In 1990, I visited the Casino Copanti in San Pedro Sula, Honduras. The casino owners were an American, Eddie Cellini, and his sons. Members of Cellini’s family had previously worked in casinos in Havana, Cuba, and Lagos, Nigeria. I was talking with one of his sons when a player approached the cage and seemed to purchase a full tray of tokens. I thought nothing about it until the same man returned ten minutes later and purchased another full tray of tokens. I commented to the younger Cellini that the man appeared to be a “high roller.” He laughed and said, “No, he is buying tokens to loan to the players”. He went on to add that the tokens were sold at a discount to certain individuals. Those individuals would then know which players they could loan them to with a good expectation of being paid back. The individuals made their own loan and collection arrangements with the players. The casino management endorsed the practices. They had learned several things when they first opened up and made loans directly to the local players. They learned that they were “the ugly Americans” when they tried to collect repayments from players who had been losers. Often the players would say, “I gave you your money back at the tables.” Then they would suggest that the casino’s request for repayment was an affront to their “manhood” and dignity. When the Cellinis went to court to collect the debts, they found judges who were quite reluctant to support the cause of the foreigners from the casino who were now seeking to “exploit” the local players. The casino’s solution was simple—let the locals borrow from each other. I questioned if this might represent casino support for loan sharking but was assured that the loan agents were respected local businessmen and that the casino had never heard of a complaint that their collection procedures were anything but fair.
The Jaragua Casino of Santo Domingo loaned chips to players directly. They had two sets of chips, however. The set of chips that were loaned to players had white stripes across them. The casino manager told me that they had had problems with players borrowing funds to gamble and then cashing in the chips and not repaying the loans on time. Credit players could only win striped chips. The players could not cash these until their debts were fully paid.
Gambling credit and indebtedness pose many issues for the gambling industry. There are simple business decisions, such as: Can the person borrowing money from the establishment be trusted to pay it back? There are also legal questions. For instance, can an establishment go to court to force repayment of a gambling debt? Moral issues confront the industry when casinos may offer loans to players who are not in control of their play (e.g., compulsive gamblers). Other questions concern the use of credit card machines and automated teller machines (ATMs) in gambling places. There is also concern expressed in gambling jurisdictions about the presence of “loan sharks” representing organized crime interests.
Without credit, many large gambling casinos would not be able to sustain ample profits to support their operations in a viable manner. Perhaps half of the table play at Las Vegas Strip casinos is credit play. High rollers appreciate being able to set up accounts with casinos upon which they can draw and also be able to draw upon credit allotments as well. As with the credit card machines or an ATM, this ability permits the player to come to the casino without having to carry large sums of money. Also, winnings can be placed back into accounts instead of being converted into cash that would have to be carried out of the casino on one’s person. This latter situation remains a major problem for casino ATMs, as they allow only withdrawals but no deposits.
By establishing accounts with a casino, a high roller can begin to establish a record of play activity. This enables the casino to award the good player with complimentaries such as free transportation (air flights), free hotel rooms, meals, beverages, and show tickets. Additionally, by engaging in straight credit play, the player and the casino can avoid the necessity of reporting large cash transactions as required by the Bank Secrecy Act of 1970. This may give the player an added sense of anonymity.
In jurisdictions where gambling credit is permitted (as in Nevada and New Jersey), there are usually detailed rules surrounding the loans. In Nevada, regulations require casinos to check the credit history of players seeking loans. They must also look at the previous loans given to the player to be assured that they were repaid. They must also check with other casinos regarding the player’s activity. Casinos are required to check identifications when players cash checks. In actuality, the credit loan from the Nevada casino is like a bank counter check. The credit instrument is called a marker, and it contains information about player bank account numbers and authorizes loan repayments for the accounts. It also acknowledges that the loan was made entirely within the state of Nevada and that the player is willing to be sued in courts, including Nevada courts, for repayment if necessary. The player also agrees to pay the cost of collection.
“In the old days”, casinos may have resorted to ugly tactics to retrieve money owed by players. Nowadays such tactics as threatened physical harm or embarrassments bordering on blackmail are hardly ever used. If they were used and discovered, casinos would be severely disciplined. Most players truly want to replay loans. One major consideration many have is that they will not be able to return to the casino to play again with VIP (very important person) treatment unless they repay the loans. If they are temporarily without sufficient funds, casinos will give them a “long leash” – that is, adequate time to get the necessary resources. Casinos will also discount loan amounts to ensure quick repayment.
Discounts may be as much as 25 percent of the value of the loan. Of course, the casino would have a record that the debtor actually lost the money while playing in the casino. Casino loans that are repaid in a reasonable time do not carry any interest. This factor distinguishes the casino loans from those received from loan sharks. Typically, the loan shark requires a repayment with 10 percent interest per week. If the person cannot make the total repayment, then only the 10 percent is accepted (that is mandatory), and the full loan plus the 10 percent interest carries over until the next week. Casinos in Nevada may use collection agencies that are bonded and licensed; in New Jersey, casino organizations do all the collection activities themselves.
The casinos must make a bona fide effort to collect all debts. Otherwise, they will be assessed taxes as if they had collected the debt in full. New Jersey limits the amount of “bad debt” that can be deducted from their casino win for taxation purposes.
Most North American jurisdictions follow the edict of the Statute of Anne (1710), which became part of the common law of England. The statute holds that debts incurred because of gambling represent contracts that are unenforceable by courts of the realm. Before 1983, Nevada also followed the Statute of Anne. As the Nevada law would apply anywhere as long as it pertained to a Nevada debt, the casinos could not collect debts from out of state, even if the debtor’s state permitted collection of gambling debts through the courts. In 1982, a federal tax court ruled that uncollected Nevada debts could no longer be subtracted from casino wins for tax purposes. Although the decision was overruled by other courts, Nevada was stimulated into action for change. Also, with the advent of New Jersey casinos and the fact that New Jersey courts allowed collection of gambling debts, Nevada casinos found themselves at a disadvantage. Players with debts in both states were paying off the New Jersey debts and ignoring the Nevada debts when they did not have sufficient funds to cover both. In 1983, Nevada repealed the Statute of Anne, and now gambling debts may be collected through courts in Nevada as well as New Jersey.
Even with the Statute of Anne repealed, both states found that other states’ courts would still refuse to order repayment of the loans. Hence, casino operators in Nevada and New Jersey have adopted another method for collection. In Nevada, casinos take their cases only to Nevada courts. There, the facts support them; the courts give judgments in favor of the casino against the debtors. The court ruling is then entered into the courts of the debtor’s home state. Those courts then will issue orders supporting the Nevada court rulings and will not consider the gambling issue. Fortunately for the casinos, debt matters do not have to go to court very often.
A gambling debt is, in effect, the result of a contract between the casino and a player. When a player is taken to court to repay the debt, he or she may offer several defenses regarding the contract, perhaps making a case that the gambling activity in question is illegal. If proven, that would make the contract for a loan illegal and unenforceable. The gambling debtor may also claim that the debt is excessive and that the casino should not have allowed him or her to incur such a large debt. Puerto Rican courts have entertained such defenses and have actually reduced the amount of the debt they ordered to be repaid.
If the player is too young to gamble, age is a complete defense against compulsory repayment of the loan. In a reverse case, a nineteen-year-old was denied a $1-million jackpot he “won” at Caesars Palace in Las Vegas. Even though Caesars was in a sense indebted to the player to pay the amount, the casino did not do so. The gaming control board and the courts voided the casino’s obligation to pay the jackpot, because the player was too young to gamble.
Some have argued that the debts from gambling should not have to be repaid if the player was intoxicated. Courts have heard such cases, although they have not ruled in favor of such a debtor. A special defense heard in many cases today is that the player was a compulsive gambler. In such situations, the player must have proof that the casino knew of the compulsive condition prior to the debt. There have also been third-party suits from family members or victims of embezzlement seeking recovery of moneys gambled by compulsive gamblers. There have been some out-of-court settlements in these cases, but as of yet, no major decisions have disallowed collection of debt or given recovery because of compulsive gambling. Efforts continue, however, to bring such cases to court.
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