Viva ManchVegas!

Gambling is big business. Commercial casinos grossed $34.6 billion in 2010. Native American casinos brought in $26.5 billion. These entertainment businesses cater to travelers, and are only now recovering to their 2007 highs as recreational gamblers cut back.

State lotteries, serving the “desperation market”, brought in about 25 billion in 2007. According to Bloomberg their revenues have boomed as the Great Recession swells the ranks of the long-term unemployed. State lotteries provide about 2.4 percent of all state government revenues nationwide. Unfortunately, statistics show that this money comes disproportionately from the poorest people. The per-capita lottery capital of the US is inner-city Washington DC. I’m sure it’s purely a coincidence that DC also spends the most per capita on its dysfunctional public schools… or maybe not.

Online gambling revenue was around 30 billion worldwide in 2010. Of course, this money mostly went to the 85 nations that have legalized online gambling, not to businesses in the United States. In fact, in 2011 our Department of Justice devoted major efforts to chasing the online poker business out of the United States. Now, thanks to the inherent censorship-resistance of the Internet, Americans can still play poker online. We just can’t make money off it… unless we invest in stocks of online gaming companies, which is perfectly legal.

Speaking of investing, the line between gambling and investing is pretty arbitrary. Most mutual fund “investors” are actually gamblers. Even though they know that most managed mutual funds return less than index funds after fees, they compulsively risk their retirement money in a vain hope to overcome statistics. So you may have more in common with that statistics-challenged ludomanic lottery-ticket buyer than you think.

Another overlapping area is insurance. In theory insurance is “reverse gambling”, where we try to reduce uncertainty instead of increase it. In practice insurance can be overused as well as any other wager… many people are overinsured, and of course the “house always wins” in insurance as well.

Laws against “gambling” even limit our access to insurance. For instance, let’s say you want to hedge against a catastrophic political event: the election of Newt Gingrich. You can’t do it in the US; you have to use Intrade in Dublin, Ireland. (Don’t worry, though; even if Newt somehow overcomes his failure to file in some states’ primaries and sign up delegates in other states, as soon as the ceremony is over he’ll leave us for a younger, prettier country.)

Gambling prohibition laws work like any other victimless crime laws. They create politically favored power groups, otherwise known as organized crime (or “Congress”, for short). Like alcohol prohibition, anti-gambling laws create an economic deadweight loss; gamblers will gamble, and if they have to do it illegally it will cost them more and be more dangerous.

Like other prohibition laws, it is unclear where the Federal Constitution grants any power to use Federal troops against poker players. However, we’re more likely to see progress first at the state level.

Keeping (Some Of) Our Gambling Money at Home

New Hampshire’s state legislators have been trying to reduce the level of “prohibition damage” to the NH economy. Representative Steve Vallaincourt recently reported the following:

As the New Hampshire House committee on Constitutional Review and Statutory Recodification began the process of determining whether a gambling bill before it is in fact constitutional, one fact became clear...

            The Gatsas plan, which I adopted under the moniker “Your Honorable Plan for Expanded Gambling” in the spring of 2010 and brought forward again today, may in fact be the only plan which passes Constitutional muster.

            That’s because the plan currently before the committee, the one which passed Ways and Means earlier this year but never came to a House vote (because Speaker O’Brien knew his committee would be overturned on the House floor) most likely creates monopolies which violate Section 83 of the state Constitution.

            The Gatsas plan avoids that problem because the state maintains control of the facilities and merely shares space (and revenues) with vendors.  As Rep Seth Cohn, R-Canterbury, pointed out, it’s like the EZ pass program.  The state does not provide a monopoly to the EZ pass provider; it merely chooses a vendor.

            The Gatsas plan, as modified in the Your Honorable Plan, also is less likely to be ruled a monopoly since it creates six facilities, all to be chosen on the basis of sealed bids.  Unlike the plan passed by Ways and Means which calls for a $50 million payment each of for two licenses, the Your Honorable Plan calls for four vendors of 500 machines at a minimum of $10 million and two vendors with 1000 machines at a minimum $20 million.

            Another benefit of the Gatsas/Vaillancourt plan is that the state keeps 60 percent of the profits whereas it gets only 40 percent in the Ways and Means plan.

Representative Vallaincourt is a decent fellow, and is serious about helping both the gambling consumer and the state budget. However, any plan that grants a… oh right, “not a monopoly, just a limited right to use state-controlled facilities”… is taking us right back to Boardwalk Empire.

There is a simpler and more sound solution. Just recognize the basic human right of New Hampshire citizens to our own property. It’s not the business of the New Hampshire General Court whether I bet my tennis partner five bucks on a match, or whether I gamble my family’s future that Gingrich will lose the Republican nomination and our nation will survive. It’s a contract like any other contract, and there is no need for a state bureaucracy to take away my right to contract.

In 2010, the NH state legislature took all our sharp-object laws and just threw them out. Did we suffer a rash of drive-by spearings and swordfights? No, all that happened was that our volunteer firefighters could carry their assisted-opening seatbelt cutters without violating some two-century-old anti-dirk law (undoubtedly passed to control those Scotsmen, you know what they’re like after they’ve had a few… they’re almost as bad as volunteer firemen).

The same Gordian-knot approach would reduce our gambling problems, helping bring in taxpaying recreational businesses and reducing costs to consumers. After all, is it really helping sports gamblers to force them to fly to the least hospitable desert in the country just so they can place a bet? Is it really helping our economy to force all online gambling profits overseas? And isn’t it incredibly hypocritical to use the power of state government to aim toxic lottery gambling at the poorest of the poor, while driving recreational gambling-industry jobs out of state?

Just throw out all our obsolete 18th-century Puritan-witch-burner gambling laws, let our software entrepreneurs put online-poker website servers in the old mill buildings, and change the signs at the city limits of our biggest burg to say “ManchVegas” in neon.