Saturday, October 17, 2015

Government Needs Gambling…and Vice Versa

There were TWO recent events that prompted these comments.  The first, obviously, is the recent Daily Fantasy Sports clusterfuck (tossed from Nevada, being investigated in NY and FL, and other shenanigans).  The other was a random post on a poker website where the postee made the standard complaint about the lack of online action, “We don’t need no government to let us play poker!”

Well, actually, we do, and just as much as they need us.  Hear me out.

Government needs gambling now more than ever.  It started a long time ago – 1963 to be exact – when New Hampshire decided to finally try a lottery as a way to increase funding for education (the idea had been debated for a decade).  Taxes is a four-letter word there, as they have property taxes but no sales or income tax.  Anyway, the lottery was a hit, New York got one in 1967, and, as the saying goes, TIDAL WAVE!  Today almost every state in the union has SOME form of legalized gambling, be it lottery, horse racing, casinos, etc. 

The things that ALL of these forms of gambling have in common? 
  • Authorization
  • Regulation, and most important for the state,
  • Part of the action (percent of the amount wagered, or fees from operators, or sometimes both).

As you have read in your history books, the online poker boom of the last decade didn’t have any of these things.  You know what happened soon enough.  And apparently, the folks running FanDuel, DraftKings, and all the other DFS sites missed that lesson.  It’s painfully obvious that in the very near future the DFS industry will undergo an evolution of sorts.  How fast and in what capacity that evolution occurs is up in the air right now.

There are many options – outright ban (as in Nevada), regulation (as in Massachusetts),  or…something else?  It’s clear to me that whatever the outcome, it will be up to the states, not the Feds (unless another version of UIGEA or RAWA or some other Sheldon Adelson-funded-prohibition bill finds its way through Washington’s sewers).

Remember, (state) government needs gambling.  Legislators are loath to raise taxes, and the money has to come from somewhere.  Gambling revenues are here to stay.

And gambling needs government.  It’s a business after all.  Name a business that doesn’t operate without SOME form of government oversight.  Even Mom & Pop stores have to have business licenses, and if they have employees there are taxes and payroll forms and perhaps more. 

In my own industry (food) we have business licensing, restaurant licensing, health inspections, plus the above.  In addition, we’re an S Corporation, so that another level of licensing.  All of this regulation is important – it provides structure and it ensures that we provide a safe and healthy environment in which to serve the public.

There are many in our industry who grumble about “excess regulation.”  The problem, as I see it, is “uneven regulation.”  Businesses cheat because they need to (make a profit) or want to (make a profit).  The problem is that no one operates in a vacuum, and if Bob’s Ice Cream Store finds a way to get around regulations and save some bucks in the process (the usual M.O.), that puts Bob’s competitors (like me) at a disadvantage.  Bob can use the money he saves by skirting the rules to advertise more, or to sell his ice cream at a lower price, or maybe Bob pockets the excess.  Either way, it’s advantage = Bob, disadvantage = me.

In some cases, ironically, it’s because of less government involvement.  In our county we only have 1.5 food inspectors to cover the entire county.  Restaurants are supposed to be inspected twice a year, and I can tell you that the inspectors here are wayyyyy behind – our last inspection was in 2013.  There are several places in our county I refuse to eat at because I know they’re not keeping a clean kitchen (and I’ve known of cases where it seemed customers suffered mild food poisoning from eating there).  Lack of inspections (caused by shortage of staff) allows some to cut corners and we all suffer.  Some (barf) more than others.

The need for regulation is important.  Don’t think so?  Would you really want to eat unregulated meat or dairy products?  Gambling (or gaming) is already one of the most heavily regulated industries in the world (I. Nelson Rose says so).  And given the potential for “problems” in the gaming industry (we’re looking at YOU, UltimateBet), regulation is essential for players and the industry.

In the case of online poker and online gambling, it’s the ONLY way it’s gonna happen.  Suck it up and push for safe, legal, and regulated online gambling.

And DFS?  Well, watch and learn.

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