Legislators have long faced an array of options when determining their state’s gaming policy, and the options have expanded in recent years.
Distributed gaming in which slot machines – even machines in which their owners and operators do not refer to them as slot machines – can be placed in numerous locations, including bars, restaurants and convenience stores – without the “inconvenience” of licensing or regulation – is one such option that lawmakers can legitimately consider.
When doing so, I respectfully suggest they first consider:
- How would such a policy potentially impact other forms of gaming, most notably if their states have – or are considering – the authorization of brick-and-mortar casinos?
- How might such a policy decision impact public confidence in the regulation of gaming?
That latter point is particularly significant, and if left unaddressed, can be damaging to a state, to its gaming industry and ultimately to a state’s ability to leverage gaming to advance other public policies. Such policies could include employment, tourism, urban development as well as a state’s overall, long-term fiscal health.
I have been involved in gaming policy for nearly a half-century, dating back to the birth of the modern gaming industry in 1978, with the legalization of casinos in Atlantic City. Most recently, I have had the privilege of serving as an expert witness in four states on the still-emerging issue of what has been termed “skill-based gaming.”
Throughout the decades, I have witnessed what has worked, and what has led the United States to authorize more than 1,000 casinos. The secret ingredient behind that success is not so secret: A licensing system based on the principle that a gaming license is a privilege granted to those individuals and organizations that have affirmatively demonstrated their good character, honesty and integrity.
In return, those licensees are granted privileges that could range from monopolies to a limited number of licenses to restrictions on limiting gaming to certain locations and communities.
With that system in place, gaming licensees can invest capital with the assurance that the rules will not change, which encourages greater investment. Moreover, they can invest that capital and operate gaming within a system that the public understands and trusts.
Lawmakers in numerous states now face the challenge of addressing the existence of – and the potential expansion of – unregulated gaming within their states. Do they uproot the unregulated machines, which can number in the tens of thousands?
Or do policymakers take the seemingly easier step of simply granting licensure to the unregulated offerings? That tantalizing option would quickly generate new revenues for the state without ruffling the feathers of small businesses that now house the machines.
That option is neither as simple nor as tantalizing as it might seem. It would, in some instances, solidify competition with other forms of gaming, most notably casinos, that have already been authorized and licensed. That would, as noted, have a discernible impact on future capital investment decisions, which would in turn, have a quite meaningful impact on other public policies.
More important but far less obvious is that a system in which unregulated operators can become regulated, licensed gaming participants undermines the proven principle that a gaming license is a privilege granted to those who have affirmatively earned that privilege.
That principle is the foundation of public trust in gaming.
The regulation of gaming is not easy, but neither is it particularly complicated. Certain questions must be addressed, including but not limited to:
- Are the games fair, and have they been tested to ensure such fairness?
- Are the revenues fully accounted for, and can the handling of funds be effectively monitored and audited?
- Are controls in place, including camera coverage, to govern such games, including the monitoring and prevention of underage gambling?
- Are stakeholders properly focused and invested in responsible gaming and harm minimization?
The most important question is: Have all operators, as well as their key employees, met the test of demonstrating their good character, honesty and integrity?
Elected policymakers cannot ignore what has worked effectively if they want to develop and maintain a healthy gaming industry.
Once again, looking back at New Jersey’s pioneering efforts in the 1970s to build an industry that could earn public trust, I note that the concept of “legalizing” and “regulating” entities that were already operating gaming establishments was never under serious consideration. Quite the opposite.
Licensees had to earn that privilege, and the license came first. Lawmakers around the nation need to consider that history, and to consider responses that will not be the easy answer, but may prove to be the right answer.
