quarter horse – occurs four days a week from Memorial Day to Labor Day. The nation’s leading quarter horse race—the All American Futurity—is run on Labor Day. According to a telephone interview on 8 June 1999 with Keith Henson, the track is beginning to turn around several years of losses (it never stopped racing), but it would like to be able to stay open longer hours and also have more machines in order to compete more equitably with the Mescalero casino.

Canada
In 1998 a decision was made to allow eighteen racing tracks in Ontario to have slot machines under the direction of the provincial lottery corporation (McQueen 1998). Windsor Raceway, a track just a few miles away from the very successful Windsor Casino, was the first to start operations. In December 1998, 712 machines were set into action.  The lottery corporation receives 15 percent of the revenues; 10 percent goes to the track and 10 percent to horsemen through purses and other awards. The remaining revenues go to the provincial treasury in Toronto (McQueen 1999).
According to John Millson, president of the raceway, “When the first coin went in, I knew there would be no turning back. it was music to my ears”. He was also very supportive of the fact that the lottery corporation ran the machines. “It’s a government agency, and quality and proper perception is extremely important, so they do it right.” He also commented, “It means a tremendous opportunity for us to market our facility as a gaming and entertainment facility”(McQueen 1999).
The track-machine situation was mixed in other parts of the province. The major track in Toronto – Woodbine – was stymied in its early efforts to get machines, as the city council refused to grant a zoning variance for the activity. That action was appealed by the lottery corporation. Overall, it was expected that twelve of the eighteen tracks in the province would have machines by the end of 1999.
The earliest province to embrace gaming on tracks was Saskatchewan. There a full casino was placed into operation underneath the stands of the Regina Exhibition Park’s racing facility. Revenues from the casino were earmarked for Exhibition activities. The casino at the track discontinued operations a year after the provincial government began a major casino in downtown Regina. When the new casino opened, track handle decreased 23%. The new casino agreed to give a share of its revenues to the Exhibition, according to an interview with Kathy Maher-Wolbaum, Casino Regina, on 15 September 1998.
Racinos are also found at the tracks in Alberta and Manitoba.

Mexico
The Agua Caliente track in Tijuana developed a sports betting complex to supplement dog racing and horse racing activities, but the horses have stopped running at the tracks. An operation in Juarez also offers dogs and sports betting.

The racino is a facility that mixes dog or horse track activity with casino-type activities.
For myriad reasons racetrack entertainment has experienced a steady decline over the past several decades. There have been many efforts to stem the ongoing decline. For the most part, however, these efforts have not achieved desired goals. During the 1990s a new solution received considerable support from track interests as well as political leaders in many jurisdictions. They recommended that tracks become venues for other forms of gambling, specifically gaming machines – video poker and slot machines.  The policy recommendations have become manifest in several states and provinces. Six states (Iowa, Louisiana, West Virginia, Rhode Island, Delaware, and New Mexico) and four provinces (Alberta, Saskatchewan, Manitoba, and Ontario) have permitted gaming machines to be installed at racetrack facilities. In addition California’s Hollywood Park has a very large card room casino. A racetrack in Omaha offered keno games; however, racing activity ceased after the keno operations began.
The tracks have particular advantages as casino-type venues. They have large parking areas, they are separated from the core urban populations by natural land barriers, and they have space that is underutilized. On the other hand, critics suggest that the facilities may prey too much on local habitual gamblers, as very few racinos are geared to attract tourists. Additionally there is debate over whether the casino-type gambling can add to the profitability of racing activity or whether it merely offers more competition, hence hastening the doom of the racing events.
Richard Thalheimer conducted an in-depth economic analysis of market demand forces, a type of investigation he has followed also in analyses of other innovations such as simulcasting, offtrack betting, and exotic betting as well as impacts of lottery and casino gaming on track operations. He found that the introduction of machine gambling results in decreased pari-mutuel wagering and decreased pari-mutuel revenues. But overall, revenues at the tracks increased as the machines more than made up for the deficit in pari-mutuel activity. He concluded that the issue of importance that must be addressed is just what share of the machine profits are assigned to the track and to horsemen either in purses or through other means. Thalheimer found that the regular horse players at the tracks did play the machines; on the contrary, however, those attracted to the track to play the machines did not tend to make wagers on horse races. His data are confined to Mountaineer Park in West Virginia.
Track dynamics are such that pari-mutuel gambling is not fully compatible with machine gambling. Seasoned horse players are renowned as cerebral, educated calculators of odds and probabilities that particular horses may win a race. For them, information is critical. Their activity requires a considerable amount of entry knowledge. Learning is a long process. One gaming executive commented that “betting on horse races is a game of skill, unlike the mindless tapping of a slot machine button, and our philosophy is that the customer must be gently educated on how to study form before he places his bets”.
Features of the style of horse-race betting can be found in some other games. For instance, persons betting on other sports events often use great amounts of information in calculating their betting activity. The same is true in the live casino game of poker. Most casino games, however, require almost no skill. Wheel games and dice games require no skill, as the result of the game is determined fully by chance. Machines call for almost no skill in play.
Wherever machine gaming is introduced, it seems to dominate other gambling products. Inside Las Vegas’s most plush casinos, machine revenues now exceed revenues from tables that cater to high rollers. The Oregon Lottery introduced video lottery terminals (VLTs). According to information in International Gaming and Wagering Business in June 1994, revenues from the machines quickly dwarfed figures from traditional lottery products. Machines have brought in 90 percent of the lottery revenues in South Dakota.  Governments seem to enjoy the opportunities to expand budgets as a result of machine gaming.

See Dog Racing and Horse Racing.

Public officials in Quebec in a sense “jumped the gun” when a lottery was introduced in Montreal in 1968 as a device to generate revenue for the municipal government. Judicial officials in Quebec took exception to the gaming operation, as they held it to be in violation of the Canadian Penal Code of 1892. Action did not stop for long. After the Penal Code was amended, the Quebec government created Loto Quebec in 1969, and the next year Quebec became the first province in Canada to establish a lottery. A separate agency licensed a wide range of games for charities and also to support agricultural fairs: bingo games, raffles, and limited-time casino events. The agency also regulated pari-mutuel horse-race wagering.
As the lottery grew along with private charity-oriented gaming, the province initiated studies of casinos’ gaming. The studies persisted from 1978 into the early 1990s. Part of the motivation guiding a conclusion that tourist-oriented casinos should be authorized was the revelation that illegal gambling and particularly illegal slot machines were quite prevalent in Quebec. In 1993 the province opened Casino du Montreal in a facility that was the French Pavilion at the Montreal World’s Expo of 1967. The casino has a 90,000-square-foot gaming floor, the largest in Canada until a permanent casino was built in Windsor, Ontario.  The province also authorized government-owned casinos for Charlevoix, sixty miles north of the city of Quebec, and for Hull, across the Ottawa River from the national capital city.
The three casinos welcome 10 million visitors a year, 20% of whom are tourists. Most of the revenue (67%) is derived from slot machine gaming; tables generate 31%, and keno games 2%. The casinos have a combined 200 table games and approximately 4,000 slot machines. The casinos do not offer credit to players; however, they do have automated teller machines. Casino du Montreal actually has a branch of a major bank located on its premises.
The mid-1990s also brought another new policy to the province. Video lottery terminals are now permitted in restaurants, bars, and taverns.  The province has placed over 15,000 machines in 4,400 locations.

There are approximately fifteen casinos in Puerto Rico. The largest and most successful are in San Juan near the Condado Beach area. The casinos are all contained within hotels. Hours are restricted to afternoons and evenings. There is no live entertainment within the casinos. Casinos are restricted in size, with most offering less than 10,000 square feet of gaming space.
Table games, blackjack, baccarat, and craps are operated by the private casinos, and slot machines are operated by the Puerto Rican Tourism Company, a government agency that regulates the casinos. The government takes the revenue from the slots and returns a portion to the casinos. The number of slots is limited by a formula based upon the actual number of players at table games.
The most prominent casinos are the Condado Plaza, the El San Juan, the Sands, and the Hilton.
These properties draw tourists from the United States. The very high cost of hotel rooms and high occupancy rates limit opportunities for extensive gambling junketing, however. Local residents are permitted to gamble, although the casinos cannot direct advertising to the local market.
It is difficult to determine the rate of taxation on the casinos. Changes in the rates were made in 1989. As the casinos yield considerable potential revenue by not controlling the slots, it may be estimated that the tax rate in reality is about 20 percent of the gross win.
The Puerto Rican casinos have potential marketing advantages over other regional casinos, as San Juan is a major airport hub for the Caribbean, easily accessible to other American cities, and as Puerto Rico is a U.S. jurisdiction with no currency restrictions for Americans. Disadvantages, however, include high room costs and U.S. taxation reporting requirements.
Several of the casinos in Puerto Rico have been suffering financial trouble. These problems are attributed to heavy taxation and to mismanagement, especially in the area of credit policies. Nevertheless, there have been several applications for new casino licenses in recent years, and new casinos have opened.

Betting on professional sports and college sports games is very popular in the United States. There can be little doubt that tens of billions of dollars are wagered on these games each year. Most of the betting action is illegal.  Only Nevada permits wagers on individual games, and the Oregon lottery allows players to wager on sports cards that require them to bet on at least four games on a single card – meaning they have to pick all four winners in order to have a winning bet. Delaware had authorized a similar system for betting on national football for several years starting in 1976. Montana permits private sports pools to be operated in taverns. The tavern organizes the pool, but all betting is among the players, who retain all of the prizes.
Several public officials expressed concern over a rising level of sports betting in the United States during the 1980s and early 1990s. The concern was attached to the fact that over a dozen states were entertaining prospects of legalizing the betting on games. One concerned official was U.S. senator Bill Bradley (D-New Jersey), who had been a star player in the National Basketball Association on the world championship New York Knickerbockers team. He deplored sports gambling, fearing that it would draw children into gambling activity as younger people were more attracted to games. He also saw the wagering as harmful to the honesty of the games, as sports betting could lead to attempts to bribe players to try to alter the results of games in ways favorable to certain bettors. The public confidence in the integrity of the games was in jeopardy.
In February 1991, legislation was introduced in the U.S. Senate to block the expansion of publicly authorized sports betting. The bill was signed into law as the Professional and Amateur Sports Protection Act by Pres. George Bush on 28 October 1992.
The law provides that no government entity may sponsor or authorize or otherwise promote any lottery or gambling scheme based in any way upon the results of one or more competitive games in which amateur or professional athletes participate. The four states with existing authorizations for sports betting – Nevada, Delaware, Oregon, and Montana – were exempt from the act’s provision. Also, New Jersey’s standing as the second state with large casinos was recognized, and the state was given until the end of 1993 to legalize sports betting in Atlantic City casinos if it desired to do so. When 1 January 1994 came, New Jersey had not legalized sports betting for the casinos, so the law’s effect is to prohibit sports betting in forty-six states. The act does not apply to horse-race or dog-race betting or to as pari-mutuel betting on games of Jai Alai.

On 28 July 1983, Pres. Ronald Reagan issued Executive Order 12435, creating the President’s Commission on Organized Crime under the auspices of the Federal Advisory Committee Act. The commission was given the charge to make a “full and complete national and region by region analysis of organized crime; define the nature of traditional organized crime, as well as emerging organized crime groups, the sources and amounts of organized crime’s income …; develop in-depth information on the participants in organized crime networks; and evaluate Federal laws pertinent to the effort to combat organized crime”. The commission was to have up to twenty members.
The president appointed U.S. Court of Appeals judge Irving Kaufman to chair the three-year work of the panel. Kaufman was certainly one of the most prominent federal jurists on any bench.  As a federal district judge, he had presided over the trial of Julius and Ethel Rosenberg. The two were executed in 1950 for being spies for the Soviet Union, stealing atomic secrets. Kaufman had also been the judge during the trials arising from the raid on the organized crime meeting at Apalachin, New York, in 1957. The commission membership also included U.S. Supreme Court Associate Justice Potter Stewart, U.S. Senator Strom Thurmond (R-South Carolina), U.S. Representative Peter W. Rodino (D-New Jersey), Louisiana State Attorney General William J. Guste, associate Watergate prosecutor Thomas McBride, and law professor Charles Rogovin of Temple University. The other members included the sheriff and district attorney for San Diego County, a former U.S. attorney, members of congressional investigating staffs, police officials, private attorneys, and the editor of Reader’s Digest magazine.
The commission had an overall budget of $5 million. Its staff of thirty-six included sixteen investigators and seven lawyers. The commission met in a series of hearings on selected topics over a three-year period. Hundreds of subpoenas were issued by the commission. Major topics examined included money laundering by organized crime, Asian gang activity in the Unites States, labor union violence, involvement of legitimate business with organized crime, illicit drugs, and gambling. The commission issued reports on the separate topics during the course of its work; however, it limited the scope of its recommendations to only a few topics.
Special importance was given to money laundering. Forty-one banks were investigated. One in Boston was shown to have “knowingly and willfully” allowed $1.22 billion in cash transfers with Swiss banks on behalf of clients who were not asked why they were bringing in large sums of money in paper grocery bags. In a court action the bank was fined $500,000 for failing to abide by provisions of the Bank Secrecy Act of 1970. That was not enough. In October 1984, the commission recommended that a new law be passed making money-laundering activities more clearly illegal under federal law. A first offense could be punished by fines of up to $250,000 or twice the value of the laundered money and imprisonment up to five years. Illegal gambling was seen as a problem area in money laundering, and legal casinos were viewed as agents of potential money laundering. In 1985, regulations of the Treasury Department were amended so that casinos with revenues in excess of $1 million a year were to be considered banks for purposes of the Bank Secrecy Act of 1970. In 1986 Congress passed the Money Laundering Act of 1986, which made money laundering illegal for the first time. The new law indicated in excess of 100 specific activities that would constitute illegal sources of moneys restricted from exchanges by banks and casinos. Illegal drug sales and illegal gambling proceeds were included.
Hearings on Asian gangs found a high level of involvement in gambling operations that were both legal and illegal. Gang members were involved in running Chinese games such as mah jongg in legal poker rooms in California, and they also attempted to use a front business to buy a casino in Las Vegas. It was feared that Asian organized criminals such as the Japanese-based Yakuza and the Bamboo gang of Taiwan could grow into an influence that would exceed that of the Mafia.
The commission focused its investigatory energies on the misuse of labor unions in order to achieve the goals of organized crime interests. The commission recommended more rigorous implementation of provisions of the antiracketeering statutes already on the books. They sought to have such involvement by labor considered as “unfair labor practices” under provisions of the National Labor Relations Act.
Hearings on gambling activity looked closely at Cuban-American racketeers who were discovered to be operating a $45-million-a-year gambling syndicate in New York City. This activity was a major component of organized crime’s control over $1.5 billion in the New York metropolitan area. There were also hearings on gambling and its effect on professional and amateur sports activity.
A study made by Wharton Econometric Forecasting of Philadelphia for the commission concluded that organized crime activity exceeded $100 million a year in drug trade alone. Overall organized crime activity cost Americans 414,000 jobs each year and $6.5 billion in lost tax revenues.
The commission ended its work somewhat in disarray. A final report recommended that bar associations take steps to self-police lawyers who would work for Mob groups. The commission also endorsed wiretapping to discover illicit practices by lawyers. Moreover it sought expanded drug testing in the workplace. Nine of eighteen commission members refused to endorse the final recommendations. The commission was criticized for having too many hearings and not enough meetings to discuss the substance of its investigations.
The topic of gambling pervaded all the investigations. The commission did not issue a separate report on gambling, however. Although commission chairman Irving Kaufman hinted that illegal gambling was a major source of income for organized crime, the commission chose to allow the transcripts of its hearings to suffice to cover the area. The federal administration did not consider organized crime to be a major factor in legal casinos in the United States. The silence was a statement.
The commission did not conduct any original research into gambling activities, but it did contract for a consultants’ report on policy options. The report was written by professors John Dombrink of the University of California–Irvine and William N. Thompson of the University of Nevada–Las Vegas. The report lamented that a wave of legalizations of gambling across North America had not been accompanied by serious research and thoughtful consequences of legal gambling for society. A program of federally supported research was recommended. It was especially important that the extent and impacts of compulsive gambling be known before more gambling was legalized, making it advisable to have a moratorium on new legalizations for a time during which research could take place. Also during the time of a moratorium (three years was suggested), state officials, industry personnel, and other interested parties should be brought together by the U.S. Department of Justice to create a set of minimum standards for gambling activity to ensure a uniform integrity and to ensure that organized criminals would be excluded from operations. The minimum standards could then be enforced by state governments or, alternatively, by the Department of Justice if the states chose to ignore the standards. States could be given incentives to follow the standards through law enforcement grants. The consultant’s report rejected the notion that the federal government should be involved in either direct regulation or taxation of gambling operations. There is no evidence that the commission used the consultant’s report. Later in 1996, however, a bill to regulate Native American gambling was introduced in Congress. The bill included a moratorium provision such as the one in the report.