Chapter 4 CASINO MANAGEMENT AND POLITICS

1. Chapter 4CASINO MANAGEMENT AND POLITICS Peter Collins University of Salford

2. Why Casino Managers Need to Understand Politics • Casino profits depend on governmental decisions. • Casino managers need to: • Identify politicians’ principle concerns about casinos • Design, develop and operate projects in ways which meet the government’s needs • Encourage governments to treat casinos in ways that are commercially helpful. • Know how governments think, so they can influence that thinking by addressing their lobbying efforts accordingly • Demonstrate to politicians how they can achieve their political objectives in ways that are at least consonant with the interests of the casino company

3. Is the Casino Industry Treated Differently from Other Industries by Governments? • How Casinos Make Money • Charging for services provided (less common): • Impose a charge for participating in a poker game. • Take a percentage of each pot. • Arranging for players to play against the casino where the odds favor the House (more common): • Casino customers pay for the pleasure they get from playing by losing money (in the long run). • Casinos pay for capital and operating costs out of the money that the players lose.

4. How the Casino Industry Is Unique • Subject to greater degree of government regulation than other service industries. Commonly regulated aspects: • Number and location of casinos in a jurisdiction • Who may and may not operate and play at them • Gambling age • Type of gambling products and entertainment that may be offered • Technical standards for gambling apparatus • Hours the casino may operate • Security and surveillance they must provide • Records they must keep for regulators • How they may market themselves and their products • Procedures they must follow to prevent money-laundering • Forms of consumer protection that must be available • Steps to discourage problem gamblers and help provided for those who do develop problems

5. Why Is the Casino Industry Treated Differently from the Rest of the Entertainment Industry by Governments? • Democracy and Public Opinion • Casinos are subject to a high degree of regulation in response to public opinion. • Politicians like to be popular and have a reputation for effectiveness protecting and promoting community interests. • Politicians are concerned how they appear in the media to their constituents. • Politicians judge whether casinos on the whole make their community better or worse. • Politicians base policy from democratic consensus that emerges from the conflict between two opposing camps – the permissivists and the protectivists.

6. The Permissive View • Stresses the role of government as restricted to only preventing citizens from harming others. • Espouses that even if something is morally undesirable, adults should decide for themselves how they spend their time and money. • Believes that people should be free to invest resources to make a profit by supplying goods and services that the public wants, including gambling. • Says that if people want to spend money at casinos and others are willing to invest in supplying casinos, then the number of casinos and how they operate ought to be determined by market forces.

7. The Protectivist View • Believes that governments enforce moral rules that are accepted by the majority of the community. • Sees gambling as immoral, and/or objects to it on religious grounds and/or thinks that casinos will disfigure communities and harm individuals. • Stresses that government has a duty to protect its citizens when the activity is known to be addictive, and deprives one of any real choice about their consumption. • Espouses that the fewer casinos there are, the smaller they are, the more inconveniently located they are, and the more regulatory inhibitions there are, the better.

8. The Democratic Consensus • The middle position around which public opinion tends to coalesce; if people want to gamble, they should not be prevented by the law. • Acknowledges that gambling has the capacity for causing harm, and is a potential source of addiction that can have negative economic consequences for the wider society. • Supports government authorization for some casino gambling, but not for too much of it.

9. How Governments Decide on Policy • The Complexity of Public Opinion • Problems confronting government relating to gambling laws: • Public opinion is ambiguous and complex • People commonly hold views that are mutually contradictory • The Dilemma of DemocracyOpinion • Democracy broadly requires governments to give people what they want: • First-rate public services • Not to have to pay for these services • Other people also pay for them • Governments’ dilemma: how to optimize their popularity by providing services, while not becoming unpopular by raising the taxes necessary to pay for them.

10. Effects on Gambling and Casino Policy • Principal features of commercial gaming industry relevant to government decision making: • A very popular form of entertainment • A good way of raising taxes • The public tends to be nervous that legalizing gambling may lead to increased crime • May be thought of as an activity that can defraud customers • Can become an addiction for a small minority; sometimes having devastating consequences • Has been thought of as a vice which is prohibited or frowned upon by most religions • Difficulties and dangers of having a substantial illegal industry If prohibited • Best way of authorizing gambling to fund public projects not funded from other forms of taxation • Preventing an increase in crime • What to do about excessive or “problem” gambling • Gauging and responding to public opinion concerning permitting different forms of commercial gambling

11. Cost-Benefit Analysis: (Governments weighing advantages against disadvantages) • Determine who will benefit from government policies. • Often it is not possible to attach actual dollar amounts to costs and benefits. • To attach more importance to maximizing potential economic benefits or to minimizing the negative impacts. • Gambling regulations define the three core objectives: • keeping crime out of certain areas • keeping the games honest • protecting the vulnerable • Note: Decisions by governments to change gambling laws cannot be driven by considerations of social risk versus economic advantage. There are other principles which governments need to take into account.

12. Minimizing Negative Social Impacts • Keeping Crime Out and the Games Honest • Strong association with illegal activities in public’s mind is fostered by popular culture. • Lawmakers require abnormally stringent tests of probity. • Governments impose many regulations because they fear casinos may be used to launder money. • Strongest incentive for casinos to avoid activities leading to accusations of breaking the law: the loss of a reputation of honesty and consequent loss of customers.

13. Protecting the Vulnerable: Problem Gambling • Achilles heel of the industry; those who want casinos closed or severely curtailed rely on this issue. • Anti-gamblers make claims about the dangers of problem gambling that are not warranted by current knowledge. • Governments believe if they liberalize gambling laws, they must minimize the dangers of excessive gambling. • Level of availability may foster problem gamblers. • Underage gambling presents less difficulty; policies keeping underage people off the floor is easy to enforce. • Bigger problems arise for casinos with true problem gamblers, those for whom gambling is an addiction.

14. Moral Damage • There is no empirical work purporting to measure the harmful effects of gambling on the moral character of individuals or communities. • The perception of the industry as selling products which exploit moral weakness is an important determinant of the regulatory environment; and therefore of a casino’s profitability. • It is important for casinos to demonstrate that they are good corporate citizens.

15. Maximizing Economic Benefits • Creation of Wealth • Consumer surplus – If players can purchase gambling services more cheaply than before, they will be better off to that extent. The wealth of a community grows as its members are able to buy more of the goods and services they want for an increasingly smaller portion of their income. • Export earnings and import substitutions – A jurisdiction benefits economically as people come in to gamble and spend money that they would spend elsewhere. Conversely, jurisdictions benefit through their own residents spending money in local casinos rather than in other jurisdictions.

16. Redistribution (wealth from richer to poorer) • Governments try to use gambling policy as a way of helping the economically disadvantaged. • Policies tax gamblers more heavily than other consumers; taxes are used to improve the circumstances of people poorer than those who pay them. • Governments believe that if gambling is expensive, it will discourage the vulnerable poor from engaging in it. • Governments seek to capture abnormal profits by means of a special tax on gambling – a gambling privilege tax. • Displacement and Employment • If customers start spending money on gambling, they will stop spending it on something else. • Governments need to ask where money is coming from and what it would be spent on if not gambling. • If customers spend funds for necessities on gambling, then it constitutes a social problem.

17. Implications for Casino Managers • Five stages in the life of a casino company: • Identifying a promising jurisdiction; persuading its government to authorize the building of casinos in a regulatory environment which is conducive to profitability • Securing a license, often through a tendering process • Building the project • Opening and operating the project • Returning to stage one in new jurisdictions