#2009-14 © Copyright 2009, all rights reserved worldwide. Gambling and the Law® is a registered trademark of Professor I. Nelson Rose, www.GamblingAndTheLaw.com
Champion poker player Lyle Berman made a last minute bet on whether Ohio voters would approve casinos that will earn his company hundreds of millions of dollars.
The poker world knows Berman as the winner of three World Series of Poker bracelets and co-founder of its rival, the World Poker Tour. But investors and the casino industry connect his name with Grand Casinos, PokerTek and Lakes Entertainment. It was as chairman of Lakes Entertainment, Inc., (trading symbol LACO) that Berman made a move that looks more like an expert poker bet than a conventional investment.
On October 29, 2009, just five days before the election, Berman agreed to fund 10% of the campaign to bring casinos to Ohio. That will probably end up costing about $4 million. In return, LACO now has the right to 10% of the profits of the four casinos that will be built in Columbus, Toledo, Cincinnati and Cleveland.
What will that be worth? Two of the casinos will be built by Penn National Gaming (PENN), which has already announced that it will spend far more than the minimum $250 million per casino the new law requires.
Naturally, the stock in PENN took a big jump on the Wednesday after the election. But so did the stock price of LACO on Thursday, once it sunk in that LACO would have 10% of four of the very few casinos in major American cities.
Berman’s bet was far from a sure thing.
Prior to 1996, there had never been a successful statewide election to bring in high-stakes casinos in the face of active opposition. The Nevada Legislature legalized casinos in 1931, without a vote of the people.
In fact, prior to 1996, high-stakes casinos had won only one statewide election. That was in 1976 in New Jersey, and it was not really a contest. The opposition were so over-confident, having defeated casinos at the polls by 60% only two years earlier, that they ran no campaign against the Atlantic City proposal: Committees opposing casinos took in only $23,230 and did not even spend it all! Proponents spent $1,330,615.
The few times voters approved amending their state constitutions were proposals for low-stakes, isolated casinos. Colorado and South Dakota voters approved $5 maximum blackjack and slots and Missouri voters accepted riverboats with $500 loss limits.
Ohio voters had defeated casino proposals four times before. The last time was just a year earlier, when Berman and LACO had spent millions trying to win the right to open and own a single monopoly casino. In that campaign, PENN spent millions to fight the proposal, which threatened its nearby racinos.
The 2008 campaign was so acrimonious, it resulted in lawsuits. Berman alleged PENN had defamed him personally by misrepresenting his involvement in the1996 bankruptcy of a Las Vegas casino. He went so far as to publicly question whether PENN met the ethical standards to hold a casino license. PENN, naturally, filed counterclaims against Berman and his partners of defamation, libel, slander, deceptive trade practices, false advertising and abuse of legal process.
But times are indeed changing. Now Berman’s LACO and PENN are partners.
In November 1996, voters in both Michigan and Arizona approved bringing in high-stakes casinos, despite opposition from governors and other politically powerful players. Other states, like Florida, have followed.
People want jobs, and they no longer consider legal gambling as something sinful that has to be isolated on a mountaintop or surrounded by holy water.
Like a skilled poker player, Berman read the public’s tells. And he didn’t let his losing bet in 2008 put him on tilt.
© Copyright 2009. Professor I. Nelson Rose is recognized as one of the world’s leading authorities on gambling law and is a consultant and expert witness for players, governments and industry. His latest books, Internet Gaming Law (2nd edition just published), Blackjack and the Law and Gaming Law: Cases and Materials, are available through his website, www.GamblingAndTheLaw.com.