Say an Atlantic City casino executive wanted to donate to New Jersey Governor Phil Murphy’s reelection campaign. Because state law bans casino staff with key licenses from direct contributions to state elections, the executive might be out of luck.
According to a recent judicial decision, the executive in question, others like him and the companies they work for would be within their rights to contribute to a political action committee (PAC) supporting a gubernatorial candidacy. That executive could also work for Murphy’s campaign if the work didn’t involve his occupation.
In June, U.S. District Court Judge Brian R. Martinotti ruled that regulated industries like banks, utility companies and casinos can make “independent expenditures” in gubernatorial and legislative campaigns; PAC contributions fit into that category.
“What’s important is that the spending does not flow into a candidate’s campaign coffers, which would be a direct contribution,” said John Froonjian, executive director of the William J. Hughes Center for Public Policy at New Jersey’s Stockton University.
A casino could also run ads claiming that Candidate B would be terrible for Atlantic City and should be defeated, Froonjian said. The spending has to be independent of the campaign and involve no coordination by the candidate’s staff.
The law that bans politics in regulated industries dates to the early 1900s. In theory, if decision-makers in those industries contributed to campaigns, they might expect something in return for their industry—the quid pro quo approach that leads to corruption.
The industries in question were considered important to the public welfare and likely targets of corruption; therefore, they were not permitted to operate in the political arena. Casinos have always been viewed as especially vulnerable to corruption, so the state began with a presumption of impropriety as a result of gambling’s colorful (and sometimes criminal) past, Froonjian said.
New Jersey isn’t alone in its prohibitions. A number of states have similar bans when it comes to politics, according to Allison Nielsen, director of media relations for the American Gaming Association. In addition to New Jersey, those states include:
- North Carolina
- North Dakota
In September 2018, Pennsylvania’s blanket prohibition on political contributions from those involved in the gaming industry was struck down in federal court. The opinion declared the law overly broad and unconstitutional, Nielsen said.
‘Thing of Value’ Rule
In the 1980s, Gloria Soto, who later worked as counsel for Trump casinos in Atlantic City, then as regulatory director for the Claridge Casino Hotel, sought permission to join the platform committee of the Democratic National Convention.
Soto told GGB News, “I didn’t know if that rose to the level of a ‘thing of value,’” i.e., a political contribution barred by the Federal Election Campaign Act. She requested clarification, and with no answer forthcoming from regulators, filed a legal challenge. “You don’t check your constitutional rights at the doorway,” said Soto, now a Rutgers University administrator.
Virginia McDowell, then in marketing at the Tropicana Casino, also wanted to be politically active and work for the campaign of Jim Whelan when he ran for Atlantic City mayor.
“I wasn’t contributing something of value either,” said McDowell, who retired five years ago. “Based on the Soto decision, I could contribute time as long as I didn’t provide marketing services. There was plenty to do outside my professional purview.”
McDowell took some heat in the media for her decision, but the decision didn’t impact her job. She had the support of Jack Galloway, president of the Tropicana at the time. Later, McDowell served as president and CEO of Isle of Capri Casinos in Missouri, where there was no prohibition.
Singling Out Casinos?
Why are casinos restricted when other, less stringently regulated industries are not? After more than 40 years, the track record of integrity in Atlantic City operations should supersede fears of corruption, said Froonjian.
“Employees at other, more lightly regulated industries including construction, chemical and pharmaceutical firms, lawyers, healthcare and real estate business may make direct contributions. In the age of Covid-19, is corruption in Big Pharma not potentially more frightening than the water company gaining influence in Trenton?
“The world has changed since banks and corporations wielded all of the power,” he said, “and it would be interesting to hear arguments why certain industries are denied political rights compared to other large industries.”
Has the Martinotti ruling opened the door to direct political contributions? Last year, the Third Circuit Court of Appeals struck down a ban on campaign contributions under the Pennsylvania Racehorse Development and Gaming Act, deeming it a violation of the First Amendment.
“I think the trend is toward the courts loosening up some of these restrictions,” Froonjian said. “There’s now a fairly long history of casino gaming in this country and very few corruption scandals. So if the industry keeps pushing the issue, the courts may revisit.”