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This study, titled “Legalized Gambling as a Strategy for Economic Development,” examines the economic, social, and legal consequences of governments using legalized gambling for economic development. The study was funded by the Aspen Institute and the Ford Foundation and published in March 1994.Key findings include:
- Lack of popular movement: The expansion of legalized gambling is driven by the gambling industry and public officials, not popular demand. There are no comprehensive state gambling plans; instead, expansion happens ad hoc as states copy each other, often due to revenue shortfalls or fear of losing gambling dollars to neighboring states or tribal casinos.
- Difficulty in control: Once gambling ventures are legalized and governments become dependent on their revenues, controlling their future form and spread becomes very difficult.
- Lack of objective knowledge: There is a significant absence of objective research on the real economic and social costs and benefits of legalized gambling. Studies used by public officials are often conducted by the gambling industry itself.
- Exaggerated benefits, understated costs: An analysis of fourteen economic impact studies found that claims of economic benefits were exaggerated, while costs were understated. Most studies were unbalanced, focusing on employment and tax revenue increases while neglecting or downplaying fiscal and social costs (e.g., criminal justice, regulation, problem gambling, infrastructure).
- Increased problem gambling: As states promote more gambling, the number of gamblers and the amount of personal income spent on gambling increase, leading to higher costs associated with gambling-related problems. Problem gambling is higher among lower-income individuals and minorities.
- Shift to addictive games: As state budgets become more dependent on gambling, there’s a trend towards legalizing highly addictive games like video lottery terminals and keno at decentralized locations. The gambling industry is also exploring at-home interactive TV betting.
- Market saturation: Growing competition among gambling ventures is leading to market saturation, potentially causing ventures to collapse. This also results in more relaxed government regulation and public subsidies for private gambling operations.
- Government as promoter: Governments have shifted from regulating to actively promoting gambling, liberalizing protective regulations and increasing advertising.
- Revenue use and constituencies: Gambling revenues are used for various budget needs, and earmarking them for specific programs (like education) creates pro-gambling political constituencies that make it difficult to curtail or terminate gambling ventures.
- State-tribal relations: Relations between tribes and states over tribal-run gambling are often adversarial. While Indian communities have seen immediate economic and social benefits, there are concerns about long-term viability and legal challenges to tribal sovereignty.
The study recommends that communities contemplating legalization use objective information, and it calls for an independent national organization to analyze the ongoing economic and social consequences of gambling. It also advises governments to avoid policies that conflict with other economic and social goals, to limit their role to making games available rather than actively promoting them, and to avoid legalizing more addictive games. Governments should also prepare comprehensive gambling plans, avoid financial dependence on gambling, and reconsider support for faltering ventures.
