Next in the War on the Poverty Industry: Daily Limits for Video Lottery?

Senator-Elect Al Novstrup and I agree that video lottery is a terrible way to fund state operations. Novstrup said (at about 53:00 in our November 4 KSDN radio debate) said the state neglects the hidden costs of addiction, embezzlement, and broken families on which the gambling industry makes its millions.

Early in his successful push to cap payday loan interest rates at 36%, café owner and activist Steve Hildebrand said he wants to rein in video lottery, another key component of what he calls the “poverty industry” in South Dakota. If he was inspired  to consider that political foray back in 2015 by the initial positive response to his rate cap petition, he must feel even more inspired now seeing more than 75% of South Dakota voters willing to vote for a business regulation that has an exploitative industry squealing.

If Novstrup and Hildebrand would like to join forces to regulate video lottery, they can find great support for the case against state reliance on gambling in this new article in The Atlantic which shows that, just as payday lenders depend on hooking desperate people into debt they can’t escape, casinos base their business model on luring gambling addicts and sucking them dry.

The preferred mode of gambling these days is electronic gaming machines, of which there are now almost 1 million nationwide, offering variations on slots and video poker. Their prevalence has accelerated addiction and reaped huge profits for casino operators. A significant portion of casino revenue now comes from a small percentage of customers, most of them likely addicts, playing machines that are designed explicitly to lull them into a trancelike state that the industry refers to as “continuous gaming productivity.”

…Problem gamblers are worth a lot of money to casinos. According to some research, 20 percent of regular gamblers are problem or pathological gamblers. Moreover, when they gamble, they spend—which is to say, lose—more than other players. At least nine independent studies demonstrate that problem gamblers generate anywhere from 30 to 60 percent of total gambling revenues [John Rosengren, “How Casinos Enable Gambling Addicts,” The Atlantic, December 2016].

We recognize that letting people drink too much alcohol harms all of us—drunk driving, domestic abuse, lost productivity, crime to feed the addiction. We thus impose legal liability on those who sell alcohol: if a bar keeps serving someone who has clearly drunk too much, and if that drinker then goes out and crashes his car into another drive, the bar bears some legal liability, at the very least a penalty for selling to an intoxicated person (SDCL 35-4-78). Bartenders thus cut customers off if it appears customers have drunk enough for one night.

Rosengren’s essay suggests a similar solution to protect us from excessive gambling. Why not hold casinos liable for damages—embezzlement, family neglect—caused when they allow customers to burn up their monthly paycheck in one long bender entranced before the video lottery terminal? Why not impose a daily limit on how much a person spend on video lottery in one day, say, $100? That seems a rather liberal limit—a gambler maxing out every day would blow $36,500, a bit more than three quarters of the personal per capita income in South Dakota in 2015. I’m willing to suggest that anyone blowing that much money on the most solitary form of gambling entertainment isn’t doing it for fun or as an expression of personal liberty; a person spending over $30,000 on video lottery probably has a problem and needs help.

So let’s enlist the video lottery industry’s help. Let’s impose a $100 daily limit on video lottery spending in any one establishment. Let’s establish something like our dram shop law or the bet limits we have in Deadwood: let a gambling addict keep gambling—i.e., let someone spend more than $100 in one day at your video lottery terminals—and you at least pay a fine or suffer some suspension of your license.

Senator-Elect Novstrup, would you like to introduce this bill? Or shall we leave it to petitioner Steve Hildebrand and the people of South Dakota to initiate another common-sense regulation against an industry (and, in this case, a state) that exploits addicts?


39 Responses to Next in the War on the Poverty Industry: Daily Limits for Video Lottery?

  1. owen reitzel

    I don’t necessarily disagree but how will we make up for the lost revenue?

  2. Liberty Dick

    An obvious unintended consequence of this proposal would be a spike in drunk driving as gamblers would travel from one bar/casino to the next avoiding the new limits.
    Eliminating video lottery is the only way to curtail the problem gambling. But then you would have to find more state funding since the state is mildly dependant on it.
    I still think people should be free to gamble however they wish and have mixed feelings about state involvement in gambling. If you want to solve this issue you have to be open to the idea of eliminating video lottery completely and talk about a replacement style of government sanctioned gambling or the government cuts/tax increases needed to suffice the budget.

  3. Donald Pay

    Lost revenue would be made up with sales taxes on purchases made from money folks won’t be spending on gambling.

  4. I agree video is not the correct way to fund state programs, however we will just chase these problem gamblers to the Native American casinos where the state pays the bill for the problem gamblers and the tribes get the profit.

    The field needs to be competitive not regulated for one sector.

    If one wants to gamble all their money away that have endlessly opportunities to do so. This is like using a bobcat to build the interstate system

  5. We can’t fix everything…

  6. Donald Pay

    When video gambling began, it led to a vast decline in the certain areas (E. North Avenue) of Rapid City. A few years after gambling, you got an explosion of title loan and payday loan outfits. All these poverty enterprises are related. I’d rather have illegal gambling, than legalized gambling that takes over whole areas of a city and causes a decline in neighborhoods through the poverty business. When gambling came in it was supposed to be limited. Well, it’s time to limit it.

  7. Without the salaries being paid to shuffle the papers for gaming, the state could put into development projects for the future. What gaming has done is create a voting bloc of support for the near conservatives to the chagrin of real conservatives. JoDene Joy got the ball rolling in the past to put this up to vote, Time to end the misery that gaming has cost us all. This is not economic development, it is really just a source of corruption. Look at the EB5’s involvement to see what I mean.

  8. Steve Hickey

    Next up in our war on the poverty profiteers is to ban bail bonding. Only two countries in the world allow it, and it’s now banned in four states for good reason.

    We are watching close to see if there is any discernible down tic in video gambling with payday loans not available.

  9. Mr. Hickey, I think that tic might not be visible for some time, but it will happen. Video gaming has a lot to do with depression as well. These are uncertain times and there may not be a quick tic in the drop of video gaming, but that does not mean that the lowering of interest rates has not had an impact on those that use the places.

  10. I also see where you are coming from regarding the rip off artists of the bail bonding industry. http://www.justicepolicy.org/news/4389 You will have some powerful political interests to do battle with Mr. Hickey. You should be able to differentiate the real conservatives with near conservatives on this deal though to bring it to ballot. I would vote in support of the ban.

  11. Ben Cerwinske

    I’d be open to this. I’m concerned about unintended consequences though. I voted against the 36% cap in part because it didn’t seem honest. It was framed as regulation, but effectively it was an industry killer. There’s a lot of things I could do without, but I’m cautious about the government interfering.

  12. Government interfering with poverty should be our top priority. Here is the next assault on poverty in South Dakota under the spell of stupid. http://www.npr.org/sections/health-shots/2016/11/19/502580120/in-depressed-rural-kentucky-worries-mount-over-medicaid-cutbacks
    Change Kentucky to South Dakota and you can see the mirror.

    I know, lets see what Nelson has to say about this. I am sure that his reasoning will soothe those who question him. The question should be is who is going to foot the bill for all of this? How will it work in the new regime same as the old regime.

  13. mike from iowa

    Sam@ let’s put your head together and see if you can come up with more ways to denigrate “poor Mr Lo” so we can kick them around some more.

  14. mike from iowa

    The more one reds and follows Master, the clearer it becomes. He is just too smart and too logical for people with Rs behind their names to ever vote for. This guy has more common sense in his typing fingers than I’ve seen in comments from the dark red side here.

    Maybe Cory should aim higher and replace the apricot colored disaster waiting to be enshrined in DC on January. I bet Master won’t let his temper get the best of him. He will calmly ‘splain to the rabid masses why it is bad form to foam at the mouth and spew spittle on people they disagree with. He isn’t in Obama’s league, yet, but he is getting there.

  15. Nick Nemec

    I like Hickey’s idea to ban bail bonding and while we’re at it lets ban bail for all but the most dangerous. Bail for minor offenses keeps poor families in poverty.

  16. I think in SD everyone knows someone that sits on a video lottery stool all evening long losing their money. I knew several people that were gambling addicts and it is awful for their families. Time to fix the problem, SD children deserve better.

  17. mike from iowa

    All is lost according to this nutjob-

    McGuiness: Trump Going To Be Inheriting Worst Fiscal Situation Of Any President Other Than Truman

    Read the story at crooks and liars. Or not if you don’t want to.

  18. Sam, wanna explain this a bit better to open yourself up to necessary criticism? “…chase these problem gamblers to the Native American casinos where the state pays the bill for the problem gamblers and the tribes get the profit.”

  19. Roger Cornelius

    sam@, Tribes will gladly take the money from people that want to go to reservation casinos.

  20. Roger Cornelius

    Steve H.
    Agreed, the idea of bail bondsmen being so involved in our criminal justice system is disgusting, Powers at the Dump Site will be pretty upset.

    A friend in Maryland has been advocating the dissolution of the fraudulent tax preparers like Liberty Tax.
    People anxious to get their tax refunds quickly pay a high price for that service not say anything about the ridiculously high rate they charge for tax preparations.

  21. @Roger, you friend is correct about how the tax scam is. You actually can get that done very easily and free in many places. The problem lies in getting the return. If you get a return and you are poor, you need the money right away. You cannot wait for the return to be processed and mailed to you when it can be done right away and sent to your new debit account. So they show the way to do that and open the debit account that puts the return in very quickly. The tax guys will help you do that for a fee on the cards they promote. It is a multi billion dollar scam that keeps on keeping on because the poor need the cash immediately.

  22. Owen, I think Donald’s suggestion that the revenue will make itself up in money saved for other purchases is more reliable voodoo economics than our President-Elect’s trickle-down plan.

  23. LibD, I’m perfectly willing to have an open, honest discussion about eliminating video lottery entirely and seeking other responsible revenue replacements or budget cuts. But when I suggest that a progressive income tax would be a more just, above-board means for the state to obtain revenue for necessary programs, everyone freaks out. Are we all willing to take up the burden that we’ve been shirking onto the backs of addicts, or is the knee-jerk SDGOP opposition to a state income tax going to make that adult conversation impossible?

  24. LibD’s unintended consequence raises another valid question: should bartenders serve alcohol to anyone engaged in gambling? Should bartenders allow any who is clearly inebriated to continue playing video lottery? Doesn’t inebriation mean the player is in no condition to make rational choices about whether to continue gambling or not?

  25. I continue to be amazed at how the libbies are trying to save the math impaired. These people are stupid, people. You can’t outlaw stupid.

  26. Darin Larson

    Grudz, we regulate, restrict and incentivize all kinds of behavior, stupid or not. Seat belt laws, helmet laws, car insurance requirements, blood alcohol limits are all examples. The government is not going to eliminate gambling addiction entirely by getting rid of video lottery, but it sure could reduce it. Also, does it seem right to you that government and video lottery owners should profit off the addiction of others?

  27. drey samuelson

    As several already noted, the problem with limiting daily losses in one venue would simply mean that problem gamblers would move to another casino. I think the only way to get limit video lottery addiction is simply to get rid of the terminals–it’s been voted down twice, but maybe folks are ready to do it now. I’d sure support it, and enthusiastically.

  28. A little heavy on the paternalism here, folks. Better ban alcohol, too. You know, revenue off the backs of addicts and such.

  29. Cory:

    One additional hurdle for the pro-income tax lobby to overcome is the proposed tax law changes being discussed in Washington. DC provides a major tax subsidy to state governments by making state income tax payments deductible from taxable income. There is talk of ending this deductibilty/tax subsidy, meaning that state income tax payers would be paying the full cost of both state and federal income taxes.

  30. Any word on what the South Dakota Democratic Party leaders have to say on this issue? How about what they say on the disgusting civil rights actions at Standing Rock?

  31. Grudz, we’re all sinners. None of us deserve anyone’s help. Yet help we do.

  32. Democratic leaders haven’t settled on an agenda for party building yet, let alone deciding which ballot measures they might fight for or whether to fight for any. (And let’s stay on topic—take pipeline protests elsewhere.)

  33. Dicta, this suggestion is no heavier on the “paternalism” than our dram shop laws. If it makes you feel better, don’t think of it as protecting gambling addicts from themselves. Think of it as protecting yourself from gambling addicts who might embezzle from your business or steal from your car. Think of it regulating an exploitative industry. Think of it us protecting ourselves from further incurring the moral stain of exploiting the weak to dodge our fair tax burden.

  34. Drey, you are right, monitoring is an issue. This proposal wouldn’t ask the bartender or VLT attendant to stop the gambler from going down the street. However, even that minute, or five minutes, or whatever the transit time is, takes the gambler out of “the zone” and gives him or her that possible crucial time away from the buttons and the screen for rational thought to kick back in and say, “That’s enough for tonight.”

  35. North Dakota has legal charitable gaming instead of video lottery. The state receives a portion of the proceeds for these games along with the city or county.
    What is nice about the charitable gaming is that the games are live and not done over video lottery, an individual has to look at the dealer and fellow patrons, and must occur within a non-dedicated establishment, providing some stigma to help prevent over embellishment.
    Also, since they are live, there is a wider appeal to more casual gamers versus the burden falling solely on the addicted. This wider appeal helps to remove some of the stigma of gaming while still providing the opportunity to play. I’d rather see the live blackjack and pull tab tables at Borrowed Bucks in Fargo versus the lines of video lottery machines at Borrowed Bucks in Sioux Falls.
    A nice summary can be found here: http://www.legis.nd.gov/files/resource/committee-memorandum/13.9065.01000.pdf

  36. Good example, MD! I have no problem with people getting together for a friendly game of poker or some group fun at the blackjack and roulette tables. And you make an interesting point about “stigma”—looking a human dealer or poker opponent in the eye amy check an addictive impulse. A beeping video screen is engineered to do the opposite.

    But I wonder: don’t good casino dealers manipulate gamblers to keep playing? Might not the peer pressure of a crowd watching or even cheering at the roulette table push one to gamble more than one might otherwise?

  37. Roger Elgersma

    if they go from one casino to another how are you going to track how much they spend in a day? If they spend to much they will go broke anyways. Impractical although a nice thought.

  38. The state allowed charitable gaming that I have encountered has been within bars, and is generally just a section off to the side at the bar, I haven’t noticed much casino style manipulation. I could stand corrected.
    Logic would have it that providing this type of gaming in a more social environment would have less social ill than providing it in a setting which relies on sitting at an individual machine.

    When researching this, I found some data from 2007 that had Minnesota bringing in over $100 million in taxes off of pull tabs while North Dakota pulled in $10 million. This was from an industry trade group though, so with a grain of salt.

  39. Roger E, same argument as with dram shop laws. I can’t stop a drunk from going to have a drink elsewhere, but I can make sure he doesn’t get another drink from my establishment. The point of the idea above is not to stop gambling completely. It’s to give the addicts time away from the machines, even a few minutes, to come to their senses, to pull back. Maybe it even stops some people from sitting and becoming addicts. It’s a deterrent.

    We could implement some monitoring techniques. The casinos discussed in The Atlantic article give gamblers rewards cards and can track their every play. It would not be hard to create a system where video lottery terminals only accept special swipe cards (think hotel keys—not difficult technology), and players can only load so much on their cards. Video lottery managers would then know exactly how much each person has spent. We could network machines to instantly report to a central database and shut out anyone who’s chunked in more than the daily limit for 24 hours (measured from the time of their first bet that day). Or heck, we could go back to arcade technology and make machines accept only tokens, which gamblers can only purchase from the bartender, who would then know exactly how much you’re spending and when to cut gamblers off for the night.

    Of course, if you think it would be easier to sell a complete ban, we can try that route.