The War on Video Crack

Who’s running the sleaziest gambling operations in America? State governments.

Americans who don’t gamble tend to view gambling as either high-glitz casinos or megabucks lotteries–the only outlets the media ever bother to notice. This narrow focus has protected the gambling industry, since Americans are willing to accept a vice that is clearly separated from the rest of society–as casinos are–or that offers a luscious chance at the good life–as megabucks lotteries do.

But three nascent grassroots anti-gambling campaigns in the West could finally bring attention to the real issue in American gambling, which has nothing whatsoever to do with casinos or multimillion-dollar jackpots. In Oregon and South Dakota, voters have gathered enough signatures to place a constitutional amendment on the November 2000 ballot to outlaw “video lottery.” In Montana, activists are preparing a similar November 2000 ballot measure to abolish video gambling in that state. These initiatives aren’t trying to eliminate all legal gambling in their states–prohibition has been a disastrously unsuccessful strategy in the gambling wars. Instead they are targeting only the newest and most addictive form of American betting: “convenience gambling.” The campaigns against convenience gambling mark the most important development in gambling politics in years.

Convenience gambling–a cheerful phrase for an alarming idea–is premised on the notion that once gambling is legal, it should be allowed just about everywhere: convenience stores, bars, restaurants, bowling alleys, gas stations. Eight states permit convenience gambling now. In several, including South Dakota and Oregon, convenience gambling takes the form of a so-called “video lottery.” To those who haven’t played it, “video lottery” sounds like some kind of high-tech Powerball–a lottery played with a computer instead of a ticket. In fact, “video lottery” bears no relationship at all to a lottery. It is simply a euphemism for state-run video poker machines. Video poker is a popular casino game, a low-stakes electronic version of five-card-draw poker. “It means minicasinos on Main Street that are run by the government,” says Tom Grey, head of the National Coalition Against Legalized Gambling, which is organizing the three ballot initiatives. Oregon, with about 3 million residents, owns 9,000 video poker machines that it places in 1,800 businesses. South Dakota, with less than 1 million residents, has 8,000 gambling machines in 1,400 locations. Montana has similar numbers of machines in similar places, though the state does not run the machines.

These Western states introduced video gambling in the late ‘80s and early ‘90s for one reason: It is a stupendously effective way of parting citizens from their money. According to the North American Association of State and Provincial Lotteries, the average American in a state with a lottery spends about $150 per year on the lottery. But in the five states with video lotteries (Delaware, West Virginia, and Rhode Island, along with South Dakota and Oregon), average per capita lottery spending is about $600 per year. In South Dakota, where lottery play is the highest in the country, the average person spends an amazing $750 per year on the state lottery.

This generates monster revenues for both state and retailer. South Dakota’s government splits the revenue 50-50 with the bars and restaurants. The state clears $90 million a year, which it is using to cut property taxes 20 percent. (This money represents about 5 percent of the total state budget.) In Oregon, the state takes about two-thirds of the video lottery revenues. That amounts to more than $230 million a year–about 3 percent of the budget–which the state spends on education, parks, and salmon restoration. (“What do Oregon’s public schools, businesses, workforce, state parks and salmon all have in common?” boasts the Oregon Lottery’s home page. “They all receive Lottery profits to help them prepare for the future!”) In Montana, the state pockets 15 percent of video gambling revenue in taxes, close to $40 million for the state’s treasury. (Both Oregon and South Dakota also run traditional lotteries, but they are penny-ante games next to the video lottery: Only a quarter of Oregon’s lottery revenue comes from traditional lottery games, and only 5 percent of South Dakota’s does.)

Video gambling delivers tax revenues, but it exacts huge social costs. Video poker is known as “video crack.” Its rate of play is dizzyingly fast–I once played more than 400 games of video poker in an hour–and the flashing lights and flickering screens send players into trancelike reveries. Unlike other kinds of gambling, video poker discourages social interaction. “The machines suck people into the screen,” says Professor William Thompson, a gambling expert at the University of Nevada, Las Vegas. “You don’t talk or socialize. You don’t trade stories. It is different from blackjack or even handle slots. These are the most addictive of any gambling instrument we have today.” It’s also voracious: A typical gambler addicted to blackjack takes about 20 years from placing the first bet to bottoming out; a gambler hooked on video poker needs less than three years. The number of Gamblers Anonymous chapters in Oregon has leapt from three to 30 since video poker was introduced in 1992. (The state itself recognizes the dangers of video poker: It forbids video lottery advertising and allocates $3 million a year for treating problem gamblers.) What’s more, the small stakes in video lotteries encourage addiction. Unlike lotteries, which offer low odds but spectacular jackpots, video poker returns tiny but frequent pots. The state relies on people playing the games over and over and over again.

Addiction is not the only drawback of video gambling. It is a cinch for kids to play video lottery machines, since they are often found in businesses that kids frequent. Though it pays off more often than lotteries, video poker offers poor odds compared with most casino gambling, taking about 10 cents of every dollar bet compared to 3 cents for casino slots. Moreover, convenience gambling doesn’t deliver the secondary economic benefits that big gambling can. Because states limit the number of machines that any one business can have, there are no large casinos. So video lottery brings none of the ancillary jobs, restaurants, and hotels that big casinos do.

As a result, convenience gambling is emerging as the kind of gambling that everyone can dislike, a juicy target for opponents and a scapegoat for supporters of more acceptable kinds of wagering. A bipartisan grassroots campaign in South Carolina just eliminated its enormous video poker industry. (Read about that abolition here.) This summer, half the parishes in Louisiana threw out video gambling from their bars, restaurants, and truck stops. Several years ago, the mayor of Las Vegas, who strongly supported casinos, tried to root out convenience gambling from stores in her city. The rest of the gambling industry treats convenience gambling like an embarrassing cousin, routinely condemning it.

S outh Dakota and Oregon have preserved a last best argument against the critics: They can’t afford to drop video lotteries. Governors in both states have said they dislike relying on lottery revenues to fund essential government services. “The governor has never been a big fan of the lottery and of letting gambling policy drive public policy,” says a spokesman for Oregon’s Gov. John Kitzhaber. But they are too scared of losing their video lottery funds to endorse the ballot initiatives. When the Oregon ballot initiative was floated earlier this year, Kitzhaber endorsed the idea of abolishing the video lottery but said the state needed a phaseout period to find replacement revenue. So the activists added a three-year phaseout to their ballot initiative. Kitzhaber now insists on a phaseout of at least six years. “He wants to get rid of it, but then he wants six years. He sounds like an addict,” says the anti-gambling coalition’s Grey.

The Oregon and South Dakota votes are a year away, and the Montana signature-gathering has not yet begun. No one knows whether even one of the initiatives can pass. The lottery retailers will surely spend millions to keep their cash cow, and the governors are likely to campaign for video gambling as well. But if the initiatives do squeak by, they may signal a new and encouraging compromise, a recognition that just because gambling is legal does not mean it has to be everywhere. If the initiatives pass, after all, the states will retain their traditional scratch-off and Powerball lotteries, and their Indian casinos will continue to offer electronic gambling on reservations. These states will have gambling that is accessible, but not universal; gambling that funds state government but does not hold it hostage.