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“Racinos” Bad Public Policy

Policy RadarIgnoring the resounding 57-43% defeat of casino gambling by the Ohio electorate last fall, Rep. Bill Seitz (R-Cincinnati) and Sen. Steve Stivers (R-Columbus) have introduced companion bills, House Bill 118 and Senate Bill 125, to bring electronic gaming devices to Ohio horse racing tracks.

Stivers and Seitz are touting the allegedly economic advantages of allowing casino-style electronic gambling. They are, however, ignoring numerous economic impact studies which indicate that the long-term economic costs exceed the short-term tax-revenue gains by several times. These studies measured the costs to society in terms of increased bankruptcy filings, divorce, business failures, crime rates and resultant incarceration costs, suicide rates, etc.

These bills are mirrors of legislation offered during the previous General Assembly session (HB158) by Rep. Seitz to expand this form of gambling in Ohio. Testimony was given during that process by one of our own board members, and, as the new proposals are virtually the same as the previous proposal, the following are the rationales for the opposition to this effort by these two elected officials. House Bill 158 was passed in committee, but failed to receive sufficient support to bring the measure to the floor of the Ohio House for a vote.

Testimony opposing “Instant Gaming” expansion at Ohio horse racing tracks:

I come before you today to express opposition to the passage of House Bill 158, sponsored by Representative Bill Seitz. Our organization strongly believes that there is a direct correlation between the expansion of gambling options in the state with increased economic and social welfare costs to society.

The proposal before the committee would allow the introduction of “instant racing” systems into the racing tracks in Ohio. Proponents have testified that this proposal would both be “just a slight modification” to the ability to wager at the tracks, to “reinventing the racetrack experience.” It is evident that the latter sentiment is closer to the truth: the experience would be reinvented to more closely mirror a casino then a horse track.

The committee was presented with photos of the proposed machines, distributed by RaceTech. From its appearance, it resembles a slot machine found in casinos. However, it is not just by appearance that that similarity is found. An Internet search revealed documentation relating to the European patent application by RaceTech for this machine. The documentation supplied for the patent application is revealing:

“Although the above described and other types of wagers commonly available
at racetracks are extremely enjoyable and entertaining, over the years,
the racing industry has seen a great increase in competition from
lotteries and casinos.

At least some patrons prefer a more immediate reward and higher frequency
wagering than customarily offered at race tracks. For example, a typical
racetrack offers one race every half hour. A casino having slot machines,
however, offers a patron the opportunity to place a wager that can be won
or lost every few seconds.

In order to remain competitive, the racing industry is in need of a gaming
system that satisfies the preferences of many different types of patrons.

Although simulcasting does enhance patron loyalty, the number of wagers a patron can place is still limited, particularly in comparison to a slot machine.

In discussing the technical aspects of this system, the patent information supplies the following:

“The gaming system also includes a video server interface for providing
high speed delivery of selected video clips from a historical database,
and a tote system interface which is coupled to a standard racetrack
totalisator system to allow the multi-function wagering terminal to
operate as a standard self-service racetrack wagering terminal. Other
interfaces to other types of wagering systems, such as a lottery, could
also be provided.

The above described gaming system can be utilized in connection with many
different types of races such as horse and dog races. In addition, the
system could be utilized in connection with other types of events. “

This would certainly seem to indicate that these particular types of machines could easily be converted to become both Video Lottery Terminals and slot-type machines. Nothing in the provisions of House Bill 158 would serve to restrict the conversion of these machines to VLT or slot-type wagering systems. This would be tantamount to allowing for the expansion to full Class III gambling in Ohio (and provide an easy inroad for the expansion of full casino gaming in this state). I would strongly urge the members of this committee to not rush to adopt this measure before a full study of the potential impacts upon our state in relation to the expansion of gambling via this proposal is conducted.

Other impacts that need to be considered are the personal and social costs associated with video gambling. Researcher Dr. Bob Breen, in the Journal of Gambling Studies, has commented that “Video gambling is the most addictive form of gambling in history. We found out that the men and women who ‘got hooked’ on video gambling became compulsive gamblers in about one year. Those who got hooked on other kinds of gambling (such as horses, sports betting, etc…) became compulsive gamblers after about 3 ½ years.”

This addiction brings increased social costs to society. Researchers William Thompson, Ricardo Gazel and Dan Rickman, in the Gaming Law Review1 (1997) noted that each compulsive gambler costs society an average of $9,469 per year in economic losses, including employment losses, debts, and welfare. Professor of Commerce and Legal Policy at the University of Illinois, John Kindt, in an article in the Drake Law Review 43 (1994), estimated the social costs (which includes the purely economic factors) to the public of a compulsive gambler to be at least $45,000 per year.

Nationally recognized expert on compulsive gambling, Valerie Lorenz, in a statement to the National Coalition against Legalized Gambling, sets the range of costs to state or federal jurisdictions for the incarceration of problem gamblers who are convicted of crimes related to their gambling habits at $20,000 to $50,000 annually.

Director of the Division on addictions at Harvard Medical School, Howard J. Shaffer, also a leading researcher on gambling, has expressed that a state’s involvement in the promotion or expansion of gambling options to the public is a conflict of interest, based upon the state’s function to protect and serve the citizenry.

The National Gambling Impact Study Commission in 1999 issued recommendations on the issue of gambling. That commission called for a moratorium on the expansion of gambling in the US, particularly that of video gambling machines, which was identified as the “crack cocaine” of creating new pathological (addicted) gamblers. The Commission also noted as a recommendation that states “should refuse to allow the introduction of casino-style gambling (slots, VLT’s, etc.) into pari-mutuel facilities to financially “save” the facility, which the market has determined no longer serves the community or for the purpose of competing with other forms of gambling.

One Ohio Senator, who participated in an ad-hoc group studying a prior proposal to enact a ballot initiative to authorize VLT’s at Ohio’s horse-racing tracks, sums it up well: “The advocates for the racetracks are single-minded in their devotion to their cause….It is now clear that the focus of this group has always been to package slot machines at the race tracks under the guise of an altruistic program to provide funds (for schools, etc.). In reality it is more about private profiteering from gambling.”

We believe that, given the above referenced information regarding these machines, their easy convertibility to other forms of electronic gambling devices, and the social and economic costs that are directly associated with the “crack cocaine” of the gambling industry, House Bill 158 is much more than it is purported to be.

We would urge the members of the Ohio Legislature to not support this legislation, which may well be a “Trojan Horse” for Ohioans.

Posted in Gambling, Marriage and Family, Public Policy Radar.