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Sports betting at SCOTUS

A case you might want to watch.

Internet gambling in the United States has been limited to just three states since it began in 2013, but it could soon get a big boost from an unlikely source: the U.S. Supreme Court.

Some gambling industry officials, regulators and analysts think that a favorable ruling by the high court in New Jersey’s challenge to legalize sports betting could also lead to an expansion of internet gambling.

“If we win sports wagering, online gaming will go to every state that adopts sports betting,” said David Rebuck, director of the New Jersey Division of Gaming Enforcement, who predicts a favorable sports betting ruling could help internet gambling “explode” across the nation. “As soon as sports wagering is legalized, online gambling will follow right behind it.”

The Supreme Court will hear arguments in New Jersey’s case on Dec. 4; a ruling could be weeks or months away. The state is taking aim at a 1992 law that forbids state-authorized sports gambling in all but four states that met a 1991 deadline to legalize it: Delaware, Montana, Nevada and Oregon. Nevada is the only state to allow single-game wagering.

The sports leagues oppose the lawsuit, arguing that legalized sports betting could taint the public’s perception of the integrity of their games.


Experts think that the sports betting legislative push would likely help expand internet gambling. David Schwartz, who runs the Center for Gaming Research at the University of Las Vegas-Nevada, says that offering online casino games and sports betting would go hand-in-hand online.

“It makes a lot of sense to offer sports betting over the internet,” he said. “Once you have the systems for letting people bet on sports in place, it isn’t a huge step to permit them to bet on casino games or poker as well.”

The law in question is the Professional and Amateur Sports Protection Act (PASPA). Texas doesn’t have a direct stake in this, just the same potential to allow online sports gambling if it wanted to if the plaintiffs succeed, but it does have a position, in favor of overturning PASPA.

Texas joined an amicus brief siding with New Jersey in favor of overturning the federal law, arguing that sports betting should be up to the states and not the federal government.

Attorney General Ken Paxton signed on to the brief, not to legalize sports betting, but to keep the federal government out of state decisions.

“PASPA is unconstitutional and tramples on state sovereignty,” Paxton told the American Sports Betting Coalition. “By ending PASPA, states can rightfully decide whether they want regulated sports betting or not.”

That means Paxton is on the opposite side of the debate from the White House. The U.S. solicitor general’s office has sided with the sports leagues and will join them for the court’s oral arguments Dec. 4.

But Paxton hasn’t shown any signs of wanting sports betting to be legal in the Lone Star State. In fact, the attorney general has been at odds with daily fantasy sports sites for years.

In 2016, Paxton issued an opinion that deemed paid fantasy sports sites to be illegal gambling.

If SCOTUS sides with the state of New Jersey and throws out PASPA, it would not change the debate about expanded gambling in Texas, but it would raise the stakes as there would be more things we could expand it to include. I could imagine there being more pressure on the Lege to take it up, but that doesn’t mean it would be any more successful than previous efforts. Like I said, worth keeping an eye on.

State sues Alabama-Coushatta tribe over casino

Here we go again.

A new legal salvo was fired this week in the state’s long-running battle against Indian gambling with a filing in federal court that seeks to close the gaming hall on the Alabama-Coushatta Reservation.

A motion for contempt and injunctive relief was filed Monday by Attorney General Ken Paxton, claiming that the Naskila Entertainment Center, which has offered electronic bingo since reopening in May, violates an existing court injunction.

It asks that the small East Texas tribe be ordered to halt the gaming operation, remove all gaming equipment and pay a civil penalty of $10,000 a day from June 2 until all gaming ceases.

On Tuesday, the log cabin-style hall on the 10,000-acre reservation in the Piney Woods east of Livingston was still open to the gaming public.

“We definitely think we’re in the right. The federal government and the National Indian Gaming Commission gave us the authority, so we think we’re on good legal grounds,” said tribal spokesman Carlos Bullock after conferring Tuesday with members of the tribal council.


The legal landscape for the Tigua and Alabama-Coushatta appeared to improve last year when both the Interior Department and the NIGC issued administrative opinions that the two small tribes could offer certain types of gaming.

But earlier this year, the state won a marathon legal battle with the Tigua when a federal judge in El Paso ruled that the tribe’s entertainment center was really a thinly disguised gambling hall.

The Tigua now plan on offering permitted bingo-hall-style games that are legal in Texas.

In ordering the Tigua to cease offering “sweepstakes,” U.S. District Judge Kathleen Cardone also ruled that federal case law, which prohibited the gaming, trumped the opinions of the two federal agencies.

See here, here, and here for some background. This action by the state was completely expected, given past litigation and the noises the AG’s office had been making since the casino reopened. Both the Alabama-Coushatta and the Tigua tribes had tried again with their casinos under new administrative guidelines from the National Indian Gaming Commission, but the subsequent loss in court by the Tigua does not bode well for the Alabama-Coushatta. We’ll see how it goes.

Alabama-Coushatta casino opens

Get your gamble on, y’all.

Fourteen years after it was forced to close under threat of legal action by the state, the tribe’s modest casino reopened three weeks ago with little fanfare but great expectations.

Now, the vast, once empty parking lot outside the Naskila Entertainmnet Center is packed with cars by noon, as gamblers from around East Texas roll in to play electronic bingo under a vaulted ceiling of knotty pine.

The 365 blinking, beeping machines, with names like Gecko Wild, Moo La La and Double Hotness, draw players long starved for local gaming, and thus far, the reviews – even by folks losing money – are five-star.


More than 240 Indian tribes around the country offer certain types of gambling under the oversight of the National Indian Gaming Commission. In Texas, only the Kickapoo in Eagle Pass have done so without a legal challenge from the state.

The crucial breakthrough came late last year, when two federal agencies ruled that national Indian law superseded Texas’ authority to block either the Alabama-Coushatta in East Texas and the Tigua in El Paso from offering gaming.

Almost three decades earlier, the two small tribes had agreed to accept a ban on gaming as a condition of becoming federally recognized tribes. The Kickapoo received recognition without this condition and have offered gambling since 1996. They now have 3,200 machines in a large modern casino-hotel complex.

The state had sued the Tigua and the Alabama-Coushatta, forcing each to close its casino in 2002. While the Tigua have been in near constant litigation since, the Alabama-Coushatta adopted a less confrontational posture.

When both the U.S. Department of the Interior and the NIGC decided late last year that both have the right to offer Class II gaming, including bingo, electronic bingo and certain card games, the Alabama-Coushatta were quick to act.

What if anything the state now intends to do remains unclear. A spokesman for Attorney General Ken Paxton last week declined to comment on the issue.

See here and here for some background. Past statements from the AG’s office have suggested that they do intend to do something about this. It’s not like they have a great deal of respect for federal laws, after all. So if you want to sample the fare at the new Alabama-Coushatta casino, I’d advise doing it sooner rather than later.

Paxton opines against daily fantasy sports sites

I feel confident saying this will be tested in court.

While placing bets on fantasy sports sites might involve skill, there is still an element of chance that equates such leagues with illegal gambling in Texas, Attorney General Ken Paxton said in a nonbinding opinion released Tuesday.

The “odds are favorable that a court would conclude that participation in paid daily fantasy sports leagues constitutes illegal gambling,” Paxton said in the nine-page opinion. But “participation in traditional fantasy sport leagues that occurs in a private place where no person receives any economic benefit other than personal winnings and the risks of winning or losing are the same for all participants does not involve illegal gambling.”

In November, state Rep. Myra Crownover, R-Denton, asked the attorney general to weigh in on whether fantasy sports sites such as and were legal in Texas. The request came days after New York’s attorney general declared such sites to be illegal gambling.


In a statement Tuesday, Crownover said she requested the opinion to clarify the law on fantasy sports sites. “It is our responsibility to try to make sure no business is profiting from illegal activity in Texas.”

As you might imagine, the sites were none too happy about this.

Daily fantasy sports site DraftKings said it intended to keep operating in Texas, disagreeing with Paxton’s interpretation of the law and his description of how the games work.

“The Texas Legislature has expressly authorized games of skill, and daily fantasy sports are a game of skill,” said a statement by Randy Mastro, counsel to DraftKings.

“The Attorney General’s prediction is predicated on a fundamental misunderstanding of [daily fantasy sports]. We intend to continue to operate openly and transparently in Texas, so that the millions of Texans who are fantasy sports fans can continue to enjoy the contests they love,” said Mastro, who disputed the description of an entry fee as a cut.


Dallas Mavericks owner Mark Cuban has invested in Fantasy Labs Inc., a platform of proprietary daily fantasy sports data, tools and analytics. He slammed Paxton’s legal opinion on Twitter, calling it “a disappointment.”

“You certainly don’t represent the views of Texans,” tweeted Cuban, who is due to keynote the Fantasy Sports Trade Association’s Winter Conference in Dallas on Wednesday.

Paxton’s opinion came despite a flood of emails to his office supporting the games. His office received 18,429 emails and 339 calls, the majority of them in favor of the games, a spokeswoman said Tuesday.

I would agree that there is skill involved in playing fantasy sports, at least if one wants to be any good at it, but one could also argue there’s skill involved in horse racing or playing blackjack. There’s obviously a big element of luck involved as well, so where does one draw the distinction? I have zero interest in these daily fantasy game sites, so I’m not qualified to say where that line is, but it’s clearly subjective. I look forward to the inevitable lawsuit.

One more point of interest, from the DMN last week.

When news broke that Texas lottery officials were looking into fantasy sports and casino games in other states late last year, the lottery agency said its exploratory trips were no big deal. Just a fact-finding mission to gather information for lawmakers, a spokeswoman said.

What the agency didn’t say was that for months, Texas Lottery Commission Executive Director Gary Grief had been aggressively working to get in on the billions of dollars flowing into fantasy sports. His efforts came as the games became the focus of legal questions around the country — and despite conservative state leaders’ long-standing aversion to any expansion of gambling here.

More than 400 pages of emails, obtained by The Dallas Morning News under Texas public records laws, directly contradict the agency’s contention that it was only considering traditional lottery draw and scratch-off games. The records include discussions with fantasy sports lobbyists and show that Grief wanted a contract with DraftKings, one of two companies at the center of a national controversy over the games.

He prodded his staff to quickly nail down a plan to get Texas in on the action. And when an insider betting scandal erupted in the industry, Grief embarked on a plan to bring the games — which some consider an illegal form of gambling — under the lottery commission’s umbrella.

Winston Krause, chairman of the five-member Lottery Commission, said that Grief explored the issue at the behest of a lawmaker whose name he couldn’t recall. When Gov. Greg Abbott learned from a News report that Grief and agency staffers had traveled to Delaware to investigate its sports betting operations, he ordered the commission to end its dalliance. Suddenly, Krause said, the lawmaker lost interest.

“The bottom line is, no one in that organization wants to expand the footprint of gambling in Texas. Nobody,” Krause said.

Lottery Commission spokeswoman Kelly Cripe declined repeatedly to elaborate. Grief, in a written statement, said the agency has stopped its efforts. He declined multiple requests for an interview, and the agency has challenged The News’ requests for additional documents on the matter.

Nothing at all curious about that. Who can keep track of all these legislators, anyway? Read the whole thing. This was separate from the request for Paxton’s opinion, but it’s definitely relevant. ESPN, Trail Blazers, Texas Monthly, and the Press have more.

The forthcoming fight over the Alabama-Coushatta casino in Texas

I missed this report from November.

After more than 13 years, the feds say the Alabama-Coushatta’s casino in Livingston can finally reopen. And here’s the kicker: according to the federal government’s reasoning, the tribe’s casino should never have been forced to close in the first place.


Recently, the tribe asked the Department of Interior and National Indian Gaming Association to clarify their legal standing, gambling-wise. In October, the Interior Department and the National Indian Gaming Commission decided that the Alabama-Coushatta (along with the Tigua, a tribe located on a reservation near El Paso) do actually have the right to offer bingo and electronic bingo on the reservation, meaning the Alabama-Coushatta will soon be open for business.

The Interior Department warned both the Alabama-Coushatta and the Tigua to be careful and line everything up with the National Indian Gaming Commission, considering the state isn’t likely to be happy with this development. Bullock says they’re intent on doing everything by the book. “The state hasn’t responded to us yet. I can’t say what their position is. I can’t anticipate what they’ll do, and we’re not going to. We’re going to do what the federal government allows us to do and that’s all.”

At the end of the day, the casino re-opening will be a game-changer for the people living on the reservation. There’s no firm opening date, Bullock says. The casino has been standing empty and acting as a sort of community center for more than a decade, but the tribe has already voted unanimously to pull money out of their permanent funds to get the casino ready.

The story delves into the background of this longstanding battle, the tl;dr version of which is that the casino that was opened in 2001 was shut down in 2002 thanks to the efforts of then-AG John Cornyn, with some court skirmishes and behind-the-scenes maneuvering since then. I’ve got a couple of posts on the more recent activity here and here; if you have a long memory and a morbid curiosity, see also here for one of the side attractions of the original fight, which went beyond Texas and demonstrated was an unscrupulous dirtbag Ralph Reed is.

So does this mean there’s casino gambling coming to Texas next year? I wouldn’t count on it just yet, because the state of Texas isn’t going to just let it happen. This story from last week explains (the lawsuit in question stems from the original fight).

Meanwhile, U.S. District Judge Kathleen Cardone issued an order requiring the Tiguas and other parties to the lawsuit to file their briefs on what the federal agency decision means.

On December 9 Paxton filed a brief on the Tiguas case — the tribe has been in a legal fight over the right to gamble for more than 20 years now — on the issue. Predictably he came down against it, contending that “no federal agency interpretation can contradict Congressional intent.”

The 26-page brief referenced 25 court cases and dug into eight “issues” that concerned the state, with most of the issues tugging at whether or not the National Indian Gaming Commission and the Department of the Interior had the right to even issue their opinion on gaming.

Paxton was pretty clear about what he thought:

“If Congress has explicitly left a gap for an agency to fill, there is an express delegation of authority to the agency to elucidate a specific provision of the statute … Here there is no gap. The only issues presented are legal issues for this court. Congress delegated no power or authority to either federal agency to interpret laws or invalidate portions of federal law.”

Outside of the brief Paxton has officially stayed silent on the question of the Alabama-Coushatta. “At this point, we will not be providing any comment,” Spokeswoman Teresa Farfan replied via email in response to our questions.

However, the Alabama-Coushatta come up twice in Paxton’s brief. The first mention comes right at the start:

“Should Texas be required to join the Alabama-Coushatta Tribe to this litigation … without any evidence that the Alabama-Coushatta Tribe is currently violating the Restoration Act?”

Then, at the end of the brief he answers his own question:

“Since this litigation was filed to enjoin and hold accountable the Pueblo defendants for their continued violation of federal law embodied in the Restoration Act, there is no need to … add third-party tribes which, unlike the Pueblo defendants here, are not currently violating federal law.”

Translation: The Alabama-Coushatta aren’t currently violating the federal law so they won’t be in trouble with the state until they actually do something to violate the federal law, like, you know, maybe reopening their casino in 2016.

So yeah. I’d continue to make plans to visit Louisiana or Vegas to get my gamble on for the near future. The Alabama-Coushatta may eventually prevail, but if so it won’t be in 2016.

Sports betting

There may soon come a day when you can place a bet on your favorite team without having to travel, visit offshore Internet websites, or interact with people who don’t have necks.

[NBA Commissioner Adam] Silver, in a November op-ed submission to the New York Times, said he supports federal regulation creating “a safe and legal way to wager on professional sporting events. … Congress should adopt a federal framework that allows states to authorize betting on professional sports, subject to strict regulatory requirements and technological safeguards.”

[Rockets owner Les] Alexander prefers to let Silver take the lead on what he describes as “a league issue, not a team issue.” But as NBA owners and players travel to New York for All-Star Weekend, Alexander continues to believe it’s time to amend the Professional and Amateur Sports Protection Act, the 1992 law that generally prohibits states other than Nevada, Delaware, Montana and Oregon from authorizing sports betting.

“I think it’s long overdue,” Alexander said. “People are gambling now on sports teams and doing it through bookmakers, which is illegal. And they are going to do it anyway, so why not make it legal? It doesn’t hurt anybody. It’s not something that’s going to hurt people.”


According to the Nevada Gaming Control agency, bettors wagered $3.9 billion on sports in the state in 2014, with the state’s 187 sportsbooks winning $227.04 million. The American Gaming Association estimates $138.9 billion is wagered illegally on all sports annually in the United States, and it estimated recently that illegal bets placed on the Super Bowl would total $3.8 billion.

That doesn’t include millions wagered in what has become the legal and, in many cases, league-authorized industry of fantasy sports. The Fantasy Sports Trade Association estimates 41 million people spent $3.6 billion playing fantasy sports in 2014.

The fantasy sports trade group emphasizes on its website that fantasy sports are games of skill and are not gambling. Alexander, however, cited fantasy sports as an example of the move toward more liberal attitudes on sports gaming.

“There’s so much fantasy sports out there, which is a form of gambling, and that’s legal now,” he said. “It (legal gambling on games) is really not a step up. It’s a step in the same direction.”

While Silver advocates changes in federal law, the NBA joins the other major leagues in opposing unilateral moves by individual states toward legalized gambling on sports.

New Jersey Gov. Chris Christie last year signed a Sports Wagering Law that allows betting on games at New Jersey racetracks and casinos. The four major pro leagues and the NCAA filed a lawsuit in federal court, and a judge in Trenton, N.J., in November granted a temporary restraining order prohibiting tracks and casinos from taking bets on games. The state has appealed.

Accordingly, some analysts agree that even if the NFL and other leagues change their stance on gambling to match Silver’s approach, it could be as long as a decade, perhaps more, before the Texas Legislature will authorize sports gambling in Texas.

“Gaming is not a popular word here,” said Bill Miller, an Austin-based consultant and lobbyist who has worked with Alexander and the Rockets. “The prospects for gaming regulations this session are minimal. It’s not rosy at all.

“I don’t think it’s from moral outrage. I think it’s a matter of fear from new members that come from conservative (voter) bases.”

That’s true enough, but I think there’s more to it than that. If Commissioner Silver managed to get Congress to authorize any state to allow sports betting – and remember, the NFL and Major League Baseball are not on board with this – there would be two distinct groups in Texas working to get that business. One is the horse racing tracks, which have been trying to get the Lege to allow slot machines at their sites, and one is casino interests, who would push for casino gambling to be legalized. Those two groups compete against each other, so neither plan ever makes any advances. If they ever worked together towards a common goal, they might have better chances. That just hasn’t been the case, and so here we are. If I were a betting man, I’d bet the over on that “decade or more” line. I’d give marijuana legalization better odds of happening in that time frame.

Just a reminder that “more gambling” does not necessarily mean “more revenue”

If Atlantic City can go bust…

The winning streak has run cold for Atlantic City, N.J.

Earlier this week, the upscale Revel Casino Hotel announced it will close, bringing the total number of casinos in the city expected to close by the end of the year to four. Thousands of workers are confronting unemployment.

The state has long guaranteed Atlantic City a monopoly on gambling within New Jersey’s borders, but gambling revenues there have been declining due to increased competition from new casinos in neighboring states and the lingering effects of the financial crisis. The monthly report from the state Division of Gaming Enforcement issued Wednesday shows that the trend is continuing, as July’s take declined 7.7 percent year over year.

Pennsylvania, which only legalized casino gambling in the past decade, has replaced New Jersey as the state with the second-largest gambling industry. More casinos have been proposed in New York. Yet revenues have been disappointing across the region. In New Jersey, they have declined by around half from a high of $5.2 billion in 2006.

Most disappointing for investors has been the performance of the casinos’ new online gaming businesses. The prospect of online revenues has kept several casinos open despite declining income.

“A lot of these casinos have been unprofitable for quite some time,” said Alex Bumazhny, an analyst at Fitch Ratings.

Online gamblers haven’t anted up, though, and several casinos have folded. Bumazhny estimates that online gaming revenues for New Jersey businesses will total only around $125 million this year. Revel follows The Atlantic Club, which closed in January, and the Showboat and the Trump Plaza Hotel and Casino, also expected to close this year.

I like to note this sort of news item because as sure as the sun rises, at some point in the fall as the elections get settled and legislators start pre-filing bills, I’m going to get a press release from a pro-gambling expansion group touting the economic benefits of slot machines at horse racing tracks and/or casinos. Said press release and its accompanying economic study will point out the vast number of Texans that are currently gambling in Louisiana, New Mexico, Oklahoma, and other non-Texas states, and will lament the money that could have been spent and gambled right here. My point is that the casinos and riverboats and what have you in Louisiana and New Mexico and Oklahoma and wherever else won’t simply give up the business those traveling Texans bring them without a fight, and the competition they will bring to hold onto their existing customers as well as lure new ones may possibly have a downward effect on those numbers in those press releases and economic studies. This isn’t about whether one does support or should support expanded gambling in Texas – as you well know by now, I am deeply ambivalent about it. It’s just a reminder to keep a sense of perspective when the issue heats up as it always does every two years.

A cautionary tale about expanded gambling


Earlier this week, Delaware’s casinos got a surprise windfall. Just days after saying no to tax breaks, Gov. Jack Markell (D) proposed that $8 million of the state’s budget surplus be distributed amongst its three struggling establishments, to forestall the layoffs that at least one of them had threatened.

That would seem to defeat the purpose of casinos: Generating revenue for states. The problem is, for the past decade, almost every state in the nation has tried to cash in–and gamblers aren’t keeping up. Twenty-three states have now legalized commercial casinos, and revenues are back to 2007 levels after taking a dip during the recession. Twenty-eight states have Native American-owned casinos, where revenues have been essentially flat since 2007. Almost all new gambling facilities take revenue away from somebody else, and one state’s explosive growth is another’s stagnation.

Delaware is a prime example. Neighboring Pennsylvania went from none in 2006 to 11 casinos making more than $3 billion in 2012, while Maryland opened two casinos over the past two years and more than doubled its revenues. And it’s not the only nearby state in trouble. Even before Hurricane Sandy barreled into Atlantic City, its gambling industry was in a long decline, and even a state-of-the-art new facility looks headed toward bankruptcy.

“Pennsylvania and Maryland had provided a substantial amount of the business for the casinos around there, and when they get their own casinos, all things being equal, people will gamble closer to home,” says Joseph Weinert, an analyst with Spectrum Gaming. “The whole purpose of those states legalizing casinos to begin with is to keep their residents’ tax dollars in state. Delaware’s in a pickle, there’s no two ways about it.”

It’s the same sad song in the Midwest, where casinos have raced to open in Ohio; Connecticut, where customers have been vacuumed up by new facilities in New York, and Missouri, hit by Kansas’ three new casinos since legalizing gambling in 2007.


At the end of the day, geography is destiny: The winners in this new world of ubiquitous gambling will be those with casinos close to large population centers (hence the hot competition to build a new facility in National Harbor, across the river from Washington D.C.). Gaming industry advocates like to point to Las Vegas, saying it’s possible to create a destination that people will travel to with rock-bottom tax rates and massive development. But Delaware isn’t going to create an east coast Vegas. And it’s probably a better idea, as the News Journal advised, to pick up and move on.

One can certainly argue that Delaware’s situation is not at all like Texas’ would be. It’s a short drive from Maryland and Pennsylvania to Delaware, so when those states allowed gambling and casinos sprung up, it was likely just too much competition in a limited geographic area for them. That won’t be a problem in Texas, since even though we’re surrounded by gambling states, it’s too far for many people to drive. Still, I’d be concerned that the market for gambling – casinos, slot machines at racetracks, whatever – is inherently limited, perhaps more so than we think. In addition, the existing casinos aren’t going to give up their Texas customers without a fight. I remain largely ambivalent on the question of whether or not to expand gambling in Texas, but I also remain skeptical of the claims that they will bring a bonanza to us. As with the Lottery, we should be very wary about getting dependent on any revenue from this kind of source.

More on the potential Coushatta casino

The Houston Press cover story from last week is about the Alabama-Coushatta tribe’s efforts to get a casino again. It covers a lot of the same ground as that Chron story I blogged about on Sunday, but it also reminds us of a very sordid aspect of the original casino and why it was closed.

A federal court had ruled that the Alabama-Coushatta had violated the terms of their recognition, which, as argued by then-Texas Attorney General John Cornyn, stated that all gaming prohibited by the state of Texas was “hereby prohibited on the reservation and on lands of the tribe.” The challenge came with the full-throated ­support of Texas’s evangelical population, spurred on by a now-­notorious lobbyist named Jack Abramoff. (Ironically, the Alabama-Coushatta remain a heavily Christian community and even forbade alcohol at their former entertainment center.)

“We already knew that when we opened, we were going to be in litigation,” Williams continues. “We were prepared for that.” The ­Louisiana-­Coushatta, a related tribe just one state over, had been concerned about consumers opting for their Texas cousins and ended up enlisting the aid of Abramoff, the fedora-topped lobbyist later sentenced to nearly six years for conspiracy and tax evasion in 2006.

While secretly disparaging the Native Americans as “stupid mofos,” “monkeys” and “fucking troglodytes,” Abramoff used Christian connections in Texas to mobilize anti-casino forces. Through shell corporations and blatant corruption — Abramoff and his partner are believed to have received a total of $85 million from their Indian clients — the lobbyist managed to muster enough opposition to shutter the casinos of both the Alabama-Coushatta and El Paso’s Tigua tribe in 2002. Less than a year in, the Alabama-Coushatta’s best modern opportunity for self-sustenance collapsed.

With equal parts gall and venality, Abramoff then approached the Alabama-Coushatta with an offer to restore their casino but was found out before he could swindle more Native-American money.

“It was devastating,” Williams says, his voice moving slowly through the subsequent drop-off. “Everyone could see what was possible — at the time, when we were open, we were one of the highest-paying employers here in the surrounding area.”

A visitor asks Williams about Abramoff, but the chairman claims the name provokes no reaction on the reservation. Nobody brings him up. No one thinks about him. But it’s Abramoff’s work — his choice to blinker both Texas legislators and tribes — that ended the only casino the Alabama-Coushatta have ever known. It was Abramoff’s slimeball politics that forced the Alabama-Coushatta to revert once more to smoke shops and land cultivation as their sole, and depreciating, sources of income. It was Abramoff’s grease-stained fingerprints, his choice to skim the profits and to try to lobby both for and against the tribe’s casino, that directed Williams and his people back onto Washington’s dole.

That was more than a decade ago. In the interim, the tribe, which sued Abramoff and settled out of court in 2007, has sunk nearly $3 million into attempting to change the federal language prohibiting its casino.

See here, here, and here for more on that story. One person that was prominently involved in screwing the Alabama-Coushatte tribe but who wasn’t mentioned in the Press piece is longtime religious right mouthpiece Ralph Reed. Reed has maintained a fairly low profile in recent years, but lowlifes like him never truly go away. It’s important to remember just how awful a person he and his cronies are and were. Be that as it may, between the Congressional action and the better-than-I’d-have-thought prospects in the Lege, this could finally be the year the Alabama-Coushatta get the opportunity that had been denied them. I remain ambivalent about gambling, but I do wish them the best of luck.

The federal option for gambling expansion in Texas

There is a way to expand gambling in Texas without going through the Legislature.

For decades the Alabama-Coushatta Tribe fought hard to make the federal government acknowledge that it illegally developed more than 5 million acres of the tribe’s aboriginal land.

The East Texas tribe eventually won when a court said Congress owed the tribe $270 million in compensation.

But now in an extraordinary move, the tribe’s leaders say they will forgo the gigantic sum of money and forget the past if allowed to open a casino to secure their future.

U.S. Rep. Steve Stockman, R-Friendswood, and Rep. Gene Green, D-Houston, introduced legislation this month to amend the tribe’s federal recognition to include the gaming rights allowed hundreds of other Native American governments, but under one important condition: Alabama-Coushatta drops claim to the $270 million in damages a federal court recommended U.S. Congress pay in 2002 and another land-based lawsuit filed last year.

“Nobody pounded us and said, ‘This is what you’re going to do,’ ” said Andy Taylor, an attorney for the tribe. “The tribe is saying, ‘We’re this serious.’ We are willing to forget 200 years of mistreatment. All we want is economic independence.”

At times pausing to fight back tears, members of the Alabama-Coushatta Tribal Council said securing an economic mechanism to move the tribe away from dependency on quick-to-change and slow-to-grow federal appropriations cinched the difficult decision to draft what they see as a generous compromise, catch-all bill.

“With the sequestration and the situation of the federal government, we understand they don’t have $270.6 million to give to an individual tribe,” said Kyle Williams, tribal council chairman. “If we have to go after each individual issue, it would never happen and we would still be pursuing these issues 20 years from now.”

The tribe opened a casino in 2001, but a court order shut it down the next year. This bill could remove the obstacle that led to the closing of that casino. The tribe would still be limited as to what kind of games they could offer, pending action from the Legislature, but they would be able to have a casino, which would undoubtedly help them make a lot of money. The one thing that I’m curious about that wasn’t addressed in the story was what the other gambling interests in Texas think about this. I suppose if the bill in question begins to gain traction, we’ll find out.

It may not matter where the casinos are

I don’t know if the gambling industry will finally gain traction in their effort to legally expand operations in Texas, but I do wonder if they’re fighting the last war and missing out on what’s happening now elsewhere in the country.

Silicon Valley is betting that online gambling is its next billion-dollar business, with developers across the industry turning casual games into occasions for adults to wager.

At the moment these games are aimed overseas, where attitudes toward gambling are more relaxed and online betting is generally legal, and extremely lucrative. But game companies, from small teams to Facebook and Zynga, have their eye on the ultimate prize: the rich American market, where most types of real-money online wagers have been cleared by the Justice Department.

Two states, Nevada and Delaware, are already laying the groundwork for virtual gambling. Within months they will most likely be joined by New Jersey.

Bills have also been introduced in Mississippi, Iowa, California and other states, driven by the realization that online gambling could bring in streams of tax revenue. In Iowa alone, online gambling proponents estimated that 150,000 residents were playing poker illegally.

Since that story was published, the states of Nevada and New Jersey have passed their laws to allow online gambling. I’m sure others will follow. Now, online gambling will never truly replace casinos. No matter how good the online experience may become, it won’t include low-cost buffets, cocktail waitresses, or Wayne Newton. Some things you still have to do in person to get the full effect. But online gambling is sure to cut into the profit margins of casinos, and perhaps reduce the overall market for them. If so, that weakens the case for expanded gambling here, at least as far as the current proposals for casinos and slot machines at racetracks go. Of course, the current proposals can be amended to allow a vote on online gambling. I don’t know if the spirit of cooperation that exists now can handle that, but who knows. In any event, this is something to keep an eye on.

More on the economic effect of casinos

I’m just noting this for the record, since I am sure that gambling expansion will come up again in The Lege this spring.

Melissa Kearney, an economist at the University of Maryland, released a literature review in 2005 summarizing work on gambling done to date. A study by Maryland’s William Evans and Julie Topoleski that focused on Indian casinos found that they created a significant number of jobs. The ratio of jobs available to adults increased, on average, by 5 percent. This in turn lead to a 2 percent decline in mortality, as residents’ economic conditions improved.

But the casinos also lead to a plethora of social ills, including increased substance abuse, mental illness and suicide, violent crime, auto theft and larceny, and bankruptcy. The latter three all increased by 10 percent in communities that allowed gambling.

Other work backs up the crime finding. The University of Georgia’s Earl Grinols, Baylor’s David Mustard, and the University of Illinois’ Cynthia Dilley found that 8 percent of crime in counties with casinos was attributable to their presence, a crime increase that cost residents, on average, $65 a year.

And the bankruptcy finding has been replicated as well. The St. Louis Fed’s Thomas Garrett and Mark Nichols found that Mississippi riverboat gambling increases bankruptcies not just in Mississippi, but in counties outside the state where many residents gamble in Mississippi. The effect was largest in neighboring states, with the Mississippi casinos responsible with a 0.24 percentage point increase in bankruptcy filings. Interestingly, other casinos — such as Las Vegas, Atlantic City, and so forth — didn’t have statistically significant effects on other areas’ bankruptcy rates.

Unsurprisingly, legalized gambling also exacerbates problems with gambling addictions. The National Gambling Impact Study Commission found that having a casino within 50 miles doubles one’s likelihood to become a problem gambler. That suggests that the new DC-adjacent Maryland casino could create major addiction problems here in the District.

The evidence on casino gambling’s distributional impact is much weaker than that concerning state lotteries, but there is extensive evidence that the latter amounts to a regressive tax, given that lottery ticket purchasers are disproportionately poor. But some evidence — admittedly from industry groups — suggests that casino-goers are richer than the average American, so the story could be quite different than with lotteries.

But as with the liquor industry, much if not most of the gambling industry’s revenue come from addicts. Grinols estimates that 52 percent of revenue at the typical casino comes from problem gamblers, while an Ontario study put the figure at 35 percent and a Louisiana one at 42 percent. So even if gambling takes more money from the middle-class than the poor, it largely takes that money from middle-class people who aren’t exactly rationally willing to spend it.

Casinos aren’t even a particularly good source of tax revenue. Kearney notes that a number of studies have found that Indian casinos cannibalize business at nearby restaurants and bars, and in so doing actually reduce state tax revenue.

Some of these studies are several years old, so it is certainly possible that things have changed. I’m sure the casinos and racetracks will have their own data to add to the debate as well. Given that there’s already a lot of casino-like gambling going on in Texas, it may be that we’re already suffering most of the ill effects we’d see with casinos without getting any of the benefits. Like I said, I’m just noting this for future reference when the subject comes up again.

The state would like for the counties to enforce the law against eight-liners

Apparently, some legislators who don’t much like gambling had a few things to say about that article about eight-liners.

“Eight-liners that provide cash prizes are against the law, and the law needs to be enforced,” [State Sen. Dan] Patrick said in a statement. “Without oversight, illegal game rooms become hot spots for crime.”

Patrick noted that there have been a number of shootings in and outside of game rooms recently.

“The state cannot just look the other way anymore,” he said. “The law must be enforced.”


[State Rep. Patricia] Harless, who authored a failed bill in 2009 on illegal eight-liners, agreed officials shouldn’t effectively sanction illegal activity by collecting a fee without making sure the businesses operate within the law. “They shouldn’t be able to collect a fee on something that is considered illegal,” she said.

But Harless said there hasn’t been much of an appetite for tougher eight-liner-related legislation in recent sessions of the Legislature. “It’s not a very popular concept,” she said. Too many businesses with legitimate games could be affected if lawmakers pass a measure, she said.

Again, I pronounce myself largely agnostic on the issue. I will say, however, that given the counties’ concerns about the cost of enforcing the anti-eight-liner laws, legislators who are unhappy with their lack of action ought to pony up the resources to help them do something about it. Otherwise, Patrick and Harless ought to accept the fact that they’re just prioritizing and making decisions based on their capacity.

Counties are skirting the state on gambling, too

When eight-liners are outlawed, cities and counties will tend to look the other way rather than try to deal with enforcing the laws against them.

Some of the money has arrived at the Duval County building in five-figure money orders or checks. But much of it has been in cash. This past April, county Treasurer Robert Elizondo took delivery of $33,700, most of it in hundreds and twenties.

“It’s very exciting to count all those twenties,” he said. “I’m going to be a bank teller after this; I’ve got the training.”

The money began pouring in soon after this sparsely populated county 90 miles west of Corpus Christi decided last summer to start charging an $800 licensing fee for each so-called eight-liner amusement machine inside its borders.

So far this year Duval County has collected just under $600,000 (about a quarter of it in cash), an amount equal to nearly 9 percent of its $7 million yearly budget.

More is expected; over Labor Day weekend, a sprawling new room with hundreds of eight-liners opened just outside the county seat of San Diego.

It could be the local government success story of the year: Confronted with a struggling economy and stagnant tax revenues, entrepreneurial officials in a county perhaps best known for its rich history of graft and political corruption uncover a lucrative new source of revenue.

But there’s a small catch.

“Of course the machines are illegal, as I understand it,” said Jo Ann Ehmann, the part-time bookkeeper for the tiny city of Gregory.


Texas’s eight-liner statutes are a mess. In their attempts to parse the differences between “amusement” and “gambling,” and determine the point at which jackpots become morally impermissible, lawmakers have rendered the statute all but unenforceable.

“The state’s definition of a gambling device is lengthier than the definition of murder,” said Shannon Edmonds, head of governmental relations for the Texas District and County Attorneys Association. “In the real world, if you want to make something clearer, you simplify it. This was drafted by people who wanted it to be vague.”

Even those willing to plunge into an anti-eight-liner campaign find the deck stacked against them. Mounting an undercover operation takes weeks or even months of dedicated police time. Prosecutions cost money that could be spent pursing more serious crime — in all, “about $50,000 of taxpayer money to shut down an establishment,” Simpson estimated.

Tiny rural jurisdictions face their own unique hurdles. For example: How to initiate a covert operation when everyone knows all your police officers?

“As soon as one of our officers walks in, he’s recognized,” admitted Robert Brake, who, as chief of the Gregory Police Department, oversees two officers. With only one typically working at a time, Brake said, he hasn’t expended a lot of effort investigating the game rooms: “We stay pretty busy with accidents and thefts and so on. I don’t have the time.”

Any parallel to the Medicaid expansion situation is of course entirely coincidental. I have as you know some conflicted feelings about gambling, and I think unregulated gambling is even more problematic, since there’s no mechanism to protect customers from getting ripped off, but it’s easy to see this from the point of view of these small jurisdictions. There’s no upside to cracking down on the eight-liners, while taxing them provides a much-needed revenue source in tough times. What else would you expect them to do? One way or another, this is a problem for the state to fix. Just don’t expect it to happen any time soon.


I’m fascinated by this story.

Hours after a judge ordered the Golden Nugget Atlantic City to let gamblers cash in nearly $1 million worth of chips they won in a card game where the decks were unshuffled, the casino’s owner overruled his lawyers Friday and agreed to make the payments.

The judge’s decision drew an angry reaction from casino officials, who called it “an ambush” and vowed to file an appeal first thing Tuesday morning.

But Tilman Fertitta, the Texas billionaire who owns the Golden Nugget, said he decided to pay the winners to make the whole thing go away.

“Without question, the mini-baccarat game that took place on April 30, 2012, allowed $10 bettors to realize a gambler’s dream and enabled them to beat the house out of $1.5 million,” he said. “Even though we can appeal the court’s ruling and take full advantage of the appellate process and legal system, and tie the matter up in litigation for a number of years, the Golden Nugget is a people business, and is prepared to allow the gamblers — most of whom continue to gamble at Golden Nugget — to realize the gambler’s dream of beating the house.”

The casino also will let gamblers keep more than a half-million dollars it already paid them from the same disputed games.

“I wasn’t cheating,” one of the gamblers, 51-year-old Michael Cho of Ellicott City, Md., said after the judge’s ruling. “I didn’t do anything illegal. It wasn’t right for them to get the money.”

I know nothing about baccarat, but obviously in any such game if you can tell what cards are coming, you’re going to do well. As Cho said, the players weren’t cheating, just very lucky to be in the right place at the right time. It was correct for the casino to pay them off and go after the cardmakers for recompense. I guess you can keep this story in mind the next time you sit down at a casino table. Maybe some day the cards will all be right for you, too.

Ending the Lottery?

Seems unlikely, but that won’t stop some folks from trying.

As lawmakers look at whether the Texas Lottery Commission is operating effectively, influential Baptists are suggesting that the lottery shouldn’t merely be tweaked. They want it abolished.

“Ask the pertinent questions. Has the lottery fulfilled its promise? My answer would be ‘no,’” said Suzii Paynter, director of the Baptist Christian Life Commission.

The group contends that the lottery was sold to Texans 20 years ago as a “voluntary, nonregressive” way to raise money but instead preys on the poor and caters to impulse purchases of scratch-off tickets. Attempts to attract higher-income players with $50 scratch-off tickets haven’t worked, they say.

They question whether the lottery has provided a revenue increase for public education or simply replaced other revenue sources.


While there may be bills next session proposing to do away with the lottery, Rep. Dennis Bonnen, the Angleton Republican who leads the sunset commission, warned in a recent public hearing that eliminating the lottery isn’t an option for the panel.

“It’s our job to make sure agencies are doing their jobs effectively with what they’ve been tasked to do,” he said. “Don’t expect that we’re going to put a poison pill in the sunset bill to end the lottery.”

After prize money, retail commissions and other expenses, about $1 billion a year from the lottery goes into a public education fund. Ticket sales in fiscal year 2011 totaled $3.8 billion, most of it coming from scratch-off tickets.

This year, lottery sales are 10 percent ahead of last year and are on track to surpass $4 billion for the year, executive director Gary Grief told legislators this month. Among top-grossing lotteries in the nation, Texas ranks fourth behind New York, Massachusetts and Florida.

I found this story via Believe it Or Not, which adds some more information.

Amid the recent Mega Millions lotto hype, Texas Baptists’ theologian-in-chief Jim Denison discussed the potential for lottery winnings to destroy lives. He warned Christians that playing the lotto can push them to seek happiness through money instead of through Christ.

Texas Baptists also opposes the expansion of legalized gambling through casinos and other gaming venues.

Paynter pointed out that two of the states highest-selling lottery ticket locations are Fiesta stores in Houston, and Rep. Garnet Coleman’s district spends $44 million on the lottery a year, more than others in the state despite being a lower-income area.

Coleman has supported the examination of the lottery system, with his own district spending more on the lotto than middle and high-income areas of Houston.

“I don’t know why I didn’t see it before,” Coleman told the Austin-American Statesmen in 2010. “It’s true and it’s real. I see who plays, and it’s not who folks think. It’s not entertainment.”

I largely agree with the Baptist Christian Life Commission that the Lottery has not fulfilled its promise, and I think there’s merit to their pursuit. The Lottery does generate some money for education, but it does so in just about the least efficient and most regressive way possible. We absolutely should do a better job providing for public education and we should do it in a way that doesn’t hurt lower income folks. But let’s be honest, that ain’t gonna happen. I’d bet on gambling being expanded before I’d bet on the Lottery being even scaled back, which is not to say that the former is a good bet.

One more piece to the puzzle: I recently came across this article in Wired about how it’s possible to get an edge in playing scratch-off games, which are the Texas Lottery’s bestsellers. Note that as of the story’s publication in January of 2011, the North American Association of State and Provincial Lotteries was unaware of this potential security hole, and that there’s a woman in Texas who’s managed to win over $1 million on four separate occasions, three of them coming from scratch-off games. The implication of all this is that there’s a possibility that scratch-off games are an even worse proposition for the average player than they’re supposed to be. Read the story and see why.

Anti-tax zealots plump for casinos

Gambling yes!

Grover Norquist, the nation’s most prominent anti-tax crusader, wrote a letter last week to Texas legislators to call for expanded gambling.

“In light of the adverse economic impact that higher taxes would have, it is imperative that lawmakers consider all other options for balancing the state’s budget,” Norquist wrote. “There are a number of alternatives to raising taxes, the most preferable being an expansion of economic activity, and thus, the tax base. One way to do that would be to permit legitimate businesses to operate that are currently not allowed to do so. Research has found that permitting lawful and responsible gaming operations in Texas is one simple way to grow the Texas economy, thereby generating more tax revenue for the state.”

Representatives from groups that tried to pass gambling measures in the 2011 legislative session said they had nothing to do with the letter.

Gambling no!

The Texas Public Policy Foundation’s executive director, Arlene Wohlgemuth, and it director of fiscal policy, former state Rep. Talmadge Heflin, sought to counter a pro-gambling letter sent to state leaders last week from anti-tax crusader Grover Norquist, the president of Americans for Tax Reform.


“While we generally agree with our friends at ATR on tax and spending issues, when it comes to gambling, that is not the case. Their suggestion that gambling is a way ‘in which to rectify the anticipated budget imbalance’ is wrong,” Wohlgemuth and Heflin wrote.

The foundation’s preferred approach would lean more toward fiscal discipline as the state faces the likelihood of another budget shortfall ahead of the 2013 legislative session.

I’m generally agnostic to deeply ambivalent on the gambling question, but if those are my choices I say bring on the casinos and the racetrack slot machines. There are of course other choices, just not ones that these one-percenter chuckleheads are interested in. As we well know, we’ll need a better legislature for any other options to get traction.

Beyond that, I have no idea if any of this will make a difference or not. Neither argument is particularly original, so at this point it’s more a matter of which article of faith one subscribes to. The real question at this point is whether or not gambling will have a higher profile in 2013 than it did in 2011. My money’s on yes.

Casinos expanding nationally

I have no idea what the political or budgetary climate will be like for the gambling industry here in Texas when the Lege next convenes in 2013, but they have been gaining a lot of ground elsewhere in the country.

You got to know when to hold em...

States have embraced casinos, after years of trepidation about their societal costs, for two simple reasons: a promise of a rich new revenue source, plus the possibility of stimulating tourism.

“They are faced with tough decisions. They are in recession … And we pay taxes far over and above normal taxes,” said Frank Fahrenkopf, president of the American Gaming Association.

Last week alone, Genting’s new gambling parlor at Aqueduct, now limited to 4,500 video slot machines and another 500 electronic table games, made nearly $13 million — putting the “racino” on pace to make $676 million per year, with 44 percent of that take going to a state education fund.

And that total is nothing compared to the $1.4 to $2 billion per year Genting predicts it would bring in at the huge complex it is planning in Miami.

Some experts, however, have questioned whether revenue bonanzas that large are realistic, and say states should be cautious about giving up too much to lure these projects. Competition for a limited pool of gambling and tourism dollars is already fierce, and recent years haven’t been kind to casinos.

Nevada’s larger casinos lost $4 billion in 2011, according to a report released this month by the state’s Gaming Control Board, as the state continued to feel the effects of the global economic slump.

As gambling options have increased in the East, revenue has slid substantially at the pair of Indian tribe-owned casinos in Connecticut and declined by a dramatic 30 percent in Atlantic City, which has lost customers in droves to the new casinos in nearby Philadelphia, according to David Schwartz, director of the Center for Gaming Research at the University of Nevada Las Vegas.

Other than that one mention of Nevada, the story is entirely East Coast-focused, so I can’t say what kind of action there may be in these parts. No question, Texas is a big prize, and I’m sure there will be yet another large push for casinos, slot machines at racetracks, or both. There’s also been a push for online gambling of late, which may add a new wrinkle to the usual legislative battle. As always, worth keeping an eye on.

A step forward for online gambling


The Justice Department has reversed its long-held opposition to many forms of Internet gambling, removing a big legal obstacle for states that want to sanction online gambling to help fix their budget deficits.

The legal opinion, issued by the department’s office of legal counsel in September but made public on Friday, came in response to requests by New York and Illinois to clarify whether the Wire Act of 1961, which prohibits wagering over telecommunications systems that cross state or national borders, prevented those states from using the Internet to sell lottery tickets to adults within their own borders.

Although the opinion dealt specifically with lottery tickets, it opened the door for states to allow Internet poker and other forms of online betting that do not involve sports. Many states are interested in online gambling as a way to raise tax revenue.

New York has offered an online subscription service since 2005 that allows state residents to enter a string of Lotto or Mega Millions drawings.

See here for some background. I don’t really expect anything to come of this here in Texas, but I won’t be too surprised if it’s part of the legislative conversation in 2013. If nothing else, I have to figure the Texas Lottery Commission would like to add online subscriptions to its bag of tricks. Worther keeping an eye on, in any event.

We do have casino gambling in Texas

With all the talk about slot machines at horse racing tracks and legalized casinos, it’s easy to forget that there already is one legal casino in Texas.

As the busloads of seniors and other low rollers pulled in from San Antonio for a day of gaming at the Lucky Eagle Casino, demolition crews were busy tearing down an adjacent concrete dome.

If all goes well, by mid-2013, a new 250-room hotel and expanded casino will take the place of the ill-conceived dome built for concerts and boxing matches by an earlier tribal administration.

The scene neatly captures the dramatic changes of the past decade for the Kickapoo Indians, who still offer the state’s only casino gambling on their small reservation by the Rio Grande.

Peace and prosperity have replaced the upheaval, legal battles and insolvency that not long ago bedeviled the Kickapoo, allowing them to launch an ambitious development project that includes improved gaming facilities.

“The tribe is in extremely good health economically. We’re doing a $90 million improvement project, of which we’ll borrow about $50 million, with the rest coming from the tribe,” said tribal administrator Don Spaulding.


The money machine that makes it all possible, of course, is the glittering casino that never closes. Restricted to what is known as Class II gambling, one notch below Las Vegas-style gaming, the casino offers machine games, poker and bingo, and it caters to clients from San Antonio and the Rio Grande Valley.

The tribe divulges little financial information, but did report that last year its casino had more than 1.1 million visitors and paid out more than $30 million in winnings.

“On July 23, we had a million-dollar winner. I think that was the biggest prize the casino has ever had,” said casino manager Robin Miller.

The facility will soon hold 2,500 gaming machines, up from 1,500 when Miller arrived two years ago.

With the planned improvements, she said, the Lucky Eagle will be more competitive with the big casinos in Oklahoma and Louisiana. And when the hotel opens, players will be able to make it more than a day trip.

I’m curious what, if anything, is the state’s take from this. If nothing else, the numbers from this casino, before and after expansion, will provide some objective basis for evaluating what a Texas with more legal gambling might look like.

States looking at online gambling

Until the economy returns to the point where states aren’t completely strapped for revenue, I expect them to look at all possible sources of new money.

It’s an idea gaining currency around the country: virtual gambling as part of the antidote to local budget woes. The District of Columbia is the first to legalize it, while Iowa is studying it, and bills are pending in places like California and Massachusetts.

But the states may run into trouble with the Justice Department, which has been cracking down on all forms of Internet gambling. And their efforts have given rise to critics who say legalized online gambling will promote addictive wagering and lead to personal debt troubles.

The states say they will put safeguards in place to deal with the potential social ills. And they say they need the money from online play, which will supplement the taxes they already receive from gambling at horse tracks, poker houses and brick-and-mortar casinos.

“States had looked at this haphazardly and not very energetically until the Great Recession hit, but now they’re desperate for money,” said I. Nelson Rose, a professor at Whittier Law School, where he specializes in gambling issues.

When it comes to taxing gambling, he said, “the thing they have left is the Internet.”

I don’t really expect this to come up in the Texas Lege in 2013, because casino and horse racing interests have too much at stake to let it happen. While I am not an advocate of expanded gambling myself, if it ever does happen in Texas I would prefer it to be in the form of real casinos and/or slot machines at racetracks, on the grounds that they would provide more jobs than online gambling. Having said that, once this is up and running somewhere, it’s not really clear to me how you could prevent someone in Texas, or anywhere else, from playing.

There are other ways that a state could leverage the Internet to feed its own gambling habit:

Some states, including New York and North Dakota, already sell lottery subscriptions online. Since 2005, New York has offered a subscription service that allows people in the state to enter a string of Lotto or Mega Millions drawings. The state says 100,000 people subscribe.

New York is exploring whether to allow people to draw from an escrow account when they decide to buy into a single drawing — say, when the jackpot reaches alluring levels.

Again, I can’t recall hearing of anything like this in Texas. Unlike the virtual casinos, I could imagine something like this being implemented by the Texas Lottery Commission, without direct input from the Lege. I wonder if they haven’t thought of it, or if they think it’s illegal for them to try it. Anyone know anything about that?

Bad times are good for the Lottery

Some people might consider this to be good news, but I don’t.

This year, the Texas Lottery Commission’s sales are headed for a record high, on pace to reach about $3.83 billion, up from $3.74 billion last year. The previous high was $3.77 billion, in 2006.

Lottery spending is also up in Harris County. Sales grew to $639 million in the state’s 2010 fiscal year and are on pace to clear $645 million this fiscal year, which ends Aug. 31.

The prize payout percentage also has increased this year – about 64 cents of every dollar spent has gone back to customers. But as is always the case with the lottery, those who play more are likely to lose more.

And which consumers are spending the most?

According to a Hearst Newspapers analysis of lottery sales statistics using data from the U.S. Census Bureau, residents in the state’s poorer counties appear to be doing a disproportionate amount of the spending.

While this is not an exact analysis – some consumers, of course, buy tickets outside of the counties where they live – lottery sales per resident are consistently higher in the poorest counties than in the wealthiest ones.


Charles Clotfelter, an economist and lottery researcher at Duke University, said it’s difficult to pinpoint what drives up lottery sales, but said, “There’s probably a desperate side to it.”

“Just ask yourself the question,” he said. “How is a person going to get his hands on $100,000? If you’re a rich person, you could think of ways. If you’re a poor or blue-collar person, there are two ways: Legal gambling and illegal gambling.

“Maybe lottery is the poor man’s Dow Jones,” he added.

I don’t know what I can add to that. I’d prefer to live in a society where playing the lottery was strictly a matter of enjoyment and not an investment strategy. I don’t see us getting there any time soon.

The bingo business

Really interesting story about how bingo, which is legal in Texas as a charitable fundraiser, operates without a whole lot of scrutiny.

In June 2006, police responded to a call from Daytime Bingo Hall in Midland reporting that $100,000 in cash was missing from a floor safe. As investigators began digging into the apparent theft, they had questions: Since bingo operations are not allowed to have so much money on hand overnight, what was the cash doing there in the first place? And how had it escaped notations on the hall’s books?

According to police reports and descriptions of the case in Texas Lottery Commission transcripts, workers at the hall revealed several possible sources for the money. Bingo prizes were often overstated, they claimed; the hall would report a $100 prize as $200 and keep the difference. They said the operator also was selling tickets without reporting the sales to the state and placing proceeds in the safe — another violation of Texas bingo rules.

The police contacted the agency that regulates bingo, the Lottery Commission, and requested an audit of the hall and the three nonprofit organizations that sponsored bingo games there — the B’nai B’rith Youth Club, B’nai B’rith Men’s Club and Lou Rosenberg Scholarship Fund.

The commission’s Bingo Operations Division had recently audited two of the charities, finding only minor bookkeeping errors. This time, auditors found that about $250,000 could not be accounted for.

The incident highlights the serious regulatory challenges facing the agency reponsible for keeping an eye on a business that generates about $700 million every year in Texas, the vast majority in cash. A small — and shrinking — state enforcement staff, laws ripe for manipulation and the fragmented nature of the game have resulted in a legal gambling enterprise that critics contend in some ways is free of meaningful scrutiny from government regulators.

Experts and participants say the vast majority of games are conducted fairly, with proceeds accounted for and ending up in their proper places; most nonprofits use the $35 million they earn annually from bingo for charitable purposes. Yet without adequate oversight, they add, money can simply disappear, with few repercussions.

“In this business, that’s more the case than not,” said Kenneth Messer, who runs an American Legion bingo hall in Longview.

How well the state keeps track of bingo money could have costly implications. As legislators grapple with a projected $27 billion budget shortfall, several have said they would consider expanding legalized gambling to bring in more revenue. If that happens, the bingo industry wants a share of the action.

As this and a companion story show, the lack of strong oversight and uniform standards means that an awful lot of bingo-generated cash can wind up in the hands of the operators and not the charities for which it is supposedly intended. A lot more often winds up getting stolen as well. And thanks to a court case won by bingo interests (currently under appeal), they’re in there lobbying the Lege to keep them in mind for any expansion of gambling they may see fit to allow. Worth keeping an eye on.

Casinos look to the Internet


Many of the country’s largest casinos, long opposed to gambling games like poker on the Internet, are now having second thoughts.

Although online gambling is popular with millions of Americans, it is illegal in the United States, and the casino industry has considered it a threat.

But a trade group that represents major casinos like Harrah’s Entertainment, MGM Resorts and Wynn Resorts is working on a proposal that would ask Congress to legalize at least some form of online gambling, the group’s chief executive said.

The group, the American Gaming Association, issued a statement in the spring suggesting that online gambling could be properly regulated — the first public indication that its hard-line stance was softening.


The move by casinos to open the door to online gambling could bring a powerful new lobbying force into Congressional debate. It would also most likely intensify fights in state legislatures as various gambling interests — groups that include lotteries, racetracks and Indian tribes — push lawmakers to grab more gambling dollars for states by moving to the Web.

California, Florida and New Jersey recently made unsuccessful efforts to legalize Internet betting on casino-style games, said Mark Balestra, the director of the BolaVerde Media Group, a consulting firm in St. Louis that tracks Internet gambling. Current law does not prevent in-state gambling over the Internet but to do so across state lines would require a change in federal law.

Just something to keep an eye on in the event that the push for expanded gambling in Texas finally succeeds next year. It’s possible that language to allow for such betting might be proposed, but I doubt it could get enough support to actually be included. But if and when casino gambling is legalized here, expect the campaign to expand it to online action to follow.

The state of the Lottery

The Statesman has an interesting two-part story about the state of the Texas Lottery today. Part One is about the declining fortunes of Lotto Texas and what that means for the state’s finances:


• In 1994, 70 percent of adult Texans reported buying tickets. Today, it’s closer to 40 percent, meaning the lottery must extract more dollars from fewer people to keep raising the same amount of money. In 2004, the state’s estimated 9 million lottery players each spent an average of $390. Last year, an estimated 7.4 million players averaged $500 each.

• The state has become increasingly dependent on instant scratch-off games, which today generate 75 cents of every lottery dollar. Yet such games are more likely to be played by “less educated and lower income” residents, according to the Texas Lottery Commission’s research. The latest analysis found that “unemployed (players) were more likely to purchase scratch off tickets than employed and retired” players.

• Because the state’s take is smaller on instant tickets, it must sell more to make the same profit. Last year, the lottery sold nearly $700 million more in tickets than in 1998 — and gave schools $160 million less.

• As a percentage of education spending, the lottery’s contribution is shrinking. In 1996, lottery proceeds paid for about two weeks of schooling for Texas students. This year, the money raised by the lottery will barely cover three days.

Part 2 is about the scratch-off games. I really try to be open-minded about expanded gambling in Texas. The argument that people are gambling anyway so we may as well let them do it here and keep that money in the state is a persuasive one. It’s just that it’s nearly impossible to find a story that analyzes some aspect of the gambling we already have – horse racing, bingo, the lottery – and comes to the conclusion that it has met the promises that were made of it when it was first legalized. Why should we expect this time to be different?

Lottery can’t meet its jackpots


Lottery officials are celebrating an uptick in Lotto Texas sales this year, but ticket proceeds were nearly $1.2 million short of covering the latest winning jackpot, forcing officials to dip into the state lottery account to cover the difference.

The shortage for the advertised $21 million jackpot that hit on July 31 was not the first the Lottery Commission has had to cover.

Lotto Texas jackpots are guaranteed to be worth at least the advertised amount, but ticket sales have fallen short of covering 14 of the 24 jackpots won since August 2006, according to figures from lottery watchdog Dawn Nettles and documents posted on the commission’s website.

State law allows officials to shift money from the state lottery account, which includes sales revenue from all lottery games.

The situation is drawing fresh criticism from Nettles, who said it means the lottery’s operating account or proceeds slated for the school trust fund must suffer.

“What I know for sure is that Lotto Texas is not self-supporting. They are not able to pay the players from sales. They are having to get money from either their operating budget or school fund money,” said Nettles, who owns the online Lotto Report. “The state’s getting shortchanged.”

If you are now asking yourself “Haven’t I heard something like this before?”, the answer is yes, you have. Some things never change.

The limits of gambling

People who like to gamble have a lot more options available to them than they used to.

The Marcuses’ three-day pilgrimage had taken them across a region suddenly awash in slot parlors and Las Vegas-style casinos, what with New York, New Jersey, Connecticut, Delaware and Pennsylvania getting in on the action. And the competition between the gambling halls is growing fiercer.

Mount Airy, the working-class resort once known for its red heart-shaped bathtubs, is one of three dozen combatants in a market where the only way to survive is by taking customers from a rival.

New Jersey is so worried about a $1 billion drop in annual revenue at its 11 Atlantic City casinos that Gov. Chris Christie proposed a state takeover of the gambling district and a large cash infusion to rejuvenate the beachfront resort.

New York already has electronic slot machines at eight racetracks, including the Yonkers and Monticello raceways, and is trying to get another gambling hall up and running in the biggest market of all: New York City, at the crumbling Aqueduct racetrack in Queens. And the Shinnecocks of eastern Long Island recently won federal recognition as an Indian tribe, allowing them to open a casino, as the Mohegan and Mashantucket Pequot tribes of Connecticut did.

So Pennsylvania authorized the introduction of table games last month at its thriving slot machine parlors, a move that officials hope will bring even more gamblers and tax revenue to the state. In the year ending June 30, Pennsylvania collected nearly $1.2 billion in slot machine taxes, 23.4 percent more than in the previous 12 months.

I bring this up for two reasons. One, even if all of Texas’ gambling interests see their champagne wishes and caviar dreams come true next year, the casinos and resorts of Louisiana and elsewhere that now attract Texas’ gamblers won’t give up all that business without a fight. They’ll offer incentives, reduce room rates, increase prizes, and generally do things that will decrease everybody’s profit margins. This is something else to keep in mind when you hear yet another rosy projection about how much money gambling will mean to the state.

And two, as a boy from New York City, I can’t read the words “Mount Airy” without hearing this:

They had other seasonal variations, but it’s the “Beautiful Mount Airy Lodge” bit that’s forever etched into my brain. When Olivia and I were in the Hudson River Valley last month, as we were driving from Newark Airport to Hyde Park, we passed an exit for The Poconos, and my dad and I instantly started singing the jingle. Some things, you just never escape. Link and post title via Yglesias, who I’m pretty sure is too young to remember those ads.

Who wants to run the Texas Lottery?

The contract is up for a bid, and the competition is fierce.

Companies that run lotteries around the world are expected to ante up by this week, proposing how they would oversee the Texas Lottery if they were to land its lucrative operations contract. The Texas contract, currently held by Gtech Corp., rarely comes up for bid, so the stakes are high for the competing businesses and taxpayers.

It’s a coveted contract, one that could net the winning bidder as much as $100 million per year.

Three firms — Scientific Games Corp., Intralot Inc. and Gtech — will probably submit bids, according to comments and actions by the companies since the beginning of the year, when the Texas Lottery Commission issued a request for proposals.

“The Texas Lottery is a highly valued customer of Gtech’s, and we are preparing to bid,” said Gtech spokesman Bob Vincent, who wouldn’t discuss the bidding process any further. Other likely bidders wouldn’t comment last week.

Since the request for proposals, the bidding process has been caught in conflict because a consulting company the commission hired to help write the bid request had been doing business with Gtech. That led to questions about whether Gtech has an unfair advantage in the selection system.

The consultant, Gartner Inc., had its contract revoked by the commission, and the deadline for bids was extended twice to remove any doubts about unfairness in the bidding, lottery officials said. The new deadline for bids is Tuesday.

A panel of Lottery Commission officials and a representative from the Texas comptroller’s office will evaluate the bids, with a decision expected in September. The Lottery Commission hired a new consultant company, Battelle, to take the place of Gartner and help check the bids to see whether they meet all the commission’s specifications, said lottery spokesman Bobby Heith.

The bidders’ financial proposals won’t be revealed by state officials even after Tuesday’s deadline passes. Only when the winning bid is selected will provisions of the new contract be public, Heith said.

The Chron has more on the GTech conflict of interest, and a quote from a familiar source.

Dawn Nettles, who owns the watchdog Lotto Report, predicted the agency would stick with its longtime operator.

“My prediction is GTECH will be awarded the contract, irregardless of who bids what,” Nettles said. “Because there are ties. And they’re not going to be broken. … I think for the purposes of our taxpayer dollars, and the fact we’re in such dire straits for money, I believe the Texas lottery ought to go with the best price.”

I will not be surprised if that prediction turns out to be true. There’s plenty of room for improvement in how the Lottery is run, though a lot of that is the Commission’s fault. Be that as it may, this is a rare opportunity. I hope we take advantage of it.

The stalking horse

Peggy Fikac brings up a familiar point about expanded gambling.

[Rob Kohler, a Texas Baptist Christian Life Commission consultant working against gambling expansion] suspects the gambling talk is paving the way for a new push to lease the state lottery to private interests, who would give Texas a big up-front payment in return for being allowed to run the games. Private interests might promise a bigger payment if allowed to expand gaming through such means as online ticket sales, he said.

GOP Gov. Rick Perry in 2007 suggested the state could reap more than $14 billion by leasing the lottery. At the time, Perry wanted to use the money to create education and health-related trust funds. This time, Kohler said, a private consortium could appear to “ride in on a white horse” with badly needed funds.

“I think that’s their play,” said Kohler — who thinks it’s a bad play. “It would be nothing short of the state taking a payday loan.”

That’s the first time I’ve seen this connection made in this context, but it’s not the first time it’s been made. When Perry first proposed privatizing the Lottery, I speculated that might lead to expanded gambling. I wasn’t the only one to think along those lines. Now it seems like we’ve come full circle. I guess no bad idea is ever truly dead when Rick Perry is involved.

You can now waste your money on Powerball

As of this week, Powerball tickets are now available in Texas. In case you’re tempted to buy one, here’s how good your chances are of winning.

The odds for hitting the Powerball jackpot are 1 in 195,249,054. That’s right, 195 million and change.

Which makes the chances for winning it all in Mega Millions (1 in 175,711,538) or Lotto Texas (1 in 25,827,165) almost look good.

Winning Powerball is like winning Lotto Texas, and then having to roll an eight at the craps table before you could collect.

The odds are only 1 in 750,000 of being struck by lightning in any given year, according to the National Weather Service.

And according to the National Safety Council, over one year, the odds for dying through contact with venomous spiders were 1 in 74,590,743 in 2006. In that same scary year, the odds were 1 in 9,323,843 of dying by being bitten or struck by a dog.

And you might want to rethink that sugary snack at work. The Book of Odds pegs the chance of a person dying from a vending machine accident in a year at 1 in 112 million.

Are we feeling lucky yet?

Here comes Powerball

Powerball will come to Texas as soon as January 31 after a unanimous vote approving sales of its tickets by the Texas Lottery Commission.

“What the Legislature has charged us to do is to raise revenue, and this is going to increase the amount that we can send to the education fund by $35 million,” Commissioner J. Winston Krause said after the panel unanimously approved a rule to allow the game in Texas. “That’s good for the schoolchildren of Texas, and it gives additional entertainment options for the public.”

The lottery contributed $1 billion to the Foundation School Fund, which helps fund public schools in Texas, in fiscal 2009, according to the commission.

Lottery watchdog Dawn Nettles, however, bemoaned the addition of the game.

“I think it’s awful, simply because it’s a game that people … most likely will not win, and they will be throwing away more money chasing a dream that won’t come true,” said Nettles, who owns the Lotto Report Web site.

Nettles expressed those same reservations back in November when the Commission gave initial approval to Powerball. As I said at the time, I think it’s more likely to cannibalize existing Lotto sales than to bring in a lot of new revenue, though the novelty factor may give it a boost at first. But we’ll see. I know I don’t ever expect to buy a Powerball ticket, but are any of you salivating to do so? Leave a comment and let me know.

Texas to get Powerball

The Texas Lottery Commission is fixing to bring Powerball to Texas.

The commission unanimously voted to publish rules for the game for public comment. If the panel gives final approval to the rules early next year, the first Powerball ticket could be sold in Texas on Jan. 31.

Texas already is part of the Mega Millions multi-jurisdiction lottery game, and officials for years have discussed the idea of adding Powerball to the mix.

The two big games just recently reached an agreement to allow states to participate in both. Previously, states had to pick one or the other.

It was back in 2003 that the TLC approved Mega Millions, after being given the authority to join multi-state games by the Lege. Looking back through my archives, I don’t see why they demurred on Powerball at the time. It may be because its jackpots are not guaranteed as advertised and can be reduced if ticket sales do not reach the needed levels. That’s kind of a sore spot at the Lottery Commission.

One objection that was raised at the time and is being raised again is that Powerball will not bring in the millions of extra revenue that the TLC is projecting.

Lottery watchdog Dawn Nettles, who operates the Lotto Report Web site, predicted, “It’s going to kill (the state jackpot game) Lotto Texas.”

“They’re not going to get more money out of the players, because the people don’t have it to give,” Nettles said. “All they’re going to do is divide their money amongst the games.”

Rob Kohler, a consultant for the Texas Baptist Christian Life Commission, said his group is most concerned about instant-win scratch tickets because they are impulse purchases.

He said that as a jackpot game, Powerball is “pretty benign.” He added, however, “We don’t think it will solve any of the budget problems or add any more money to the state.”

I think that at first, when Powerball is shiny and new, it will spur an increase in lottery revenues. Going forward, its ridiculously large jackpots may draw in more casual players. But I think Nettles has a point – I think a lot of Powerball’s sales will come from Texas Lotto players who have shifted their purchases from one game to the other. At the very least, I hope the TLC tried to include that likelihood in its models. Anyway, for those of you looking for the chance to throw away a few bucks on a one-in-147,000,000 chance, you’ll get it starting next January. We’ll see how much revenue for the state it really does generate.

Scratch EZ Match

I can’t say this comes as a surprise.

EZ Match is a scratch.

The Texas Lottery Commission pulled the plug Friday on the proposed game that would have allowed players to become instant winners by handing their money to a clerk for a ticket printed from a lottery terminal.

Commission staff had described the game as another way to deliver the sort of instant gratification players enjoy with scratch tickets, since they would not have had to wait for a drawing.

Conservative groups and other critics, however, had charged that the game would be a big step toward slot machines, which lawmakers have refused to approve.

“As long as I am chairman, it is never my intent nor my wish or desire that we overstep our bounds in regards to our authority for making rules,” said commission Chair Mary Ann Williamson.


Commission staff had emphasized that the ticket could be purchased only through a clerk, not directly from a machine. Proposed rules had specified the game would not be played on a video lottery terminal.

The commission’s assistant general counsel, Pete Wassdorf, had said the only similarity to a video lottery machine is that the ticket would have been purchased from an electronic machine, but that the differences were far greater.

Yes, and those differences are what made the game sound deadly boring to me. If you’re going to put out a new tax on people’s innumeracy, the least you can do is give them a bit of a thrill for their money. Never mind the claims about a back-door expansion of gambling, I never saw how this game was going to appeal to anyone. Now we’ll never know, though I figure the Commission will find a way to try again with something similar. We’ll see if they can do any better.

With more gambling comes more problem gambling

The never asleep gambling industry in Texas likes to point out how much business the casinos in Oklahoma and Louisiana get, which includes a hefty amount from Texans. But as gambling becomes more prevalent, so do gambling addictions.

Tribal casinos have grown in size and number since voters in 2004 approved a law expanding tribal gaming. There are now more than 100 tribal casinos in the state. Four horse racing tracks, the state lottery and even the Internet offer more gaming options.

“Of course the number of problem gamblers is on the rise,” said Wiley Harwell, executive director of the Oklahoma Association for Problem & Compulsive Gambling office in Norman. “Anytime you have casinos, per se, you’re gong to have this come along with it. If you’re in the casino business, you’re in the problem gambling business as well. We’re just now seeing our fair share of it.”

Figures from the Oklahoma Department of Mental Health and Substance Abuse Services show the number of people who called the state’s gambling helpline increased from 627 in fiscal year 2007 to 912 in fiscal year 2009. The number of people seeking treatment for gambling addiction at a state-funded facility rose from 149 to 350 in the same time period.

“Gambling addiction used to be a hidden problem in poker rooms,” Harwell said. “Now you see more and more casino gamblers.”

Harwell said many of people who call the helpline see the number on posters and brochures that are required at casinos.

These numbers don’t address those who seek private help. Many more do not seek help at all.

I refer you back to this post about the concept of “playing to extinction”. The point, simply, is that there is a cost to expanding gambling, and that cost is in my opinion understated. I just want to make sure we all keep that cost in mind, especially if the prospects of casinos in Texas are getting brighter.