A Barry Keene Law

#07-17 © Copyright 2008, all rights reserved worldwide. Gambling and the Law® is a registered trademark of Professor I Nelson Rose, www.GamblingAndTheLaw.com

One of my favorite stories of government incompetence is the Barry D. Keene scandal. Keene, one of Gov. Gray Davis’ cronies, signed a contract requiring California to overpay Oracle as much as $41 million for software that was not needed and never used. Keene’s excuse was that he was having problems with his second wife. As the Press-Democrat put it, he claimed “…he simply messed up by signing the Oracle contract on a bad-marriage day.”

So, if you are working for a government that is thinking about legalizing gaming, the following advice should help you to avoid becoming a laughingstock like Barry Keene:

1) Don’t pretend you are not legalizing gambling. Riverboat casinos were sold to Missouri’s voters in 1993 as merely cruising. The casinos were eventually able to win the right to move onto land. But the law still requires them to float, resulting in boats in moats. They have to be “on the river,” so one casino was fined for filling its moat with tap water. And Missouri law still requires mythical cruises, with gamblers having to pay a $2 admission fee every two hours for non-existent excursions.

2) Build it, and they still will not come, if they can’t get there. Russia’s new law allows casinos in only four zones. One of those areas is so remote and rugged that it can’t even be reached by four-wheel drive – you need a tractor to get there. Another is in Siberia, 5,500 miles from Moscow.

3) Don’t expect federal law to be rational. Nevada T.V. and radio broadcasters cannot advertise the California Lottery, because federal law does not want the good citizens of Nevada to hear about the evil California gambling.

4) Don’t lay new casino gaming legislation on top of existing laws. When Hurricane Rita hit Fair Grounds Race Course, the Louisiana Racing Board ruled that the scheduled horseraces could be conducted at other tracks. The Fair Grounds’ slot machine facilities were not badly damaged. But the racino statute allowed slot machines only if races were being conducted at the track. There was no “act of God” clause, allowing the racino to stay open when the track had to be closed.

5) Understand that monopolies are wonderful – for the owners and taxing authorities – but they don’t last. Resorts International opened the only legal casino on the East Coast in 1978 at a total cost of $45.2 million. In its first year, Resorts had gross revenue of $224.6 million. But the thirteenth casino in Atlantic City, the Taj Mahal, opened in 1990 at a cost of $1.2 billion. It declared bankruptcy 16 months later, joining many others, including Resorts International.

6) Don’t get greedy. Every government that has legalized casinos has later raised the gaming tax or imposed additional fees. The worst, in the U.S., was Illinois, which raised the top tax rate to 70%. Not only does this kill investment, it sometimes leads to more devastating results. The Colorado Gaming Control Commission raised the tax from on October 1, 1992, just in time for winter. Storms and those taxes forced one-third of the casinos out of business.

7) Don’t write detailed requirements into statutes, which can tie regulators’ hands if situations change. Missouri legislators wrote a law forbidding any riverboat casino patron from losing more than $500. A Barry Keene law, if there ever was one: The only way to strictly enforce this is to throw everyone who loses $500 overboard. The industry, patrons and regulators have tried for years to get rid of this silly restriction, but they can’t, because it is literally written into law.

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© Copyright 2008. Professor I Nelson Rose is recognized as one of the world’s leading experts on gambling law. His latest books, Internet Gaming Law and Gaming Law: Cases and Materials, are available through his website, www.GamblingAndTheLaw.com.