New Jersey’s Credit Card Mistake

written by I. Nelson Rose

The New Jersey Casino Control Commission has just adopted a new rule that will allow casinos to accept credit and debit cards for the purchase of chips and slot tokens — at gaming tables!

Casinos in Nevada and elsewhere often have machines, usually near cashiers’ cages, to give players cash advances on their credit cards; the cash can then be used to buy chips.

But no other state allows players to buy slot tokens and chips directly at the table with credit cards.

The timing of this new rule could not have been worse.  The casino industry is entering the fight of its life:  The regulation was filed on August 23, 1996, three weeks after President Clinton signed the bill establishing the new National Gambling Impact Study Commission.

The specter of compulsive gambling has been haunting legalized gambling for decades, but has become a major issue with the explosive growth of riverboat and mountaintop casinos over the last five years.  Unlike tobacco executives, casino industry leaders, spearheaded by the American Gaming Association (“AGA”), have acknowledged that their product can be harmful.  Their approach has been to promote responsible gaming.

The new rule invites the kind of criticism expressed in an article run in the August 26, 1996, Wall Street Journal, entitled “Gamblers Take Easy Money in Casinos Without Leaving Their Seats or Slots”:  “A losing streak clean you out at the blackjack table?  Don’t walk away.  At casinos here, you’ll soon be able to whip out a credit or ATM card and buy more chips without leaving the table.”

For the short-term, the impact of the new rule will probably be minimal, because procedures for delivering chips for credit cards are so time-consuming.  But once systems are simplified, buying chips with a card will eliminate the cooling-off period that now exists when a patron has lost all he had.  And while a debit card can “only” wipe out gamblers’ checking accounts, credit cards can destroy their lives.

The wisdom of the regulation was raised at the recent International Association of Gaming Attorneys conference in Monte Carlo.  The session’s moderator, Bud Hicks, one of Nevada’s most experienced gaming lawyers, asked whether this new rule shows the casino industry has a tendency “to shoot itself in the foot.”

Mickey Brown, President and CEO of Foxwoods, replied, “I strongly resisted” the number of times this proposal was presented to that tribal casino.  He added, “The use of credit cards is a national illness.”  For casinos, table credit card play would be “digging our own grave.”

The other panelist, AGA President Frank Fahrenkoph, described the public relations problem.  “An estimated 10 million are already addicted to the use of credit cards,” he said.  This new rule has “taken two problem areas and lumped them together.”

The regulations itself is of questionable legality.  A court could decide that the Commission did not have the legal power to make this broad change in the state’s laws.

The Casino Control Act lays out procedures for the extension of credit in great detail.  Only the New Jersey Legislature and Governor have the power to change the Act.

They did amend the Act in 1993 to permit the Commission to authorize casino patrons to obtain chips by credit card.  But they never changed the statute’s conflicting language that all credit be in the form of written checks that are deposited or redeemed.  The Legislature certainly never expressly voted to broaden the extension of casino credit to include the use of credit cards at blackjack and craps tables.

This would be a major change in public policy.  As the New Jersey Superior Court wrote in a 1988 decision, “Prior to the passage of the act, there was strong resistance to allowing credit to patrons at all.”  A compromise was reached, requiring that all casino credit be markers and all transactions be conducted “within the well-fortified and highly monitored confines of the cashiers’ cage.”

In 1981, the Court refused to allow a casino to recover $1,500 in credit extended to a player, because the casino had not complied with the “strict conditions for advancing credit.”  The Court, citing a report from the Governor’s Staff Policy Group on Casino Gambling, declared “ready, unlimited credit can have a ‘pernicious effect’ upon the compulsive or imprudent player.”

Limiting the means and places where chips can be bought on credit helps prevents skimming and fraud.  Most importantly, it makes it difficult for a losing gambler to go out of control in a single session.

The argument has been made that compulsive gamblers will always find ways to get the money to bet.  That may be true, but getting a loan takes time and effort.

Envision someone with five credit cards, each with a $10,000 line of credit.  In New Jersey, that player will be able to run card after card to its limit, losing $50,000 in a single session, without a question being asked.

Could that same player have borrowed $50,000 in cash?  Probably, given sufficient time and motivation.

But imagine telling a bank loan officer that you need $50,000 to gamble in an Atlantic City casino.


©Copyright 1996 by I. Nelson Rose, [].  All rights reserved worldwide.  Gambling and the Law® is a registered trademark of Professor I. Nelson Rose.

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