Gambling in the United States
Gambling is legally restricted in the United States, but its availability and participation is increasing. In 2007, gambling activities generated gross revenues (the difference between the total amounts wagered minus the funds or "winnings" returned to the players) of $92.27 billion in the United States. Commercial casinos provided 354,000 jobs, and state and local tax revenues of $5.2 billion as of 2006[update]. Critics of gambling[who?] claim it leads to increased political corruption, compulsive gambling and higher crime rates. Others claim that gambling is a type of regressive tax on the individuals in local economies where gambling venues are located.
- Card Rooms - $1.18 billion
- Commercial Casinos - $34.41 billion
- Charitable Games and Bingo - $2.22 billion
- Indian Casinos - $26.02 billion
- Legal Bookmaking - $168.8 million
- Lotteries - $24.78 billion
- Pari-mutuel Wagering - $3.50 billion
Grand Total - $92.27 billion
Games of chance first came to the British American colonies with the first settlers. Attitudes on gambling varied greatly from community to community, but there were no large-scale restrictions on the practice. Early on, the British colonies used lotteries from time to time to help raise revenue. For example, lotteries were used to establish or improve dozens of universities and hundreds of secondary schools during the 18th and 19th centuries. A 1769 restriction on lotteries by the British crown became one of many issues which fueled tensions between the Colonies and Britain prior to the American Revolution.
Lotteries continued to be used at the state and federal level in the early United States. Gambling businesses slowly developed in various communities. The lower Mississippi River valley became a hotbed of gambling activity with New Orleans emerging as the nation's leading gambling center. A wave of hostility against gambling in the mid 19th century pushed gambling activity onto boats in the Mississippi River and toward younger territories in the West. Anti-gambling forces in the northeast put an end to lotteries in those locations and this trend spread to some other parts of the country. The rise of railroads caused passenger travel on the Mississippi to decline, heavily damaging the riverboat casinos' revenue. The increasing legal pressures on gambling gradually created opportunities for illegal operations.
Gold Rush era
With the advent of the California Gold Rush, San Francisco became a populous town flush with aspiring prospectors. By the 1850s, the new city had overtaken New Orleans as the gambling capital of the United States. As California gradually strengthened its laws and policing of gambling, the practice similarly went underground.
Lotteries and other forms of gambling would be revived temporarily in the South during Reconstruction, and in other areas, but by the early 20th century gambling was almost uniformly outlawed throughout the U.S. Gambling became a largely illegal activity helping to spur the growth of the mafia and other organized crime.
Gambling was extremely popular everywhere during the settlement of the west and nearly everyone participated in games of chance. Towns like Deadwood, Dodge City, Denver, and Kansas City were all famous for their many lavish gambling houses. Citizens of the west viewed gamblers as respected members of society working at an honest trade. Around the start of the 20th century, nearly all the western states' governments outlawed gambling and ended it as a way of life.
During the Prohibition era, illegal liquor provided an additional revenue stream for mob figures, and organized crime blossomed. Towns which had already had lax attitudes about vice such as Miami, Florida; Galveston, Texas; and Hot Springs, Arkansas became major gambling centers attracting tourism from around the nation. The Great Depression saw the legalization of some forms of gambling such as bingo in some cities to allow churches and other groups to raise revenue, but most gambling remained illegal. Major gangsters became wealthy from casinos and speakeasies. As legal pressures began to rise in many states, gangsters in New York and other states looked toward Texas, California, and other more tolerant locales to prosper.
The stock market crash of 1929 and the Hoover Dam project led to the legalization of gambling in Nevada. In 1931, Nevada legalized most forms of gambling when Assembly Bill 98 was signed into law, providing a source of revenue for the state. Interest in development in the state was slow at first as the state itself had a limited population. After World War II, enforcement of gambling laws became more strict in most places and the desert town of Las Vegas became an attractive target for investment by crime figures such as New York's Bugsy Siegel. The town rapidly developed during the 1950s dooming some illegal gambling empires such as Galveston. Nevada, and Las Vegas in particular, became the center of gambling in the U.S. In the 1960s Howard Hughes and other legitimate investors purchased many of the most important hotels and casinos in the city gradually reducing the city's connections to organized crime.
Southern Maryland became popular for its slot machines which operated legally there between 1949 (1943 in some places) and 1968. In 1977, New Jersey legalized gambling in Atlantic City. The city rapidly grew into a significant tourist destination, briefly revitalizing what was previously largely a run-down slum community. In 1979, the Seminole tribe opened the first reservation-based commercial gambling beginning a trend that would be followed by other reservations. Gradually, lotteries and some types of parimutuel betting were legalized in other areas of the country.
In the 1990s, riverboat casinos were legalized in Louisiana, Illinois, and other states. In 1996, Michigan legalized gambling in the city of Detroit creating an economic center for potential casino growth. As the Internet grew in the late 20th and early 21st centuries, Internet gambling exploded in popularity.
Many levels of government have authorized multiple forms of gambling in an effort to raise money for needed services without raising taxes. These include everything from bingo games in church basements, to multi-million dollar poker tournaments. Sometimes states advertise revenues from certain games to be devoted to particular needs, such as education.
When New Hampshire authorized a state lottery in 1963, it represented a major shift in social policy. No state governments had previously directly run gambling operations to raise money. Other states followed suit, and now the majority of the states run some type of lottery to raise funds for state operations. This has brought about morally questionable issues, such as states' using marketing firms to increase their market share, or to develop new programs when old forms of gambling do not raise as much money.
- Card Rooms, both public and private
- Commercial Casinos
- Charitable games and Bingo
- Indian casinos
- Legal bookmaking
- Parimutuel wagering
Gambling is legal under US federal law, although there are significant restrictions pertaining to interstate and online gambling. Each state is free to regulate or prohibit the practice within its borders. If state-run lotteries are included, almost every state can be said to allow some form of gambling. However, casino-style gambling is much less widespread. Federal law provides leeway for Native American Trust Land to be used for games of chance if an agreement is put in place between the State and the Tribal Government (e.g. A 'Compact' or 'Agreement') under the Indian Gaming Regulatory Act of 1988.
Nevada and Louisiana are the only two states where casino-style gambling is legal statewide. Both state and local governments impose licensing and zoning restrictions. All other states that allow casino-style gambling restrict it to small geographic areas (e.g., Atlantic City, New Jersey or Tunica, Mississippi), or to American Indian reservations, some of which are located in or near large cities. As sovereign nations, American Indian tribes have used legal protection to open casinos, which has been a contentious political issue in California and other states. In some states, casinos are restricted to "riverboats", large multi-story barges that are, more often than not, permanently moored in a body of water.
Online gambling has been more strictly regulated. The Federal Wire Act of 1961 outlawed interstate wagering on sports but did not address other forms of gambling. It has been the subject of court cases. The Unlawful Internet Gambling Enforcement Act of 2006 (UIEGA) did not specifically prohibit online gambling; instead, it outlawed financial transactions involving online gambling service providers. Some offshore gambling providers reacted by shutting down their services for US customers. Other operators however have continued to circumvent UIGEA and have continued to service US customers. For this reason UIEGA has received criticism from notable figures within the gambling industry.
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Commercial casinos are founded and run by private companies on non-Indian land. There are 20 states (and two US Territories) that allow commercial casinos in some form: Colorado, Delaware, Illinois, Indiana, Iowa, Louisiana, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Nevada, New Jersey, North Carolina, Ohio, Oklahoma, Pennsylvania, Puerto Rico, South Dakota, U.S. Virgin Islands, Washington, and West Virginia.
The approximately 450 commercial casinos in total produced a gross gambling revenue of $34.11 billion in 2006.
American Indian gaming
The history of reservation-based commercial gambling began in 1979, when the Seminoles began running bingo games. Prior to this, the Indians had no previous experience with large-scale commercial gambling. American Indians were familiar with the concept of small-scale gambling, such as placing bets on sporting contests. For example, the Iroquois, Ojibways, and Menominees would place bets on games of snow snake. Within six years after commercial gambling among Indians developed, seventy-five to eighty of the three hundred federally recognized tribes became involved. By 2006, about three hundred American Indian groups hosted some sort of gaming.
Some American Indian tribes operate casinos on tribal land to provide employment and revenue for their government and their tribe members. Tribal gaming is regulated on the tribal, state, and federal level. Indian tribes are required to use gambling revenue to provide for governmental operations, economic development, and the welfare of their members. Federal regulation of Indian gaming was established under the Indian Gaming Regulatory Act of 1988. Under the provisions of that law, games are divided into three distinct categories:
- Class I games are "traditional" games that involve little or no wagering.
- Class II games include bingo, pull-tabs, and certain non-banked card games (poker, cribbage, contract bridge, whist, etc.).
- Class III games include all casino games (craps, roulette, blackjack, baccarat, slot machines, and other games where the player bets against the house) and games that do not properly fall into classes I or II.
Of the 562 federally recognized tribes in 1988, 201 participated in class two or class III gaming by 2001. Tribal gambling had revenues of $14.5 billion in 2002 from 354 casinos. Approximately forty percent of the 562 federally recognized tribes operate gaming establishments.
Like other Americans, many American Indians have dissension over the issue of casino gambling. Some tribes are too isolated geographically to make a casino successful, while some do not want non-Indians on their land. Though casino gambling is controversial, it has proven economically successful for most tribes, and the impact of American Indian gambling has proven to be far-reaching.
Gaming creates many jobs, not only for Indians, but also for non-Indians, and in this way can positively affect relations with the non-Indian community. On some reservations, the number of non-Indian workers is larger than the number of Indian workers because of the scale of the casino resorts. Also, some tribes contribute a share of casino revenues to the state in which they are located, or to charitable and non-profit causes. For example, the San Manuel Band of Mission Indians of California gave 4 million dollars to the UCLA Law School to establish a center for American Indian Studies. The same tribe also gave $1 million to the state for disaster relief when the area was ravaged by wildfires in 2003.
Although casinos have proven successful for both the tribes and the surrounding regions, state residents may oppose construction of Indian casinos, especially if they have competing projects. For example, in November 2003, the state of Maine voted against a $650 million casino project proposed by the Penobscots and Passamaquoddies. The project's objective was to create jobs for the tribes' young people. The same day the state voted against the Indian casino project, Maine voters approved a plan to add slot machines to the state's harness racing tracks.
The National Indian Gaming Commission oversees Indian gaming for the federal government. The National Indian Gaming Commission (NIGC) was established under the Indian Gaming Regulatory Act in 1988. Under the NIGC, Class I gaming is under the sole jurisdiction of the tribe. Class II gaming is governed by the tribe, but it is also subject to NIGC regulation. Class III gaming is under the jurisdiction of the states. For instance, in order for a tribe to build and operate a casino, the tribe must work and negotiate with the state in which it is located. These Tribal-State compacts determine how much revenue the states will obtain from the Indian casinos.
The Indian Gaming Regulatory Act requires that gaming revenues be used only for governmental or charitable purposes. The tribal governments determine specifically how gaming revenues are spent. Revenues have been used to build houses, schools, and roads; to fund health care and education; and to support community and economic development initiatives. Indian gaming is the first and essentially the only economic development tool available on Indian reservations. The National Gaming Impact Study Commission has stated that "no...economic development other than gaming has been found". Tribal governments, though, use gaming revenues to develop other economic enterprises such as museums, malls, and cultural centers.
There are currently 30 states that have American Indian gaming: Alabama, Alaska, Arizona, California, Colorado, Connecticut, Florida, Idaho, Iowa, Kansas, Louisiana, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Mexico, New York, North Carolina, North Dakota, Oklahoma, Oregon, South Dakota, Texas, Washington, Wisconsin, and Wyoming.
The classic lottery is a drawing in which each contestant buys a combination of numbers. Each combination of numbers, or "play", is usually priced at $1. Plays are usually non-exclusive, meaning that two or more ticket holders may buy the same combination. The lottery organization then draws the winning combination of 5-8 numbers, usually from 1 to 50, using a randomized, automatic ball tumbler machine.
To win, contestants match their combinations of numbers with the drawn combination. The combination may be in any order, except in some "mega ball" lotteries, where the "mega" number for the combination must match the ball designated as the "mega ball" in the winning combination. If there are multiple winners, they split the winnings, also known as the "Jackpot". Winnings are currently subject to federal income taxes as ordinary income. Winnings can be awarded as a yearly annuity or as a lump sum, depending on lottery rules.
Most states have state-sponsored and multi-state lotteries. There are only seven states that do not sell lottery tickets: Alabama, Alaska, Hawaii, Mississippi, Nevada, Utah and Wyoming. In some states, revenues from lotteries are designated for a specific budgetary purpose, such as education. Other states put lottery revenue into the general fund.
Multi-jurisdictional lotteries generally have larger jackpots due to the greater number of tickets sold. The Mega Millions and Powerball games are the biggest of such lotteries in terms of numbers of participating states.
Some state lotteries run games other than the lotteries. Usually, these are in the scratchcard format, although some states use pull-tab games. In either format, cards are sold that have opaque areas. In some games, all of the opaque material is removed to see if the contestant has won, and how much. In other scratchcard games, a contestant must pick which parts of a card to scratch, to match amounts or play another form of game. These games are prone to forgeries both from card dealers (Which can sell fake cards) and players (Which can fake winning cards at home).
On July 1, 2000 a new law took effect in the State of South Carolina where the ownership, possession and operation of a video poker machine for either commercial or personal use became illegal. Violators are subject to prosecution and hefty fines. Currently the only type of legalized gambling in the state is the South Carolina Education Lottery.
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