Thursday, March 31, 2011

Back To The Future – Part III : Casinos Are So Yesterday, Dude!

Kenneth M. O’Brien


Massachusetts has traditionally been the home of innovation.

Lately, however, we’ve generated the ideas and the technology and let somebody else somewhere else capitalize on it.

Now, in another step into this pattern of adopting the rapidly obsolescing, we are debating whether to establish two or three sites for casinos. All the politicians love it. It favors labor unions. It favors sycophantic moneyed interests. It promises riches to a couple of communities that are politically favored by being chosen as the destinations for these facilities.

And, once again, it is one small step for a state, one giant bleep for Massachusetts.

Way back in 2004 I wrote an article proposing that the state should focus its natural competitive advantage, technological excellence, on developing an on-line casino.

Over the intervening years the laws relating to internet gambling have shifted. In addition, the basis upon which I proposed the plan has evolved.

As regards the latter, I originally proposed the plan as a basis for generating a revenue source for a statewide health insurance program. This, I argued, would provide us with an enormous competitive advantage in attracting business.

Since then, we have had the birth of Romneycare, as well as the consequences of its afterbirth. The fundamental shortcoming of Romneycare is its inability to control prices and a spiraling level of costs to companies and self-employed individuals. It was this very consequence that my plan was intended to address.

As regards the former, I provided suggestions for circumventing the limitations imposed by the Interstate Wire Transfer Act, as well as potential benefits to local banking interests. During this time Nevada legalized internet gambling within its borders. Despite the restrictions imposed by law, supposedly “illegal” internet gambling outside the U.S. has prospered – and many of the clients are here in the U.S.

U.S Congressman Barney Frank of Massachusetts has fought to legalize on-line wagering.

In the last week alone the issue of on-line computer gambling, and the laws related thereto, have been featured on CNBC, WCVB TV, and the Worcester Telegram & Gazette.

But the state continues to defend its Lottery Commission, which has declined in popularity in recent years. Once the gem of state lotteries, the decline in payouts as well as suffering from competition from multistate lotteries, the benefits to local communities have not kept pace with needs. Rather than substantial efforts at innovation, the agency has merely expanded access to its games, with KENO available everywhere but in your bathroom.

In the meantime, local entrepreneurs have sought to meet the demand from the public.

The T&G article reported about a local “internet café”, “… only one of the 24 people who got four minutes of computer time for each dollar they paid one afternoon last week was on the Internet.

The rest, evidently tired of the debate between the governor and House speaker over whether Massachusetts should have racinos or casinos, were gaming happily on the computers offering about 30 games, such as poker, slot machine-like endeavors, and Dungeons and Dragons where you might win some money.

Similar attitudes were reported by WCVB as regards another facility in Fairhaven.

The State’s response was summarized in the Telegram article. “These forms of unregulated gaming operate without parameters, and in Massachusetts pose a tremendous threat to the Lottery-generated revenues available for cities and towns,” said Lottery spokeswoman Beth Bresnahan.

There's nothing the Lottery can do about games at Internet cafés springing up across the state and nation — but it's not taking the trend laying down. Besides the concentration of games at the cafés, individual sweepstakes machines are popping up at convenience stores.

Last month, the Lottery sent letters to all 7,300 of the places that sell Lottery tickets in Massachusetts saying their licenses to sell Lottery products will be confiscated if they are “discovered using non-Lottery gaming or gaming-like machines.”

The Lottery has reports of 157 Lottery agents “offering alternative forms of gaming that conflict with Lottery sales,” and that matter is before the commission's legal department, Ms. Bresnahan said.


Rather than opposing this trend, the Lottery Commission and the State should embrace it. If over 150 Lottery Agents are offering alternatives then there is an obvious public demand.

Rather than seeking to establish a few destination locations, of which there is already a surfeit, the state should adopt a program that allows local entrepreneurs to start businesses without the “ghetto” consequences associated with casinos. Among many others, the problems arising from such enclaves have been documented by The International Social Science Review and the General Accounting Office.

WCVB reported  "Is this the kind of business we want? I don't think so," said [Fairhaven Selectman, Mike] Silvia.

I would ask Mr. Silvia, “How many local bars offer KENO? How many strip clubs are there in yours or neighboring communities? Are these more desirable?”

The development of a statewide internet casino would have multiple advantages.

First, it would offer entrepreneurial opportunities to all communities. With this would come transitional employment just like restaurants and local shops, rather than the dead-end prospects that exist in casino ghettos. In addition, who knows what new business models may emerge promoting local talent as entertainers or whatever?

Second, it would allow the state to develop a competitive infrastructure for a national and international rollout when the laws are changed. This would be beneficial financially in both the short and long term.

Third, it would focus emphasis on high tech software development opportunities that would generate substantially greater economic benefits as well as reasonable expectations of spin-off business development.

Fourth, as a state-sponsored enterprise, it would have a level of credibility as opposed to the risks perceived in existing fly-by-night operations, as CBS’ 60 Minutes reported.

But, then again, maybe we want a few casinos with the side effects sung about by Warren Zevon:


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