Archive for the “K” Category
Encyclopedia: Gambling in America - Letter K
The Knapp Commission (officially known as the Commission to Investigate Allegations of Police Corruption and the City’s Anti-Corruption Procedures) consisted of five leading citizens of New York City. The commission was instituted by an executive order of Mayor John V. Lindsay on 21 May 1970. Lindsay appointed Whitman Knapp as chairman. Joseph Monserrat, Arnold Bauman (later replaced by John E. Sprizzo), Franklin A. Thomas, and Cyrus Vance (later secretary of state in the Carter administration) were commission members. The commission met for two years and issued its final report on 26 December 1972. The creation of the commission was not driven by policy considerations of Mayor Lindsay. Quite to the contrary – city officials, as well as top police administrators, were said to be quite content to allow a persistence of on-street corruption of policy activity through bribery in exchange for having a police force that could basically ensure publicly acceptable levels of social control and criminal activity. Their priorities were often directed toward overlooking certain illegal activities by police if strict enforcement would negatively impact police morale. Allegations of police corruption have dogged the police force of New York City since its creation in 1844. Investigations have been conducted on a periodic basis. A New York state senate committee (known as the Lexow Committee) looked at police extortion of houses of prostitution and gambling operations in 1894. In 1911 the city council appointed a committee led by Henry Curran to look into police involvement in the murder of a gambler in Times Square. The gambler had revealed to city newspapers a pattern of bribes that he had paid to the police. In 1932 the state legislature again sponsored an investigation under the leadership of Samuel Seabury. It examined cases of bribes paid to police by bootleggers and gamblers. In 1950 and 1951 the district attorney again held grand jury hearings into bribery tied to gambling. Harry Gross, the head of one of the largest gambling syndicates in the city, agreed to testify. Twenty-one policemen were indicted, but charges were withdrawn when Gross ceased to cooperate in the hearings. In the mid-1960s, it could be expected that the issue would somehow resurface again. This time the catalyst for investigations was a policeman whose quest was to be an “honest cop”. His name was Frank Serpico. Serpico’s story was the subject of a popular book by Peter Maas (Maas 1973) and a widely acclaimed movie, Serpico, released in 1973, starring Al Pacino in the role of Frank Serpico. Shortly after joining the police force, Serpico became aware that officers were taking bribes from persons involved in numbers betting and illegal sports betting. Soon he discovered the depth of a network of bribes tied to protection given to various games. Operators of different kinds of games would pay different levels of bribes depending upon the volume of their activity and the public exposure given their activities. Open gambling games would require higher bribes. All the police of a precinct would participate in the police bribes, with varying shares given to uniformed officers, plainclothes officers, detectives, and higher administrators. At first Serpico simply refused to accept his share of the bribe money. But as he could not escape personal involvement with the situation on a day-by-day basis, he confided his displeasure to higher police officials. Although he was very reluctant to name any fellow officers in his discussions, he was eager that an investigation follow so that the practices would cease. He found little satisfaction within the police hierarchy and instead was severely ostracized. Even contacts with the mayor’s office were futile. The highest politicians in the city were more concerned that police morale be high, as race riots were anticipated and general social “peace” in the streets was their priority. Serpico’s persistent actions led to internal proceedings that resulted in individual convictions of lower-level policemen. He saw little action at top levels where general reform had to start, although a higher-level investigation was initiated. In frustration and fear for his personal safety, Serpico and two supportive fellow officers decided to go on record and make their story public. On 25 April 1972, the New York Times reported Frank Serpico’s story on the front page “above the fold”. The cat was out of the bag, and Mayor Lindsay could no longer hide behind bureaucratic values. He immediately appointed an interdepartmental committee to recommend action. The committee asked for public complaints that would back up the New York Times story. They received 375 complaints within a couple of weeks. They told the mayor that as regular city employees they did not have time to follow up with an investigation. They urged that the mayor create what became the Knapp Commission (Knapp Commission 1972, 35). The city council approved a budget for the commission and also gave it subpoena power. Additional funds were received for the work through the U.S. Law Enforcement Assistance Administration. An investigating staff was formed, and several inquiries into illegal activity were made in the field. The commission also held two sets of hearings. Five days were spent with Frank Serpico and his fellow confidants. The commission also invited public complaints, and they received 1,325 in addition to those sent to the mayor’s earlier committee. In addition to the Knapp Commission’s report, their work led to the indictments of over fifty police officers. Over 100 were immediately transferred after the hearing began. The commission spent considerable time discussing what is known as “the rotten apple theory”, specifically that corruption is not pervasive but rather the result of a few “rotten apples” that somehow get into every barrel. They rejected that supposition, as their report began with the words, “We found corruption to be widespread”. In one precinct they found that twenty-four of twenty-five plainclothes policemen were involved in receiving bribes from illegal gamblers. Although group norms motivated police to participate in networks of bribery, so did their realization that the enforcement of gambling laws was not taken seriously by the judicial system. The commission reported that between 1967 and 1970 there were 9,456 felony arrests for gambling offenses. These resulted in only 921 indictments and 61 convictions. Of these, only a very few received jail sentences, and the sentences were “nominal”. Although the commission’s report dealt with a wide range of corrupting activities, a special focus was upon gambling and the bribes gamblers paid to the police in their part of the city. The activity was found in all parts of the city. Ghetto neighborhoods were especially susceptible to this police activity. One witness indicated: “You can’t work numbers in Harlem unless you pay. If you don’t pay, you go to jail. You go to jail on a frame if you don’t pay”. The commission found that the “most obvious” result of the gambling corruption was that gambling was able to operate openly throughout the city. Although those with no moral opposition to gambling were not upset, they realized that the pattern of bribery in this area opened the police up to other corruption – looking the other way during drug activity, during certain Mob larcenies, and during other Mob activity. The commission saw a definite link between Mob organizations and gambling activity. The bribery pattern also taught the public that the police were not to be respected. This was especially harmful for children. An additional danger to police corruption was that the police neglected their specific law enforcement duties as they concentrated on collecting their bribes and protecting gamblers. One remark from Serpico was telling. In effect, he said that all the crime in New York City could be ended if the police were not so busy seeking payoffs. The police responded to the commission by indicating that they were no longer concentrating on small gambling operatives but rather would focus on leaders in gambling operations. The commission felt that this might be admirable, but that it was not sufficient. They believed that “gambling is traditional and entrenched in many neighborhoods, and it has broad public support” (90). Such being their belief, they recommended that numbers, bookmaking, and other gambling should be legalized. Moreover, the regulation of such legalized gambling should be by civil agents and not by the police. As the commission rejected the “rotten apple” theory, so did the Commission on the Review of the National Policy toward Gambling. They reported that a Pennsylvania Crime Commission that began its study in 1972 also found bribes from gamblers to be pervasive in Philadelphia, and the same was also found in other large cities.
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Three times one man built the largest hotel in the world. First it was the 1,512-room International Hotel on Paradise Road in Las Vegas in 1969. This is now the Las Vegas Hilton. Next it was the 2,084-room MGM Grand on Flamingo Road at the Las Vegas Strip in 1973. This is now Bally’s, which is also part of the Hilton Casino Group – also known as Park Place Casinos. Then in 1993 it was the second Las Vegas MGM Grand Hotel and casino – with theme park. This facility at Tropicana and the Strip, with 5,009 rooms, was the first billion-dollar casino project in Las Vegas. These projects alone would merit the mention of that man – Kirk Kerkorian – in any encyclopedia of gambling or gamblers, but his story is more interesting than simply being a builder. Parts of his story make him sound like Howard Hughes, part like Steve Wynn, but he was really neither. He is unique in the annals of casino personalities. Kirk Kerkorian was born in Fresno, California, on 6 June 1917. His family moved to Los Angeles, where he had to contribute to their finances by selling newspapers at the age of nine and performing whatever other work he could find. He had spoken only the Armenian language of his forefathers until he reached the streets of Los Angeles. Los Angeles taught him that life was to be a struggle, and he willing jumped into the flow of the activity. He drove trucks to carry produce from the San Joaquin Valley, he worked with logging operations in Sequoia National Park, and he was an amateur boxer who won twenty-nine of his thirty-three fights. In 1939 he fell in love with flying, and within two years he had a commercial pilot’s license. He soon became a flight instructor, and then at the first chance he joined the British Royal Air Force. He ferried bombers from Canada to England in one very dangerous mission after another. In one flight he set a speed record for his aircraft. After the war, his interest remained in the air. In 1945 he visited Las Vegas, bought a single-engine Cessna, and went into the charter business. He would fly into Las Vegas almost daily. In 1947 he purchased the Los Angeles Air Service. Soon he went into the business of refurbishing planes and reselling them. He renamed his company Trans International Airlines and went into the passenger service business in 1959. His business continued to expand, and he would spend much of his free time in Las Vegas at the casinos. Kerkorian always kept his eyes open for deals. In 1962 he was able to purchase the eighty acres across from the Flamingo on the Las Vegas Strip. By consolidating other pieces of land, he was able to create the parcel of property that Jay Sarno purchased in order to build Caesars Palace. Kerkorian also bought eighty-two acres of land on Paradise Road in 1967. The same year he was able to purchase the Flamingo Hotel for $12.5 million. In 1968 he sold Trans International Airlines for $104 million. He had the resources for his first major project, the International. He invested $16.6 million of his own money in the $80 million facility. He took the properties public in 1969 when the International opened, featuring performers such as Barbra Streisand, Ike and Tina Turner, and Elvis Presley. Yet the Securities and Exchange Commission did not allow him to sell sufficient shares of stock to pay off debts on this and other projects in which he was involved. He felt that he had to sell the Flamingo and International in order to satisfy his business obligations. Hilton took over the two hotel casinos in 1970 and 1971, but Kerkorian was not out of town for long. He started out by buying a controlling interest in Western Airlines, and he began buying stock in a failing movie company called MGM Grand. He pushed the company toward diversifying into resort hotels. Their first project was the MGM Grand Hotel Casino in Las Vegas, named after the 1932 film Grand Hotel. The hotel opened on 5 July 1973, with a 1,200-seat showroom, a shopping arcade, a movie theater featuring classic MGM films, and a jai alai fronton. In 1976, Kerkorian sold a large block of Western Airlines stock and began a new hotel-casino in Reno. In 1978 the $131 million MGM Grand–Reno opened with the largest casino floor in the world and a 2,000-room tower – making it Reno’s largest hotel. Disaster struck the MGM Grand in Las Vegas on 20 November 1980. A fire that started in an electrical panel in a kitchen quickly shot through the casino area, killing a score of players and employees. When the fire reached the hotel lobby area it was knocked down by the sprinkler system. A massive smoke cloud was able to rise up stairwell and elevator shafts, however, before it was trapped on the upper floors. There the smoke penetrated guest rooms, killing dozens more. In all, eighty-seven persons perished. Although the tragedy was devastating, Kerkorian quickly decided he would rebuild. By the end of 1981, the MGM was operating at full force. In 1986, however, Kerkorian walked away from his two properties, the Las Vegas MGM and the Reno MGM, selling them to Bally’s for $594 million. Subsequently Bally’s Reno was sold to Hilton, and in turn Hilton bought all of Bally’s, so both properties – like the International before – have become part of Park Place Gaming. Kirk Kerkorian could not stay away from Las Vegas gambling for long. Once again, he began to plan. One plan to take control of Chrysler Corporation fell short of its goal, although Kerkorian became the largest stockholder in the automotive giant. His other plan led to the creation of the largest hotel and casino floor (at the time) in the world. His 5,009-room colossus, also called MGM Grand (he had held on to the right to the name), featured a 330-acre theme park, a health club, eight restaurants, and a 15,000-seat arena where boxer Mike Tyson has performed on many occasions (some notable, some infamous). Barbra Streisand came out of a twenty-year moratorium on personal concerts to perform there as well for the grand opening in 1993. When Kerkorian opened the International, he included a youth hostel in the facility. Later the Hilton had a youth recreation area in the facility. His 1993 MGM Grand was heralded as a casino for families with children. It had a Dorothy and the Wizard of Oz theme with an Emerald City and a Yellow Brick Road. The word went out that Las Vegas was a place to bring children. Within a very short time, Kerkorian and the MGM management realized that children want two things from their parents—time and money. Both ways the casino loses. Kerkorian has backed off the “family” theme, and so has Las Vegas. The theme park at the MGM Grand has been consistently downsized, and plans have been made for expanding convention space and also for developing more rooms for prosperous gambling patrons. Kerkorian, in the meantime, keeps moving forward, always seeking new business deals. In 2000 he failed in an effort to take over Chrysler Motors, but he did succeed in a takeover of Steve Wynn’s Mirage Resorts.
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Kentucky is the home of horse racing. More racehorses are born and bred in Kentucky than in any other state. The Kentucky Derby is the most famous horse race in The United States. In 1988, 61 percent of the Kentucky voters said they wanted a lottery, and the next year one was established that offers instant games, lotto games, and numbers games as well as Powerball interstate lottery tickets. Charitable games are also permitted. The fact that many states bordering or near Kentucky – Indiana, Illinois, Missouri, Mississippi – offer casino gambling pressured state leaders into making plans for casino gambling. In 1999, the governor recommended that as many as fourteen casinos be authorized for the state. The notion of casinos in Kentucky is not too far out of bounds for most residents, as Kentuckians remember that the middle decades of the twentieth century found many wide-open but illegal casinos operating along the Ohio border. The seven tracks of Kentucky are supporters of the idea of having casinos, as long as they are located at the tracks and operated by the tracks. The idea of casinos has not received much support in the state legislature, however.
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Keno is a game that enjoyed great popularity in Nevada casinos in the mid-twentieth century. Its use is now waning, as serious players realize that it does not offer a good expected return. Casinos also realize that it requires much labor and also considerable security to ensure that all play is honest. The game that is now played can be traced back to Chinese games two millennia ago. The Chinese used boards with ninety (or more) characters. They brought the game to the United States as they emigrated to the West Coast for jobs on the railroads and in the mines. Americans modified the game so that numbers replaced characters. When casinos reopened in Nevada in the 1930s, an 80-number game became standard, and it is still in use. The player is given a sheet of paper with ten columns and eight rows of numbers. He or she may bet on from 1 to 15 numbers. Numbered balls (or a computer number generator) are then retrieved from a randomizer, and 20 numbers are called. Hence, for a one-number pick, there is a one in four chance to have it called. The payoff is even money. In addition to picking one set of numbers (up to 15 of them), the player may use his card for making several combination bets. After marking the card, the player gives it to a casino official (or keno runner) who verifies it and gives him a receipt. The convenient feature of keno in a casino is that players can wager and play the game while dining, watching entertainers, or playing other games. The winning numbers are posted on boards throughout the casino facility. Games are separated by fifteen or twenty minutes, and winners usually have several hours to turn in cards for payoffs. The house edge is determined by payoff schedules. Typical Nevada payoffs to players range from about 75 percent to about 65 percent (a house edge of 35 percent) depending upon how many numbers are bet. When more than three numbers are bet, there are prizes for having some of the numbers (but not all) called. Although the game is considered by most experts to be a “sucker’s bet”, many persons like the fantasy of being able to play a one-dollar game and win $25,000 or $50,000 for hitting fourteen of fifteen numbers. The casino, however, guards itself from extraordinary risks by limiting all prizes on a game to an arbitrary figure, such as $50,000. If there are multiple big winners on the game, they have to divide the prize.
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Robert F. Kennedy was a U.S. senator and attorney general. Robert Francis Kennedy, known as Bobby, was born on 20 November 1925 in Massachusetts. He was the son of Ambassador Joseph Kennedy and the brother of Pres. John F. Kennedy and U.S. Senator Edward Kennedy. Robert Kennedy graduated from Harvard University with a B.A. in 1948 and received his legal education at the University of Virginia, earning an LL. B. degree in 1951. After graduation he worked briefly in the U.S. Department of Justice before becoming a counsel in 1953 with a Senate committee investigating internal security, chaired by Sen. Joseph McCarthy (R-Wisconsin). After the Democratic party secured the Senate majority in 1955, Kennedy became chief counsel of the Investigations Committee under the chairmanship of Sen. John McClellan (D-Arkansas). In 1957, the committee became known as the Rackets Committee as it focused its attention on organized crime and illegal activity in labor unions. The first target of the investigations was the International Brotherhood of Teamsters (often referred to as the Teamsters’ union). Union president Dave Beck was implicated in personal corruption; he was subsequently tried, convicted, removed from office, and imprisoned. Then Kennedy went after Beck’s replacement, James Riddle Hoffa. Kennedy was able to demonstrate Hoffa’s interactions with organized crime figures and illicit gambling activity. Kennedy’s work with the committee led eventually to the 1959 passage of the Landrum-Griffin Act, which regulated financial activities of labor unions. The committee action also established Robert Kennedy’s reputation as a fighter against organized crime. That reputation was enhanced when he authored the best-selling book The Enemy Within (Kennedy 1960). In 1960 Kennedy demonstrated his political expertise as he managed John F. Kennedy’s successful campaign for the presidency of the United States. Bobby Kennedy’s reward was his appointment to the office of attorney general in January 1961. He held the office until September 1964. He concentrated the energies of his office and his Department of Justice on civil rights issues and on organized crime. He continued his quest to bring down James Hoffa; however, he was frustrated in these endeavors. It was left to his successors to finally guide the prosecutions that resulted in the imprisonment of Hoffa. Attorney General Kennedy established an organized crime task force, and he pursued his objectives with prosecutions as well as with an agenda of new legislation. Three major bills dealing with illegal gambling were passed into law as a result of his efforts. These included the Federal Wire Act of 1961, the Travel Act of 1961, and the 1962 amendments to the Johnson Act (Gambling Devices Act), which expanded the prohibition of transportation of slot machines across state lines to include all gambling equipment. Congress also passed the Racketeer Influenced Corrupt Organizations Act (RICO) in 1961. Kennedy maintained his steady attacks on organized crime until late 1963 when his brother, Pres. John Kennedy, was assassinated. There has been more than one set of rumors suggesting an organized crime connection to the assassination. One account (Davis 1988) suggests that organized crime had been quite influential in the president’s election and that crime figures maintained close relationships with the president and his father (who had been involved in bootlegging businesses decades before). Some feel that the attorney general’s vigorous attacks on Mob activity somehow represented a double cross by the president. After John Kennedy’s assassination, Robert Kennedy turned his energies toward passage of civil rights legislation. In 1964 he resigned the office of attorney general in order to successfully run for a U.S. Senate seat from New York State. In 1968, while he was running for the presidency, Robert F. Kennedy was assassinated in Los Angeles.
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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.
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The Kansas lottery began operations in 1987. It offers instant games, daily numbers games, and lotto, as well as participation in the multistate Powerball game. Three small Native American reservations – Iowa, Kickapoo, and Pottawatomie – won the right to offer casino games after a long struggle for a compact with the state of Kansas. One governor signed a compact only to have it repudiated by the legislature. A later compromise in the mid-1990s allowed limited gaming on the reservations. Kansas City, Kansas, is within the Greater Kansas City metropolitan area, so it is directly accessible to the riverboat casinos of Missouri. The competition of the riverboats has effectively destroyed the market for Woodlands racetrack, which is located just west of Kansas City. Kansas allows pari-mutuel wagering for both dog and horse races. As a consequence, the owner of the track launched efforts to establish casino games on his property. The efforts have not been successful, but they are sure to continue.
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