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Legislators: Vote NO on legalizing internet poker

busted flush

Coalition Against Gambling in New York, the New York State Council of Churches and the national organization Stop Predatory Gambling  say to New York State legislators “Vote NO” on S5302 and “NO”  on A 9049A  .

The two bills to legalize certain internet-based poker games (Omaha Hold ‘em and Texas Hold ‘em)  look the same.  Both use the same deceptive role-of-skill argument to say the two games are not gambling, thus evading the prohibition against gambling in the State Constitution.

A thought experiment: five robots are programmed at exactly the same very high skill level to play Texas Hold ‘em.  Each has ample cash.  They are gambling.  Pure chance will rule.  In the first hand, one bot will take all.   After  thousands  of  hands,  however, each will still have  about as much as the others.  This is in  game theory a “fair game.”

Now downgrade the skill levels of four ‘bots so that one scarcely knows the relative values of different hands, while the other three are each in its own stratum of skill between beginner and tournament champion.  After many hands the bottom ‘bot will have been cleaned  out.  After  hundreds  of hands,  the supreme robot will have pocketed much more than the others.  After  thousands  it will have cleaned them out,  too.

In the second scenario disparities in skill skewed the distribution of winnings,  but in both the robots are gambling,   playing the same game by the same rules as in the first scenario.

The only way to consistently make money in poker is to play with people you outclass who don’t know how much better you are.  Gambling in “games” whose outcomes are not  (like slot machines or roulette)  due to pure chance sets the stage for money to flow to  the more skilled from  the less skilled.  This is the stage for hustle and fleecing.

Besides the prevarication that i-poker is not gambling,  the twin bills share a set of supposed safeguards that look good on paper.  Nothing is said about stringency or enforcement.

If internet poker is not gambling, why would licenses be granted only to racinos or class III casinos?

Could the  paradoxical restriction be to avoid opposition to the bill from the bricks and mortar gambling sector?

S5302  and A9049A  are pushed by companies wanting  to make money from New Yorkers  and  to sustain the  sharks who target New York i-poker players.  The  two bills are to sell high-cost hustling licenses that will hurt  New Yorkers.

Permission to reproduce the above in whole or in part is hereby given by the author.  Please cite the permalink above. Illustration by the author.

See no gambling, hear no gambling, speak no gambling, think no gambling: A 10473

Epic Showdowns 23451208866_cc0bc9a8e0Comments on A 10473 New York State Assembly  “Relates to the registration and regulation of interactive fantasy sports contests”

Introduced by Mr. Pretlow May 27 2016

S 6793A was brought out  in the Senate by Mr Bonacic on May 24.  It is not a “same as” version but not very different.  Comments in the body of this post concern the Assembly version. Do not write to a Senator about the Assembly version.  See the appendix when  writing a Senator.  A letter can be done that can go to either chamber.

 Epic Showdowns

Coalition Against  Gambling in New York  (CAGNY), an all volunteer nonprofit  organization, urges every member of the NY State legislature to vote against the  bill if it comes to the  floor in his or her chamber and to vote no on any larger  omnibus bill into which A 10473  or S 6793A may have been  inserted late in the session.  Seven  really good reasons:

We will return to each of these in more detail below

  1. Assumes that entering contests in fantasy sports is not gambling,  attempting an end run around the NYS constitutional prohibition on gambling.  It  is gambling and internet gambling to boot.  Only a few states allow internet gambling though all but two now allow certain forms of gambling such as casinos, card rooms or state lotteries.
  1. Considers certain video games to be “sports events” and  players to be “athletes.”    The bill would allow entry (that is betting)  in a myriad of  “Interactive Fantasy Sports Contests.”  IFSC provide a vastly  greater platform  of events around the world than the stick and ball sports to which fantasy “sports” “contests” of  the big operators in the USA have previously been confined.  It would allow Daily Fantasy eSports (DFeS) without ever mentioning that term.
  1. Consumer protection has no watchdog,  Everything is based on self-report by “registrants” [operators]  to the Gaming Commission or by “authorized players” (bettors) to registrants.
  2. The drive to be “regulated” comes from companies that expect to profit from “regulation.”  They want to create a market.   Lobbying and outright corruption go hand in hand with such forces.  Draft Kings was getting ready last September to launch its own DFeS.
  3. Revenue to the state from licensing fees and from a 15% tax on what operators hold after paying out winnings would not be even enough to cover the cost of  “regulation.”  This is explicit in the justification section of the bill memo (see below),
  4. Legalizing internet gambling in NYS would not increase tourism, would not promote “economic development,”  would not provide “support  for education”  or “property tax relief.”   The proposed legislation is a concession to special interest groups who want to resume hustling New Yorkers.
  5. Expansion of gambling, particularly to the internet, worsens social injustice.
  1. Gambling or not?

This  dishonest bill  ignores the opinion of the NYS AG, shared by other states’ AGs and other parties  (football player Joe Namath, radio host Mike Francesca) that Daily Fantasy Sports as practiced by DraftKings and FanDuel is gambling.  It  does not even acknowledge  a controversy in NYS or in any state.  The bill avoids the issue by (a) limiting use of words that remind anyone of gambling and (b) implying that the AG’s complaint about DK and FD was related only to insider trading allegations. To illustrate (a), a text analysis:

  • Term or word                         number times used in text of bill

 

“gambling”                                          0

“gaming”                                             once   § 1401   ¶ 3

“internet”                                            0

“skill”                                                  0

“betting” or “bet”                                0

“wager”                                               0

“online”                                               once   § 1401   ¶ 8

“esports”  or e-sports or eSports         0

 

(b)   Watch the subtlety (deviousness) of the justification in the  bill memo, which opens by saying that the AG’s office began in October to investigate “into whether employees of the two biggest daily fantasy sports companies, DraftKings and FanDuel, were able to gain an unfair financial advantage in daily fantasy football contests by exploiting access to non-public data” and continues   “On November 10, the Attorney General’s office issued a notice to DraftKings and FanDuel demanding that they stop accepting wagers in New York.”  It never gives the reason for the demand, namely that the AG considered the operations of DK and FD to be forms of gambling, which with certain exceptions is illegal in New York State.  The justification  pretends that the AG’s objection was to charges of  insider trading.  The AG’s main  motivation,  however,  was not insider trading nor false advertising.  It is given in the office’s memorandum   below (italics added).

“The New York State Constitution has prohibited bookmaking and other forms of sports gambling since 1894. Under New York law, a wager constitutes gambling when it depends on either a (1) “future contingent event not under [the bettor’s] control or influence” or (2) “contest of chance.” So-called Daily Fantasy Sports (“DFS”) wagers fit squarely in both these definitions, though by meeting just one of the two definitions DFS would be considered gambling.  DFS is nothing more than a rebranding of sports betting. It is plainly illegal. 

  1. “Daily Fantasy Sports” becomes  “Interactive  Fantasy Sports Contests”

Since video game competitions are a booming activity around the world,  the bill would allow betting (or in DFS terms, paying to enter a contest) on a vastly greater platform  of events around the world than the stick and ball sports to which fantasy “sports” “contests” of  the big operators in the USA have been confined.  The bill is dishonest.  It uses  empty harmless-sounding terms (“interactive,”  “contests”) to hide a huge intended expansion of opportunities to “play” on the internet.  The most outrageous terminology calls video game players  “athletes”  so that competition in video games can be called a sports event.

http://www.legalsportsreport.com/4037/daily-fantasy-esports-market-overview/  Chris Grove on DFeS and the potential for growth September 18 2015.  Quoting below

“Daily fantasy eSports (DFeS) is essentially identical to the mainstream DFS product. The competition structure, lobby, promotions, and other core elements are more or less interchangeable.  The difference is that DFS players build rosters from athletes in stick-and-ball sports, while DFeS players build rosters from  athletes in eSports like Dota 2 and League of Legends.”

http://www.legalsportsreport.com/4025/draftkings-fantasy-esports/  Dustin Gowker posted Sept 18  2015 on the announcement that DK was preparing to launch its own DFes site.

http://edition.cnn.com/2016/05/29/sport/esports-revolution-revenue-audience-growth/   posted May 29  by a CNN writer describes the potential for growth.  League of Legends is a game that DK  had  its eyes on last September for  its  DFeS offering.  A quote from this is below.

“The eSports industry has been experiencing  double digit growth for several years and according to the research group Newzoo, it boasts a global community of 148 million enthusiasts. That number is projected to hit 215 million by 2019. Just one game — “League of Legends” — drew an audience of 36 million for its World Championship last year, that’s more viewers than the NBA Finals.”

  1. Consumer “ Protection”

The bill looks very consumer-protective, addressing many of the criticisms made of DK and FD, seemingly correcting those weaknesses.  For example,  it requires  that the mean and median net winnings of all players be made public and that “highly experienced players” be labelled as such.  It requires that payments be made to authorized players on time.

Loopholes abound.  Here are some

If someone becomes highly experienced in the future but was not on the registration date,  what mechanism ensures he will be labelled?  Who checks for omissions? Who checks for aliases?

Can college students on e-sports scholarships be picked for an IFSC team, or is their “sport”  a “collegiate sport” and therefore not eligible? Click here for more on athletic scholarships.

Persons under age eighteen are not supposed to be authorized. §1404 (b) (iii) says each registrant shall take all appropriate steps to confirm that  an individual opening an account is not a minor.

There is no definition of “appropriate.”  Is this an elaborate investigation  like New Jersey’s “Know Your Customer?”  Nothing is said.

Regulation, apparently on the honor system,  is based on self-report, of  registrants to “the commission”  [ the Gaming Commission without the  word Gaming] or of  “authorized players” to registrants.

The proposed  plan for voluntary self-exclusion has no supervision and no time frame.  Someone could self-exclude from one site,  then join another  tomorrow.  §1404 (d) reads enable authorized players to exclude themselves from contests  and take  reasonable  steps  to prevent such players from entering a contest  from which they have excluded themselves;

What are “reasonable” steps?  The  Upstate New York Gaming Economic Development Act of 2013 spells out more detail on self-exclusion than “reasonable steps.”

The use of scripts is prohibited.  (Section 1401 para 7)  Without these computerized routines for composing teams, sharks and minnows would be on nearly equal footing.  This would move things toward a truly fair game, closer to what seasonal fantasy sports were and are.   “Highly experienced players” (AKA sharks)  will not approve.  The use of scripts is hard to prove  though easy to suspect.   Scripts  will still be used sub rosa.  The proposed legislation says nothing about penalties.

4. Who is behind the insertion  of  eSports into  “regulation” of DFS?   The drive to  “regulate” comes from companies that expect to profit from “regulation.”  They want to create a  market much bigger than current DFS.   Lobbying and outright corruption go hand in hand with such forces.  Draft Kings was getting ready last September to launch its own Daily Fantasy eSPort (DFeS) with the video game League of Legends.

In Illinois last week  a similar bill was tabled by its sponsor for the current session because of allegations of proposed vote-buying by a FanDuel lobbyist whose hapless explanation (“corporate social responsibility goals”)  is here .

5. Revenue to New York State

Assuming “the commission” has the staff  to add regulating IFSC to its other duties, who is going to pay for the effort?    The Justification section of the bill Memo addresses the question.

“By registering and taxing interactive fantasy sports contests, this bill will also bring about a new and abundant source of revenue for New York State. Such funds will help [emphasis added] pay for the cost of regulation.”

How abundant will the funds be if they will not even cover the cost of regulation?  It they don’t, what source will?  This writer suspects that if this legislation passes not very much will be spent on enforcing regulations, and that some or most of the revenue will go  into the General Fund.  Realizing income to state coffers  by stinting on regulation of gambling is hardly a new concept but, sad-to-say, appeals to budget-makers.

Admitting  that legalizing internet gambling in New York State will not  pay for “regulating” internet gambling in New York State shows  that the  drive to legalize internet gambling in New York State is not to help all New Yorkers.  It is to help internet gambling special interests.

6. Tourism, “economic development” “support for education” “property tax relief”  CAGNY has long said that “benefits” such as the above to localities, regions or states are illusory,  really net losses when hidden costs are accounted for.  This opinion, I  admit, was was not shared by a number of  lawmakers who voted for “second passage” of the “casino amendment” in 2013 while saying “I don’t personally support casino expansion.”

Legislators who  previously voted to expand gambling in New York State because they believed the benefits to their constituents outweighed the costs can  vote their consciences against this  Interactive Fantasy Sports Contest legislation.   It  does not even pretend to offer any such economic benefits to the people of NY State.  Nor does it enjoy popular support.  A recent Siena poll showed 45% of respondents oppose legalization of Daily Fantasy Sports,  37% want it, 17% undecided.

Passage of this legislation is a handout from all New Yorkers  to corporate special interests that can’t even pretend their plans will improve the quality of our lives.

6. Social injustice Government-sanctioned predatory gambling wreaks hardship and suffering  not just on gamblers but on  their families, friends, relative, employers, employees, clients and more.  It contributes to social injustice.  The  60+ posts on this site pile up the evidence.

Permission is hereby given by the author, Stephen Q. Shafer  MD MPH,   to reproduce this text in whole or part as long as the permalink above is cited. The photo image is from flickerCC  title “Epic Showdowns” 95205711@NO2/23451208866.

Since publication on June 1 this post has been slightly revised.

Appendices

From § 1401 ¶ 8   The term  “Interactive fantasy sports contest” makes its debut in proposed legislation

18    8. “Interactive fantasy sports contest” or “contest”  shall  mean  any

19  online fantasy or simulation sports game or contest offered by an opera-

20  tor  or  registrant  in  which an authorized player manages a fantasy or

21  simulation sports team composed of athletes from an amateur  or  profes-

22  sional sports organization and which meets the following conditions:

23    (a)  the  value of any prizes and awards offered to authorized players

24  shall be established and made known to such players in  advance  of  the

25  contest, and such value shall not be determined by the number of author-

26  ized players or the amount of any entry fees paid by such players;

27    (b)  no  winning outcome shall be based on the score, point spread, or

28  performance of a single sports team, or any combination of such teams;

29    (c) no winning outcome shall be based solely on any single performance

30  of an individual athlete in a single sport or athletic event; and

31    (d) no game or contest shall be based on a prohibited sports event.

Comparing the Senate Version to the Assembly version:  The Senate version is not as sanitized as the Assembly version.  The word “gambling” is allowed, as is “gaming.”   “Internet” appears   The Senate version recaps and swallows whole  tortuous arguments by counsel for FD and DK that skill is material, making the process not gambling.  No mention  that the Attorney General has ever said a word about DFS.   The  Assembly version avoids all discussion of controversy as to whether DFS is gambling.

The Senate version offers  another gambit by DK and FD,  that since seasonal fantasy sports were carved out from the  UIGEA of 2006, Daily Fantasy Sports ( a later development) have been too.  This to me is like saying that cars with engines should be allowed into a soapbox derby as long as they have four wheels.

The Senate version  is even more vague than the Assembly’s on what sorts of “interactive fantasy sports contests:  would be allowed.  Neither version mentions eSports (video gaming).

The Assembly version prohibits high school sports; the Senate’s does not.

Senate: 15% tax on gross revenue from New York players  Assembly 15% on gross revenue, residence not mentioned.

Senate version even looser than Assembly on what “compulsive participants” might do to remove themselves.  Assembly calls them “compulsive players.”

Senate version more specific about how to keep minors out.

Both versions are vapid and vague about how to prevent use of scripts.  Neither prescribes punishment.

Both versions share a unilateral assumption that Daily Fantasy Sports is not gambling,  though they get there by different paths. The Senate version parrots Mssrs Mastro and Boies, counsel for two of the big companies.  The Assembly version is a thick  whitewash.  They are asking the legislature to make an end run  around the prohibition against gambling in the state constitution. Both versions provide paper-kitten protection against being hustled and fleeced. Neither version offers any benefit, credible or not, to the vast majority of New Yorkers.  Casino expansion and Lottery expansion have been sold to New Yorker by mirages. Promoters of “Interactive Fantasy Sports Contests”  (hitherto called internet sports betting)  don’t  offer mirages to the general population.   Could it be that  campaign contributions are  a better deal ? This legislation is for special interests.

Archives about the AG’s case against FanDuel and DraftKings

http://www.nytimes.com/2015/11/11/sports/football/draftkings-fanduel-new-york-attorney-general-tells-fantasy-sites-to-stop-taking-bets-in-new-york.html?_r=1   NY Times November 11,  the day after AG announced the cease and desist letter

http://www.nydailynews.com/sports/football/fanduel-draftkings-assure-users-remain-open-article-1.2431300   NY Daily News from November 11

http://www.nydailynews.com/opinion/editorial-fantasy-meet-reality-article-1.2431796  NYDN editorial says DFS is gambling.

http://www.nydailynews.com/sports/fantasy-sports-predatory-gambling-dangerous-article-1.2431896  sidebar by Stephen Shafer in Daily News article linked to above

http://www.ag.ny.gov/pdfs/DK_MOL.pdf complaint against Draft Kings submitted Nov 17, 2015

http://www.nydailynews.com/new-york/ag-schneiderman-bad-gamble-bluff-law-article-1.2441071  op- ed by AG Schneiderman November 19

http://www.nydailynews.com/opinion/fantasyland-n-y-bets-albany-casino-article-1.2652600 Daily News  holds its great position  May 31 2016

 

“Fair Game,” “Fair Game” “Fair Game” and Daily Fantasy Sports

Super Bowl 50

Super Bowl 50

What is “a fair game?”  According to game theory,   it’s one in which all participants have an equal chance to win whatever is at stake.  A classical lottery is a fair game in that sense.     Any game of pure chance, even when the house gets a cut on every round, is a “fair game”  among  the wagering  participants  if there’s no cheating.

There is another meaning to “a fair game,”  this  one  from sports: a contest that follows explicit rules agreed to by all participants and does not allow cheating.  No pretense in this kind of fair game that all contenders have an equal chance to win.  Skill, that is getting and holding an advantage over the opponent(s),  is paramount. Strength, stamina, strategy, practice, motivation and innate talent are some elements of athletic skill.    Pitting an Olympic volleyball team all out against the junior varsity of a 300-student high school is “fair”  in this sense  if  the rules of volleyball  are followed, yet everyone who hears about such a “contest”  knows it’s “not fair.”  Even if the rules are strictly followed, the HS team has absolutely no control over the objective  outcome, i.e. who wins.   By contrast, a big urban marathon is “fair”  in the sports sense and in the ethical sense.  Everyone is aware that among 5000 female entrants the first-place finisher will be one of twenty women identified days before.  The other runners have no thought of winning.  Who places first is not under their control.  They do, however,  have control over other outcomes such as logging a personal best or completing their third marathon of the year or  simply finishing.   These events (accomplishments) have subjective, not objective,   value.

Live poker has a different skill set than athletics.  A trained memory, long attention span, ability to mentally reckon probabilities and a knack for reading other people’s body language are some of the requisites.

What is “fair” in the sports sense becomes unfair in playing for a money prize or for public honor when disparities in the multiple dimensions of skill  are overwhelming.    The facade of fairness can also warp into actual unfairness  when  the supposedly explicit rules are vague,  deliberately obscure or pliable or not enforced.  This leads down a slippery slope through “gamesmanship” to outright cheating.  Both situations – disparities in skill or bendable rules – mean that some of the participants  have no control over an objective outcome like winning money or  public accolades.

Now drop the “a” and take the phrase “fair game.”  This today  usually means someone whom circumstances (e.g. elected public office,  past history) have made a subject of  criticism or ridicule.  The original meaning came from field sports: quarry taken under established rules such as “don’t shoot sitting ducks.”   Such rules are not to bring parity in survival chances between hunter and hunted. They are just codes against cheating.   Examples of  this kind of “fair game”  are birds shot on the fly or, to some,   rats penned with a terrier.

Learned counsel for Daily Fantasy Sports distance their clients from the “fair game”  model of gambling, declaring that a small fraction of participants take home 90%  of the prize money.

Learned counsel argue that this handful are more skilled than the others, which no one denies.

Learned counsel argue that for the elite handful the outcome (cumulative money won over time )  is under their control; therefore, “it’s not gambling.”    Perhaps it isn’t  for the handful, but it is for everyone else who has no control over the outcome once they are “swimming with the sharks.”

Learned counsel want courts to consider DFS a fair game in the second sense: people enter of  their own free will,  aware  of  rules.  In that sense it is as fair, or as unfair, as the volleyball matchup above.  All persons who enter become “fair game”  for the elite handful whose skill is in sourcing or building  computerized routines to select their players.

If a group of people unfamiliar with  National Football League players were invited to  play a few weeks of  DFS,  90% of the winnings would not follow 10% of the players.  One week’s big winner would flop the next.  If the group is then joined by a friendly stranger who uses customized computer programs to pick his team, that f.s. might fare badly in one week, but would be sure to win more money over time than anyone  else.  Among  players of equally low skill, chance rules completely,  as it nearly does among those  who are all at the same high level.  The effect of skill on outcome emerges when skill levels vary across the players.  Throw in one player much better than all others and the role of chance goes down for him with respect to the rest. He may be so well-informed that he is doing prudent investing, not gambling.    Everyone else is gambling.

DFS is a hustle.  It is not a “fair game” in the game theory sense.  It is not fair in the sports sense because too many matchups are patently not fair, but rather the equivalent of the volleyball game  above.  The only “fair game”  in the story  is the group of new players who jump in thinking they can win big,   not knowing what they are up against.

The prizes come from “entry fees.” which DFS partisans say are not wagers.  If the guaranteed prize pool is $100,000  the companies say entries are closed at  a fixed pre-specified ceiling above  $100,000 such as $112,000.   If  $112,000  of entry fees came in and $100,000  is paid out to winners, the company pockets $12,000 for its trouble in enabling the “competition.”  If only $90,000 of entry fees came in the company has to pony up the other $10,000 to meet the purse money.  DFS is thus “house-banked.”   This gives a very strong incentive to fill every round.  Thus the advertising blitz to recruit new entrants and retain previous ones with accounts of fabulous winnings by smart neophytes.   A house-banked game is different from an office March madness pool where the amount going to the winners is determined by how many people have entered at the start.  If each entry costs a dollar, and twenty enter, then twenty dollars is divided.  If a hundred enter, the pool is $100.

DFS is  a house-banked hustle.  That’s gambling.

Permission is granted to reproduce this essay in whole or part as long as the permalink is cited.  The opinions are those of the author, Stephen Q. Shafer and are not necessarily shared by any or all members of Coalition Against Gambling in New York .  The photo image is from Flickr Creative Commons 24805517021_3fc6989ef3

Generally Recognized as Gambling: Daily Fantasy Sports

Testimony Before the Hearing on Daily Fantasy Sports held by Committees of the New York State Legislature,  8 December 2015

GamblinglosspictureMy name is Stephen Shafer. I chair Coalition Against Gambling in New York, an all-volunteer organization registered in Buffalo since 2007. Our members have different philosophies about gambling. The mainstream holds that not all gambling is bad for society or the individual. A March Madness pool where 100% of entry fees are paid out to winners, a game of cards among true friends, a bet on whether it was Yogi or Casey who made a certain remark – these actions don’t bother us. What does, and deeply, is predatory gambling – gambling in which some party profits predictably over time by preying on others. That party can be “the house” or “sharks” or both.

I think Attorney General Eric Schneiderman  is entirely right that Daily Fantasy Sports of the DraftKings and FanDuel type is gambling under New York State law; payback depends on a future contingent event that the person placing the stake cannot control. That person controls the selection of his fantasy team, but not the actual performances of the component athletes from which the outcome of the contest derives. A horseplayer uses skill to decide which horses to pick at for the trifecta, but where the horses place that day is not in her control. No one denies that is gambling.

Assuming DFS is gambling, it is certainly illegal. The State Constitution bans all gambling in New York State except (by specific amendments allowing regulated parimutuel, charitable gambling, Lottery and (as of 2013) up to seven non-Indian casinos in the future. There is no exception for any kind of betting on sports, either live action or fixed odds. There is no exception for internet gambling.

The business model of i-poker and online FS is similar to that of a casino or a state lottery:

  • Recruit people through their hopes of payoffs far greater than investments.
  • Keep their loyalty with frequent small payouts and tidings of rich payoffs to others.
  • Replace them as they burn out, go broke or jump ship.

Result:  some, far from all, of the internet  “players” become problem gamblers and addicted gamblers. They damage, even wreck, not only their own lives but those of all around them, the hidden victims of predatory gambling – spouses, children, parents, in-laws, siblings, employers, employees, clients, neighbors. With  “land-based” casinos and state lotteries, half the revenue (sometimes more than half) comes from problem and addicted gamblers, maybe 12-15% of customers. Their net losses are drained from someone else by deception or bullying or crime. These gamblers need help; so, in greater measure because there are far more of them, do those they are ripping off. My organization has great respect for clinicians and peers who help problem gamblers day to day. Our focus, however, is to stop expansion of predatory gambling. That’s why we hold that DFS and all forms of so-called i-gaming are illegal and should stay that way. That’s why we support the AG’s stance.

There are differences between the model for i-poker and online DFS on the one hand and that for casinos and government-run lotteries on the other. In the first group, “players” pay real attention to the action.   Some win more consistently than others through preparation (e.g. scripts in DFS) and mental probability calculations as in i-poker. This is called skill, though it can verge on insider trading in DFS. In the second group, no decision-making is needed beyond which card to buy or slot machine to go to.

In i-poker and DFS newcomers have no idea how they will fare. They don’t know how their skills stack up to those of other players, most of whom are strangers; moreover, chance has a big role. The game board changes day to day, hour to hour. They are really less well-informed about their chances of success than slot players who know they can expect long-term about 88-93 cents back for every $ invested.

In i-poker and online DFS there are two types of predator: the house, or operator, which takes a  percentage of the pot (“the rake”) or of pooled wagers (which DFS calls “entry fees”);  and the elite stratum of well-prepared pros or near-pros who pocket most of the money laid out  by everyone. In the typical casino or state Lottery setup – a slot machine – the house is the only predator, setting its expected payout % as it sees fit under regulation.

Operations with player predators (“sharks”) need prey (“ fish”) to contribute to the betting pool or join the poker game. Heavy advertisement with upfront incentives is the way to get new fish. Fish may know a lot about their sports, but few can match the preparations of the sharks.   Some fish will fall into the cycle of chasing losses that spells problem gambling. If there are indeed 500,000 DFS participants in New York State , then it is likely there are, or will be soon, at least 20,000 problem gamblers and addicted gamblers among them.

I surmise that the distribution of players’ net losses and net wins is different from that of a casino or Lottery. In the latter, the small fraction of users who are the most “involved” – that is, invest the most time and money– provide the lion’s share of gamblers’ net losses (= house’s net win). In DFS, the biggest investors are the few sharks, who divide among themselves as their winnings nearly all the pooled bets. The investments of problem gamblers and addicted gamblers are perhaps not as over-represented in the winners’ pot as they are (> = 50%) in the gross gaming revenue of a casino or a state Lottery. In that sense the AG’s action in ordering a shutdown of DFS is consumer protection as well as an effort to prevent the cultivation of problem gamblers.

Why don’t we see many problem gamblers or members of their circles here today?  Why do most complaints voiced to the media re DFS relate to how the player was cheated or had winnings withheld, not how he was suckered into layers of debt and despair?

  • Most problem gamblers and addicted gamblers are in denial at any given moment.
  • The culture of recovery says “Don’t make the casino/game/track or whatever responsible for your gambling problem. You take responsibility.” This keeps current and recovering problem gamblers from taking a public stand against gambling.
  • The many victims of state-sponsored predatory gambling who are not gamblers themselves (collateral casualties) need not be “gambling-neutral,” but are often too ashamed or guilty to speak out against the casino or the operator.

Thus DFS and other longer-established forms of internet gambling not legal in most states, like i-poker, have great potential for harm that reaches beyond the ostensible victims, beyond the problem gamblers themselves. This is why they are illegal.

To legalize illegal activities and “regulate” them is not a solution. It gives government a conflict of interest. Tight regulation lowers profit margins and hence government’s share.

When DFS have been unequivocally recognized in NYS courts as gambling and therefore incontestably illegal, the legislature should not cure these companies by legalization and regulation. Thank you.

Post script: the operations of Fan Duel and Draft Kings in New York State have not ceased since the AG called for that to happen.  They  continue  while the case is on appeal.  A decision appears unlikely before the end of 2016.

Permission is hereby granted to reproduce any part of this piece as long as the permalink above is cited.

Hold ‘em Harmless?

high7

The following letter was sent by US mail on 26 October 2015 to the Delhi District office of State Senator John J. Bonacic.  An electronic version  with attachment was transmitted to the  Senator’s  e-mail three days later.

 

 

Dear Senator Bonacic,

At the hearing you held Sept 9 regarding S5302 there was good news: you gave at least a little time to the important question of whether legalizing i-poker would have an impact on problem gambling and gambling addiction. The bad news was that you readily accepted a “negdec”   from Mr Pappas of the Poker Players Alliance. I fear your questioning was to get this assurance of no harm onto the record.

Your questioning of Mr Pappas did not show the trial lawyer skills that Mr Featherstonaugh accorded you later in the hearing. Was this just a lapse in preparation, or was it deliberate? Whichever it was, your “OK” to Mr Pappas’s reply surely gave most listeners the false impression that internet gambling — of all kinds – has been well-studied and found not to be worse in any dimension for individuals or populations than other kinds of gambling. Not so.

I would be glad to meet with you and your staff to go over some basic principles of epidemiology and public health that should be applied to the important work you and your colleagues do. They are explained in the enclosed 12-page critique. Sad to say, the approach in the September hearing to this basic science  is no more valid than evaluating a corporation by whether it declared a profit or loss in the most recent annual report.

Sincerely,

Stephen Q. Shafer MD MPH

Chairperson,  Coalition Against Gambling in New York  917 453 7371

Below is the critique that was enclosed with the cover letter

Considerations of Internet Problem Gambling in the New York State Senate i-Poker Hearings of September 9 2015: an Epidemiologist’s Critique

Stephen Q. Shafer MD MA MPH                                              27 October 2015

 

The author is a retired Clinical Professor of Neurology, Columbia University and Chairperson of Coalition Against Gambling in New York, a non-profit all-volunteer organization registered in Buffalo.

 

During the Sept 9 2015 hearing on legalizing i-poker held by Senator Bonacic there was scant mention of the potential for i-poker or other forms of i-gambling to cause addiction or problem gambling or to sustain these conditions when they had developed in another setting such as a b and m [bricks and mortar] casino. Below is the nearest approach.

At about 15:50 Mr Bonacic, chairing, asked Mr Pappas, CEO of the Poker Players Alliance and the first person to testify, “Is there a ratio for the amount of people that play on line poker, gaming, as opposed to those that get addicted? Is it one in three hundred, one in five hundred?   Is it ascertainable?”

Senator Bonacic seems here to be groping for the prevalence of gambling addiction among persons who do i-poker or i-“gaming.” I expect he meant to make the ratio as he set it up  500 to one, not one in 500. He is certainly leading the witness towards a very low proportion of addicted gamblers among all on-line gamblers.  Note also that the question does not separate poker from other types of i-gambling. This is likely intentional, to blur distinctions in readiness for the transition I think he and associates plan, from two particular forms of i-poker to all forms of casino-type “gaming” on the internet and ultimately to i-betting on sports.

 Mr Pappas responded that he didn’t have notes in hand but that his written testimony gave backup. He summarized,    “There is not a discernible increase, not any increase.” Mr. Bonacic replied “OK. ”

Note well: Mr Pappas did not answer the question Senator Bonacic asked, which was about a “ratio,” not an increase. His response belonged to a question not put. Perhaps he had been expecting something like one of the following:

Continue reading

Daily Fantasy Sports Is Internet Gambling and Illegal

220px-TheprocessionofthetrojanhorseintroybygiovannidomenicotiepoloOn Nov 10 2015  NYS Attorney General Eric Schneiderman  announced that his had issued  a cease and desist order to  Fan Duel and Draft Kings, the two largest operator of Daily Fantasy Sports.  He gave them five days to voluntarily close, which they did not do. The November 10 order  got  much  notice in the NY papers, with an editorial in the NY Times essentially supporting it,  though talking about “strict regulation.”   The Daily News had a 2-page news article      and an  editorial saying that the AG is correct, plus  an op-ed. The news article had a sidebar by the writer of this post..  The Post had a front page article, though their editorial took issue with  the AG’s action.

The Times article on Nov 11 provoked a flood of comments, most angry at the decision.    Dissenters generally used one or more  of four basic  arguments (1) skill is involved; so, it’s not gambling  (2) the NYS lottery holds a much higher proportion  of users’  losses  than do DFS operators,  yet the AG does not try to enjoin it  (3)  no one is being hurt by participation (4) the AG wants to get money for the state by imposing regulation.

My comments on these comments:

“Skill”  certainly determines success, but relatively  few participants have that skill,  It lets them  exploit the vast majority.  As the AG memo below says, this is still gambling.  Take a few minutes to watch TV satirist John Oliver on this.  A recent lawsuit in Alabama gives a another useful perspective on gambling.

The NYS Lottery is an abomination,  but it is technically legal with enough seniority in that status that even I can’t fault the AG for not now going after every aspect of it.  The floridly illegal aspects, like hybrid table games with physical dice,  I do wish he would challenge.

Full-blown cases of gambling addiction already spawned by DFS are not numerous, are still largely hearsay to my ears. It is still early.  Yet  the exploitation of  “fish”  (less expert participants) by “sharks”  with their computer routines is no less predatory than the behavior of a casino or a state lottery.  It’s just that in DFS there are two types of predator,  not one.  Besides the operator there are the sharks. The ad blitz of the last few months is meant to recruit  millions of fish by deceptive advertising.

To the fourth argument   I would reply that  the AG has not proposed to regulate DFS.  He has said they are illegal and should stop operating in NYS.  Devising regulations to legalize is not his job.  His motivation is to protect New York’s people from being exploited by illegal gambling and to enforce existing regulations.  It is up to  the legislature to regulate.

Daily Fantasy Sports herniated through a loophole in the 2006 Unlawful Internet Gambling Enforcement Act and should be surgically reduced.  It is  a strong bridge to two activities that are at this time illegal in New York State and in most jurisdictions in this country: internet gambling not on sports, such as i-poker or internet casino “games” and betting on sports.  The bridge could reach  further,  to the gambling entrepreneurs’ promised land of legalized internet betting on sports.  DFS should not be “regulated.”  It should stay illegal.

Below is a forwarded message from the AG to the public and press,  a strong summary.

If you read this post, please send a comment to the AG to counter the pickets and telephone chains of complaint his office has been dealing with from DFS partisans.

Click here for a link to the AG’s office

Below is a press release from the AG dated November 17.  On Nov 19 Mr.  Schneiderman had an op-ed in the Daily News that complements the press release.  Either is a great source for writing a letter to the editor of a paper near to you.

News from Attorney General Eric T. Schneiderman

FOR IMMEDIATE RELEASE
November 17, 2015

New York City Press Office / 212-416-8060
Albany Press Office / 518-776-2427
nyag.pressoffice@ag.ny.gov
Twitter: AGSchneiderman

A.G. SCHNEIDERMAN SEEKS PRELIMINARY INJUNCTION AGAINST FANDUEL AND DRAFTKINGS

NEW YORK—Attorney General Eric Schneiderman filed an enforcement action this morning in New York State Supreme Court in the County of New York, seeking a preliminary injunction against DraftKings and FanDuel.  The Attorney General’s suit details alleged violations of law by DraftKings and FanDuel.

The Attorney General’s memorandum of law and complaint against DraftKings can be found here and here. A copy of the memorandum of law and complaint against FanDuel can be found here and here.

The following are excerpts of the memorandum of law filed by the Office of the Attorney General:

  • The New York State Constitution has prohibited bookmaking and other forms of sports gambling since 1894. Under New York law, a wager constitutes gambling when it depends on either a (1) “future contingent event not under [the bettor’s] control or influence” or (2) “contest of chance.” So-called Daily Fantasy Sports (“DFS”) wagers fit squarely in both these definitions, though by meeting just one of the two definitions DFS would be considered gambling.  DFS is nothing more than a rebranding of sports betting. It is plainly illegal.
  • Yet FanDuel and DraftKings insist that DFS is not gambling because it involves skill. But this argument fails for two clear reasons. First, this view overlooks the explicit prohibition against wagering on future contingent events, a statutory test that requires no judgment of the relative importance of skill and chance—they are irrelevant to the question. Second, the key factor establishing a game of skill is not the presence of skill, but the absence of a material element of chance. Here, chance plays just as much of a role (if not more) than it does in games like poker and blackjack. A few good players in a poker tournament may rise to the top based on their skill; but the game is still gambling.  So is DFS.
  • FanDuel and DraftKings’ current denials about DFS constituting gambling are belied by how the sites depicted themselves in the past and how they portray themselves behind closed doors.  FanDuel’s DFS contests were designed by a veteran of the legal online betting industry in the United Kingdom, Nigel Eccles.  The company admitted to an early investor that its target market is male sports fans who “cannot gamble online legally.”
  • DraftKings depicts itself to investors in a similar fashion. For example, in one investor presentation, DraftKings pitched itself to a prospective investor by noting the “Global opportunity for online betting,” pointing to the massive revenue of the “global online poker market,” and making direct comparisons throughout the presentation to poker and sports wagering.
  • The CEO of DraftKings previously spoke openly about DraftKings as a gambling company.  He called DFS a “mash[-]up between poker and fantasy sports,” suggested that DraftKings operates in the “gambling space,” and  described its revenue model as “identical to a casino.”
  • The rejection of the gambling label by the DFS sites is particularly hard to square with the overt strategy of recruiting gamblers. For FanDuel, this has meant hiring a former top executive from Full Tilt, the online poker company, and affiliating with gambling industry stalwarts like “Vegas Insider” and BetVega, a sports betting and handicapping website. For DraftKings, this has meant aligning itself closely and negotiating sponsorships with other gambling ventures, like the World Series of Poker and the Belmont Stakes.
  • DraftKings has also embedded gambling keywords into the programming code for its website. Some of these keywords include “‘fantasy golf betting,’’ “weekly fantasy basketball betting,” ‘‘weekly fantasy hockey betting,” “weekly fantasy football betting,” “weekly fantasy college football betting,” “weekly fantasy college basketball betting,” “Fantasy College Football Betting,” “daily fantasy basketball betting,” and “Fantasy College Basketball Betting.” This increases the likelihood that search engines, like Google, will send users looking for gambling straight to the DraftKings site.
  • FanDuel’s advertisements commonly showcase testimonials from ostensibly ordinary DFS players (g.,“Zack from Fairfield, California”), and play up the ease of playing and of winning huge cash prizes…The reality is that like poker, blackjack, and horseracing, a small percentage of professional gamblers use research, software, and large bankrolls to extract a disproportionate share of DFS jackpots. With poker and DFS, professional players, known as “sharks,” profit at the expense of casual players, known as “minnows.” The numbers show that the vast majority of players are net losers, losing far more money playing on the sites than they win. DraftKings data show that 89.3% of DFS players had an overall negative return on investment across 2013 and 2014.
  • While irresponsibly denying their status as gambling companies, the DFS Sites pose precisely the same risks to New York residents that New York’s anti-gambling laws were intended to avoid. Experts in gambling addiction and other compulsive behaviors have identified DFS as a serious and growing threat to people at risk for, or already struggling with, gambling-related illnesses.
  • Jeffrey L. Derevensky, Director of the International Centre for Youth Gambling Problems and High-Risk Behavior at McGill University, notes that, among other things, false or misleading representations of the skill involved in DFS “can lead players to a preoccupation with DFS, chasing of losses, and developing symptoms and behaviors associated with a gambling disorder.”

The illustration reproduces  a painting by Tiepolo with a timeless theme.  The opinions expressed in this post, aside from the quote by the AG’s office, are entirely those of the editor, Stephen Q. Shafer and do not necessarily reflect those of any or all other members of Coalition Against Gambling in New York.  Permission to reproduce in full or in part is hereby granted on condition that the permalink above is cited.

 

 

From the Front Lines Against Predatory Gambling

Nelson Acquilano photoA Stop Predatory Gambling National Day of Action in Geneva NY 26 September 2015 was co-sponsored by  CAGNY, Women’s Interfaith Institute, Geneva Assembly of God “Celebrate Recovery,” Phelps Baptist Church, and Concerned Citizens of Seneca County (CCSC).       Nelson Acquilano. LMSW, MPA, MA gave the audience his views on the untrue assertion that making  predatory gambling more convenient benefits the community and the region.  Mr Acquilano (pictured) is on the Board  of Directors of CAGNY.

” My name is Nelson Acquilano. Many of you know me because of the work I have done in the Finger Lakes and because of the many different human service groups and agencies I have worked with over these past 40 years.

We have a terrible problem in New York. Our families, our communities are in great crisis. But this is not an economic problem. No, New York has a Quality of Life Problem… and it is a real crisis for our families and our community.  It will only further decline if we allow it.

New York has a high rate of crime…. a high rate of divorce, high rates of child abuse, academic underachievement, teen pregnancy, and drug abuse.….. our jails are full, our schools are faltering, and our families are failing. Now given this background, the introduction of gambling in New York is contra-indicated.

Given these community problems, to allow a known environmental carcinogen such as gambling into an otherwise delicately balanced community… to take a powerful risk factor, a known risk factor — and allow it to flourish will only further undermine the healthy families and healthy communities we are trying to build and maintain.

Gambling is one of the most destructive dynamics that can be introduced into a community, and when it is – it spreads like a cancer – like an epidemic, leaving broken lives, broken families, and broken communities in its path.

All states that have legalized gambling have found subsequent dramatic increases not only in the incidence of compulsive gamblers, but in crime, family dysfunction, divorce, bankruptcy, and mental illness. But by then it’s too late. Once legalized, communities cannot reverse the trend and control the increase in the gambling addiction and negative consequences.

Compulsive gambling leads to many thousands of personal and family bankruptcies each year. It leads to lost homes, broken families, lost savings accounts, lost college funds, and to a dramatic increase in crime including embezzlement at business. It is strongly correlated with mental illness, and also seriously affects the spouse, children, parents, and friends of the problem gambler.

Some states have reported that divorce tripled after the introduction of casinos. Others reported an explosion in domestic violence.

Other research shows that gambling is indirectly subsidized by the taxpayers. For every dollar that gambling contributes in taxes, it usually costs the taxpayers at least 3 dollars (and higher numbers have been calculated) because of major increases in the welfare system, mental health system, and the criminal justice system. The ultimate cost in broken families and disintegrated communities from gambling never even comes close to justifying it as a means to raise revenue.

Gambling is exploding across America but America is not ready for the consequences.

The National Council on Problem Gambling has found that pathological gamblers have a suicide rate twenty times higher than non-gamblers.

Now if we could stop an epidemic – something that would destroy tens of thousands of families wouldn’t we have an imperative – a compelling moral and ethical responsibility to serve and protect our families?

And that is why I am against gambling anywhere in New York State, but especially in the Finger Lakes. Studies show that the negative consequences impact not just upon the host community, but all communities within a 50 mile radius…. the region I have served for the last 40 years. Gambling is simply the worst strategy for a delicate community.

I would like to leave you with a few final points:

1) It never ceases to amaze me how the moral and ethical implications of gambling are so easily dismissed. When I see casino owners say that the future of gambling is with our youth and we need to have more youth gamble, when I see a casino that comes out and targets women to get more women to gamble, when I see a casino develop a youth program to get more college students to the tables….. then I need to question the morality of that entire industry.

In fact, one college Chaplin told me he is increasingly experiencing college students with a high percent of gambling issues – losing their tuition and room and board monies.

And by the way, a couple of years ago, researcher Natasha Schull who wrote the book “Addiction by Design” was in Rochester. She explained how the gambling industry models psychological experiments on rats for behavior modification techniques on humans, to increase time – and money spent – sitting and playing at slot machines.

She explained extensive studies on Time-on-Device, on algorithms of “Intermittent Positive Reinforcement”, and on how the gambling industry studies the best variance of high-frequency low payout wins and low-frequency high payout wins to keep you gambling. These are some of the strongest shapers of human behavior.

And today’s slot machines are actually learning your preferred method of play….. it hasn’t reached the level of artificial intelligence yet, but according to Natasha… the machines are studying YOU.

There are some 30 organizations opposed to casino gambling in New York, including:- The Institute for American Values

The New Yorkers Family Research Foundation

        and
-   the Roman Catholic Church

- the Episcopal Church

- the United Methodist Church…

- the Baptists….
- the Interfaith Impact of New York State, and

- the New York State Council of Churches!

The Catholics….. Methodists, Baptists and Episcopal Churches are all publicly on record as denouncing the expansion of gambling…..   and I don’t know about you… but I prefer to listen to them for my spiritual health and wellness.

2) Second, the gambling industry follows a business model – that model is all about growth and expansion….. to survive, profits need to grow, which means more and newer ways to gamble… and more and newer ways to get non-gamblers to the table.

At the Senate Hearing one gambling company was asked if they are concerned about the proliferation and saturation of gambling, and their response was “no”, that is not a concern of ours.

Well let me say that it is a concern of ours! And it is already happening. There are all types of efforts to expand gambling throughout New York State. We’ve opened Pandora’s Box.

There is one Italian City, Pavia, that has so much gambling, that it has surpassed most every other city for debt, bankruptcies, depression, domestic violence and broken homes.
It is devastating to the community, and now the people said they have had enough and are trying to pass legislation to curb gambling.

3) And third, if you take a look at the true voting outcome for Proposition I, even with all the manipulation and irregularities to get the voters to vote for it….. Proposition I was voted DOWN in the central Finger Lakes region:

If you include….. Ontario County, Cayuga County, Monroe, Onondaga, Schuyler, Seneca, Wayne and Yates Counties….. 125,031 voted to pass Prop I, but over 126,648 voted against it!

Developers wanted to put a casino in Rochester, but the people defeated it….. they wanted to put a casino in Syracuse, and the people defeated that…. And now they are trying to put one here in the Finger Lakes….

I believe that local citizens groups should be honored, not demonized, for their fight against a proposed casino.

You know, Governor Cuomo accepted some $715,000 from the gambling industry prior to changing the constitution, although he did not include gambling in his pre-election platform. According to Common Cause, over $47 million had been spent on lobbying and campaign contributions to other senators and assemblymen by the gambling industry prior to the changing of the NYS Constitution.

And there have been other discrepancies and irregularities, even with Proposition I itself.

I have reviewed over 100 gambling studies and articles, and I have yet to find one that says that gambling helps to build positive youth development. I have yet to see one that says that gambling supports healthy families. I have yet to see one that says that gambling builds strong communities… in fact, they all say exactly the opposite.

When local groups t recognize the real environmental impact – the human costs, and decide to commit themselves to fight such a devastating dynamic as casinos present, then I applaud their work….. and ask our representatives to remember that the fundamental purpose of public service is for the health, safety and welfare of our residents… and there is nothing about gambling that supports the health, safety and welfare of the people.

Thank you.”

Permission is hereby given to reproduce the words of the above text in whole or part as long as the above permalink is cited and Nelson Acquilano is credited as author.

If the casino comes to town

DCIM100MEDIA

Aerial view of proposed Tyre casino site April 7 2015,

Remarks by Robert H. Steele   at the Stop Predatory Gambling National Day of Action event in Geneva NY,  26 September 2015,  Geneva is a few miles from Tyre, NY

“Although I’m from Connecticut, I should to tell you at the start that I feel a special connection to the Finger Lakes region for two reasons. First, because my wife went to Wells College on Lake Cayuga and I spent many, many enjoyable weekends here getting to know the area. And second, we in CT are very familiar with the Wilmorite group, because it financed an effort to open an Indian casino in Connecticut. That effort ultimately failed because the tribe in question could not prove it qualified for federal recognition.

I also appreciate your interest in my book – The Curse: Big-Time Gambling’s Seduction of a Small New England Town. The book is a fact-based novel set against the explosion of casino gambling in Connecticut during the 1990s, when Congress and the courts opened the door to the construction of the world’s two biggest casinos in the southeastern corner of my state.

In the end, The Curse is a cautionary tale about a small, quintessential Connecticut town that faces a Faustian dilemma in which it must choose between preserving its character and values or accepting an enormously seductive offer that would change the town forever – in other words, a story that has played out in one way or another in hundreds of communities across America and is playing out in Tyre today.

In 2013, the Institute for American Values, an independent think tank in New York, released a landmark report about the impact the spread of casino gambling is having on the nation.

The report began with this powerful statement:

“From time to time in American history, a new institution takes root across the country, and in doing so, changes the nation—changes the physical landscape of communities, impacts the patterns and habits of daily life, and affects citizens’ and communities’ economic outcomes…Something of this magnitude is now occurring in the United States. It is the spread of casinos.”

For many local people, the first thing that would probably come to mind in hearing this opening statement is the way Wilmorite’s proposed $425 million Tyre casino would impact the physical environment – including the nearby [Montezuma] National Wildlife refuge, federal and state protected species and habitat, as well as traffic congestion, noise, and air quality. The developer and key local officials evidently thought so little of these issues that they tried to get by with a slipshod environmental impact study, but in a stinging rebuff, the N.Y. State Court of Appeals ruled that their study did not meet state requirements.

As important as the environmental impact would be, however, I would like to zero in on the social and economic impact of what is being proposed for Tyre, using what is happening in Connecticut and elsewhere as background.

Connecticut’s two casinos, Foxwoods and Mohegan Sun, got off to blistering starts. With no significant competition other than in Atlantic City, 250 miles away, they quickly grew into the two biggest casinos on the planet, drawing more than half their combined customers from out of state, creating over 20,000 casino jobs, and sending hundreds of millions of dollars a year in slot revenues to the state treasury.

Today, however, the bloom is off the rose for Connecticut’s casinos as the Northeast fills up with competing casinos, fewer and fewer out-of-staters come to CT to gamble, and the out-of- state money that fueled CT’s gambling boom, and that of other early casino states, increasingly dries up.

Thanks to the growing competition, the combined revenue for CT’s two casinos is already down 38% from its peak. The casinos have eliminated 8,000 jobs and have been increasingly replacing full-time jobs with part-time jobs to reduce wage costs and eliminate medical benefits, while Foxwoods has stopped all profit-sharing payments to its tribal owners and is mired in debt.

The story is similar elsewhere, with growing competition cutting into the profits of casinos and changing the dynamics of the casino business in more and more states. For example, Delaware has had to put millions of dollars toward bailing out its 3 casinos, while New Jersey has spent hundreds of millions trying to prop up its casinos, only to see a third of them close in the past 20 months. In Ohio and Maryland, casino revenue is roughly 40% below original projections.

As the casinos’ profits slide, we have also been getting a clearer picture of the overall economic and social downside of what has happened in Connecticut.

First, with less out of state money coming in, an increasing percentage of the casinos’ profits and resulting state revenue is coming from the gambling losses of Connecticut residents, resulting in what Nobel Prize-winning economist Paul Samuelson called “the sterile transfer of money” from one group to another without creating any net new value.

Second, even with all the out-of-state money that came in in the past, the Connecticut casinos did little to create spin-off businesses, but did cannibalize other businesses.

One example of cannibalization actually involved a good friend of mine who owned one of the region’s most successful restaurants and who I never saw more excited than when one of the casinos opened nearby. He thought the casino would be great for his business, that with all the people coming down from Boston and up from New York, surely hundreds of them would stop at his restaurant every week.

Unfortunately, it didn’t work out that way, and I remember what he told me when he closed his restaurant because of competition from the casinos. “I have to admit,” he said sadly, “that I had no idea how the casinos actually work. But now I understand. People drive to the casinos, play at the casinos, go to shows at the casinos, stay at the casino hotels, eat at the casino restaurants, and then fill up their gas tanks at the casino gas stations and drive home. We as local merchants rarely see any of them.”

As casino mogul Steve Wynn once told a group of Connecticut businessmen when he was trying to put a casino in Bridgeport: “Get it straight, there is no reason on earth for any of you to expect for more than one second that just because (people come to my casino) they are going to run into your store or restaurant.”

And third, there is little evidence that casinos ultimately strengthen state or local government finances. Connecticut receives 25% of its casinos’ slots profits, which has provided the state with over $6 ½ billion in revenue in the past 22 years. Yet CT today is in the worst financial shape in its history, with a lagging economy and the third worst debt and unfunded liability ratio of any state.

And then there are the social issues.

For starters, the casinos have created a pervasive gambling culture in southeastern CT and they were followed by a steep increase in the number of CT residents seeking treatment for gambling addiction, with an attendant increase in debt, bankruptcies, broken families and crime.

One of the most remarkable findings from a 2009 state-sponsored study was that there had been a 400% increase in arrests for embezzlements in Connecticut since the casinos opened, a rate of increase 10 times the national average.

One of the embezzlers, incidentally, was my tax collector in the town of Ledyard, where Foxwoods is located. She stole $302,000 from tax receipts to play the slots at Foxwoods. And of course she didn’t win. Indeed, statistically it is almost impossible to win when the casino takes up to 10% of everything you bet over time. I should note that the embezzler, who was sentenced to prison, had a pristine record as an individual and public servant before she became hooked on slots.

There were so many embezzlement cases in southeastern Connecticut, in fact, that a columnist for the New London Day newspaper described the region as the embezzlement capital of America.

Recent embezzlement stories range from a Bridgeport elementary school principal charged with taking $10 thousand in student funds to gamble at Mohegan Sun to the chief financial officer of the town of Winchester, Connecticut stealing over $2 million from that town and losing much of it at the state’s casinos. The Winchester embezzlement was so serious that there was talk of the town having to temporarily close its school system.

Looking at crime overall, a 2014 study from Western CT State University shows that the number of violent crimes (including murder, rape, robbery and aggravated assault) increased in nearby towns after the casinos opened DESPITE A SHARP DROP in violent crime nationally and CT as a whole, while interviews with local police and judicial officials indicated increases in non-violent crimes such as prostitution and illicit drug use.

As far back as 1997, Congress became so concerned about the spread of casino gambling that it set up a National Commission to study the issue. Based on its findings, the Commission recommended that there be a moratorium on opening new casinos until the government could get a better handle on their social and economic costs.

But the recommendation was never implemented, and casinos have continued to multiply as state governments have invited them into their states to raise revenue without having to openly raise taxes.

In the process, casino gambling has become a $67 billion industry, with casinos arguing that they spur economic development and provide state and local governments with much-needed money.

But both economic studies and experience refute those arguments.

In fact, looking at all the evidence, the 2013 Institute for American Values report concludes that the regional and local casinos springing up across the nation drain wealth from communities, weaken nearby businesses, hurt property values, and reduce civic participation, family stability, and other forms of social capital that are at the heart of a successful society.

At this point, one might think states would begin to recognize the shortsightedness of depending on casino revenue. But that’s not what’s happening. Instead, state after state has become so hooked on casino money that it is seeking to expand gambling either to increase gambling revenue or replace the gambling revenue it is losing to cross-border competition.

And that is precisely what is happening in CT. The state began by increasing Foxwoods’ and Mohegan Sun’s FREE PLAY ALLOWANCE so they could beef up promotions and attract more customers; the state legalized the casino game KENO for restaurants, bars, and convenience stores, and the legislature has passed a bill which would allow construction of the state’s third casino and which could quickly lead to two more casinos after that.

Casino expansion advocates argue that the so called “convenience” casinos would help keep CT gamblers from going to MA and NY to gamble and thereby protect CT casino jobs and revenue. What they carefully avoid discussing, is that one or more new casinos would create thousands of new Connecticut gamblers and encourage current Connecticut gamblers to gamble more frequently, leaving CT residents with even less money for other goods and services and further adding to the state’s social problems.

Moreover, with both government and investors constantly pushing for new ways to make money from gambling, there is no reason to think that CT’s gambling expansion would stop there.

For example:

Video slots are beginning to spread beyond casinos into local neighborhoods in many states. There are now some 12,000 video slot machines at so-called “lottery delis” in Oregon, and more than 20,000 video slots at bars, restaurants, truck stops, fraternal clubs, gaming cafes, and even 2 flower shops in Illinois.

Next, there is a strong effort underway to expand legalized sports betting in the United States, including on daily Fantasy Sports.

And finally, thanks to a 2011 U.S. Justice Department ruling, New Jersey, Delaware, and Nevada have legalized in-state online betting for their casinos, and other states, including NY, are considering legalizing Internet gambling as well.

In short, the lesson across the country, and the lesson we are increasingly learning in Connecticut, is that each new expansion of legalized gambling is followed by increased pressure for still more gambling, and the only way to stop it is for individual citizens like you and me to stand up and say to our government leaders: STOP!

STOP trying to expand gambling in my state and trying to bring it into my community.

Stopping it is admittedly an enormous challenge – a true David and Goliath fight. The casino developers and gambling promoters have enormous financial resources which they use to dominate the public debate, gain political and government support, and overwhelm the opposition, while average citizens typically have little money with which to fight back.

For instance, in last fall’s statewide referendum in Massachusetts on whether to repeal the law allowing casinos in that state, casino interests ran a reported 4,000 TV ads in the last month of the campaign in a successful effort to kill repeal, while those supporting repeal were unable to afford any TV time. Then this summer, the developer seeking to put a casino in Brockton, MA reportedly outspent a coalition of churches, civic groups and individuals by 450-1 in order to win a narrow victory there.

Yet, remarkably, casino opponents have recently won important victories in which they (1) stopped casinos from being legalized in New Hampshire, (2) defeated efforts to expand casino gambling in Rhode Island and (3) beat back casino proposals in Newport, RI; in West Springfield, Palmer, Milford, Tewksbury, Worcester, and East Boston, MA; and in Albany, East Greenbush, and Tuxedo, NY.

One of the saddest aspects about your battle against the proposed Tyre casino is the extent to which the developer has gone to try to keep you from speaking out against its proposal. Here is a giant real estate corporation which is spending a fortune on an army of designers, engineers, lawyers, consultants and publicists to break into Tyre to further enrich itself, yet criticizes Casino Free Tyre for trying to raise a modicum of money to defend its town.

It is truly an act of monumental hypocrisy and demonstrates how worried the developer is about your ability to persuade others to actively join your fight and demonstrate to the State Gaming Commission how strong the opposition among everyday citizens is to the proposed casino. Hopefully the casino advocates’ tactics will encourage you to redouble your efforts to speak out, to recruit your neighbors, to reiterate your opposition to the casino to the Gaming Commission and town and county officials, and to support Town Board candidates who oppose the casino.

In defeating the casino in Palmer, MA, opponents used the slogan “The more you know about casinos, the less you’ll like them,” and used every possible means to explain to the community what casinos are really all about.

The opponents did a particularly good job of getting across the predatory nature of casinos, pointing out that multiple independent studies show that roughly half of a typical casino’s gambling profits come via problem gamblers, whether the money is their own, or they have begged, borrowed, or taken it from others. In other words, that the casino industry’s very business model is dependent upon preying on addicted gamblers.

That’s the nature of the business they want to bring to your community.

Palmer’s slogan pretty much said it all. “The more you know about casinos, the less you’ll like them.”

Thanks very much.”

Permission is hereby granted to reproduce the above text  in whole or in part as long as the permalink is cited and the speaker, Robert H. Steele, is credited.

Mr. Steele, a Connecticut businessman, is a former Representative to Congress from Connecticut who recently joined the Board of Stop Predatory Gambling.

Online Poker Hearing Misses the Point

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The New York State Senate website has announced that the Senate Racing, Gaming, and Wagering Committee will ‘discuss the future of online poker in New York State’ at a hearing scheduled for 1:00 p.m. on September 9, Wednesday. ORAL TESTIMONY BY INVITATION ONLY

Coalition Against Gambling in New York believes that there should be no future for online poker.  Not invited to speak, we submit the statement below to  the record:

No form of internet gambling is now legal in NY. State Senator John  Bonacic’s bill S 5302 proposes to legalize internet poker. The upcoming  hearing looks like a shout-out to gambling interests*, including the Poker Players’ Alliance.  The Senator seems indifferent to social and constitutional legal issues about internet gambling.  According to Tight Poker,   his concern is how   it might profit NYS to legalize  i-poker ASAP.

Online poker is the thin end of the “legalization” wedge because some savants hold there can be enough skill in poker to make it  not gambling. They note that  a star  player may   win big over time, unlike a slot machine user. The vast majority  of players who aren’t stars, however, are certainly gambling. Outside “World Series” tournaments that draw skilled peers, the consistent big winners are sustained by  the predictable losses of the less apt, the more chance-tossed.

Ominously, were i-poker  “legalized,” other on-line games would likely follow. First would come those that have less, but still some, element of decision-making skill relative to chance than does poker. Later, with these precedents, would come casino “games” of pure chance, which everyone agrees are gambling.

If stymied by a future ruling that i-poker is gambling, the Senator may try a different tactic.   He knows that unless a bill to rebuild the longstanding federal ban on internet gambling passes soon, each state may make its own laws about internet gambling (except on sports). He may anticipate that the Legislature would concede him i-gambling after the trite argument that “Other states will be doing it; so, we should too and before them.” New York, however, has a constitutional prohibition against all types of gambling other than those that have been allowed in by amendment, most recently casinos. The Legislature has shown itself ever ready to re-define words like “lottery,” but it cannot amend the Constitution.  That would require a vote of the people, who have shown no special desire for internet gambling.

Article 1 § 9 . . .no lottery or the sale of lottery tickets, pool-selling, book-making, or any other kind of gambling, except lotteries operated by the state and the sale of lottery tickets in connection therewith as may be authorized and prescribed by the legislature, the net proceeds of which shall be applied exclusively to or in aid or support of education in this state as the legislature may prescribe, except pari-mutual betting on horse races as may be prescribed by the legislature and from which the state shall derive a reasonable revenue for the support of government, and except casino gambling at no more than seven facilities as authorized and prescribed by the legislature shall hereafter be authorized or allowed within this state; and the legislature shall pass appropriate laws to prevent offenses against any of the provisions of this section. (Amendment approved by vote of the people November 5, 2013.)

Sen. Bonacic will perhaps argue that i-gamblers can be required (the NJ model) to be registered with an  in-state casino, which they need never visit again.   He may assert that when “Prop 1” passed in 2013  it  implied this easy fix.  Plainly it did not.

Or, less likely, the Senator might try to graft internet gambling onto the New York State Lottery, requiring participants to register with a racino, not a licensed casino.

There are many arguments against i-gambling that we don’t take up here. Our focus today is on the wrongness of hearings that have nothing to do with whether internet poker should be made legal and everything with “When do we start?”  . Mr.  Bonacic acts as if legalizing internet poker in New York State is a mere formality, like closing a business deal with allies. Such arrogance should be called.

[*] In August, Tight Poker interviewed Sen. Bonacic about who had been invited to testify orally. “ ‘Lawmakers and various representatives of the gambling industry will be present at the hearing.’ Bonacic said: ‘I’m bringing in Caesars and MGM plus all of my [emphasis added] casinos, racinos, and OTBs. We are going to have a discussion on the pros and cons of moving the legislation.’ ”

Permission to reproduce this in whole or in part is hereby granted by cagnyeditor as long as the permalink above is cited.  The Trojan Horse painting is by Tiepolo.

The Curse

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Pachinko

 

A Talk at Patchogue-Medford Library Long Island NY  July 30, 2015  by Robert H. Steele

Mr. Steele is a Connecticut business executive and former U.S. Congressman, and was a nominee for Governor of Connecticut.

 

Comment by CAGNY editor: This talk starts about  a book set in Connecticut but moves through many important issues about predatory gambling before homing in on a location in New York State now threatened with the imposition of a 1000-device slot parlor.  It is a privilege to present it here.

Thank you for the invitation to come to Patchogue and for your interest in my book, The Curse: Big-Time Gambling’s Seduction of a Small New England Town.

The book is a fact-based novel set against the explosion of casino gambling that hit southeastern CT during the 1990.

The novel begins with the Pequot War in 1637, when Connecticut’s Puritan colonists joined with their Mohegan allies to defeat and almost destroy the Pequots, who were the largest and most warlike of the Connecticut tribes. The story then jumps 350 years, as these two tribes reemerge to build the world’s two biggest casinos – Foxwoods and Mohegan Sun – and a Connecticut family, led by a descendant of one of the Puritan colonists, becomes embroiled in a battle to stop a third casino that threatens the family’s town and ancestral home.

In the end, a small, quintessential New England town faces a Faustian dilemma in which it must choose between preserving its character and values or accepting an enormously seductive offer that would change the town forever.

The Curse, in sum, is a novel based on fact, and this evening I’d like to focus on the factual background of what has occurred in Connecticut and elsewhere – in other words, on the story behind the book.

First, I should probably give you a little more of my background since it entered into my writing the book.

I represented eastern Connecticut in Congress in the 1970s. Then, after running unsuccessfully for governor, I left politics and my family – my wife and four children and I – moved to Ledyard, Connecticut well before anyone dreamed of casinos coming to Connecticut. Those two experiences – knowing Connecticut’s politics as intimately as I did and then living in the midst of the subsequent casino explosion – gave me a front row seat for watching the political maneuverings that led to the casinos and then seeing their impact.

Indian casinos got their start in 1988, when Congress passed the Indian Gaming Regulatory Act, which was seen as a means of promoting tribal economic development and self-sufficiency by allowing federally recognized tribes to open casinos on their reservations.

It would be fair to say, however, that Congress had no idea of the Pandora’s Box it was opening when it passed the act.

As it turned out, the law not only opened the door to Indian-owned casinos, but it spurred the legalization of commercial casinos as many states rushed to open casinos as way to raise revenue without directly and overly raising taxes.

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