Almost The Law

#139 © Copyright 2009, all rights reserved worldwide. Gambling and the Law® is a registered trademark of Professor I Nelson Rose, www.GamblingAndTheLaw.com

Law school classes are conducted using the case method. Students are given edited versions of published court opinions and then questioned on what they deduce the law is. This produces lawyers with the mistaken belief that the first place to look when conducting legal research is reported cases. It also puts an overemphasis on federal constitutional issues.

Most executives in the gambling industries – casinos, parimutuel betting, lotteries, tribal and charity gaming – rarely see published court opinions. When it comes to legal issues, they are much more concerned with what their regulators have to say. If someone asks them what the law is on the subject, they usually pull out the published regulations.

Both of these approaches would have astounded the lawyers who created the government of the United States. They knew exactly what “law” is – it’s statutes passed by state legislators and Congress.

It is dangerous to forget that the final say on the law still means a bill that has been approved by a legislature and signed by the executive, governor or president. Overridden vetoes are rare.

Of course, there are exceptions. There are occasions when judges do rule statutes to be in violation of state or federal constitutions, but those are relatively rare. There are certainly a lot of regulations, but these have to be based on statutes, including the laws that give the regulators the power to make rules. There is judge-made case law, but these, too, can be overruled by statutes.

With a few important exceptions – Indian gaming, interstate horseracing and Internet gaming – it is state legislatures, not the federal government, who determine the most important issues involving legal gambling. Even when the state constitution requires a vote of the people on whether a form of gaming should be legal, it is the legislators who will decide what the industry actually looks like.

So, what are the big issues facing lawmakers in 2008? Looking at the bills that were introduced in state legislatures over the years shows us not only what is being proposed, but what actually becomes law.

At first reading, it appears that almost every state is looking at expanding legal gaming. Hawaii and Utah are the only states with no commercial gambling. The Hawaii Legislature has had so many proposals to legalize gambling that it passed a Resolution ten years ago declaring a moratorium prohibiting any new gaming proposals. That’s now gone. Yet, in Hawaii, as in every state, almost all expansion bills still can’t get out of committee.

The anti-gambling crusaders sometimes use statistics to argue that the tidal wave of legal gaming has crested and is beginning to recede.

They’re absolutely wrong.

Although 19 out of 20 proposals to expand permitted wagering fail in state legislatures, one occasionally does pass and is signed into law. These also inevitably lead to more proposals for expansion, never reduction.

States start with legalizing charity bingo and licensing horseracing. There still are a few that don’t have state lotteries. But the current trend is proposals for racinos. And once slot machines or video lottery terminals are introduced, there are always campaigns to expand with table games – campaigns that almost always fail… for a few years.

If the first laws place limits on the number of licenses, or locations, or stakes, bills will be introduced before the first casino opens to expand, never decrease, what is permitted.

The gaming industry has gained great political power in many states, but casinos and other operators still lose most of their battles. This is particularly true when they want restrictions relaxed, such as being able to operate longer hours or higher stake games. And forget about getting tax rates reduced, unless there have been a few high-publicity bankruptcies.

Money is at the heart of most bills introduced that would affect gaming. Bills to change how funds are distributed, such as the Connecticut proposals to have more Mashantucket Pequot and Mohegan Fund revenues go to cities impacted by these casinos, almost always die. In fact, the failure of almost every bill having anything directly to do with gaming and money, except raising taxes, shows how important it is to make sure everything is done right when legal gambling is first introduced into a state.

Casinos are especially politically weak when confronted with widespread social movements. Business executives, even the most socially-conscious, do not want the government telling them how they have to run their businesses. It might be the right thing to do, it might even, eventually, increase revenue. But, having legislators mandate such things as smoke-free gaming rooms is more than annoying. It can be scary. This is especially true when there are direct competitors, such as tribal casinos, that don’t have the same restrictions. There were no celebrations in Black Hawk, Cripple Creek and Central City when the Colorado bill repealing the casino exemption from the “Colorado Clean Indoor Air Act” was signed into law.

Every proposal to bring in legal gaming now includes provisions to help problem gamblers. The movement is so widespread that legislators are regularly calling for more and more protections, such as the proposed regulation in California of the location of casino ATMs.

Even with their significant impact on state and especially local economies, and the general acceptance of gaming by a majority of the population, casinos are still viewed as slightly immoral deep pockets. So, bills to exempt businesses from burdensome taxes, in states like Colorado, Indiana, Kansas and Nebraska, or to preserve historic buildings in Montana, expressly exclude casinos from the benefits of the new laws.

Speaking of money, one Connecticut representative introduced a bill that could create a national nightmare for casinos: to tax out-of-state visitors on all they have won at casinos in the state. Casino executives claim, probably correctly, that they do not know if patrons bought in for $1,000 or $10,000 when they cash out $5,000 in chips. Very few players, other than big winners at Keno, Bingo and slot machines, now have to fill out the form W-2G “Certain Gambling Winnings” required by the IRS.

Attempts at social engineering continue. Harking back to the days when New Jersey first accepted gaming to revitalize Atlantic City, some Florida lawmakers wanted to require that casinos have hotels with at least 250 rooms.

States are ramping up their competition for the gaming dollar. This usually means proposals for expansion of legal gambling. But Tom Burch, a Kentucky Representative, made the point by introducing a resolution that the Commonwealth send a submarine to sink any Indiana riverboat casino that strayed onto the Kentucky side of the Ohio River.

The most important message of all proposed legislation is that once the door is opened a crack, there is incredible political pressure to swing it wide. The growth of legal gaming is not only coming from casinos being introduced into Kansas and racinos into Delaware. It is coming from such established states as Louisiana, with its one commercial and three Indian casinos on land and a limit of 15 on riverboats. Senate Concurrent Resolution no. 119, enrolled into law this summer calls for “a joint committee to study and make recommendations regarding the effects of the state of Mississippi’s decision to land-base its casinos.” In case anyone doesn’t know what the recommendations will be, the Resolution contains this “Whereas:” “a study is necessary for the state to determine whether a move to limited inland gaming would also lead to increased economic development in this state…”

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© Copyright 2009. Professor I Nelson Rose is recognized as one of the world’s leading experts on gambling law. His latest books, Internet Gaming Law (2nd Edition was just published) and Gaming Law: Cases and Materials, are available through his website, www.GamblingAndTheLaw.com.