CASINO WATCH's Briefing Points
Concerning The Proposed Repeal Of Missouri's
$500 Loss Limit Law

The following reasons strongly suggest that Missouri Lawmakers should not consider removal of the $500 Loss Limit.

The following are points well documented and supported by unbiased and credible studies. For example, the economic study of gambling commissioned by the Florida Governor's Office, a Maryland State Department of Health and Mental Hygiene task force, the United States General Accounting Office and the unanimous Report of the National Gambling Impact Study Commission which included representatives from the gambling industry as commissioners. These basic economic and societal facts assembled by objective third parties suggest that it would be unwise to repeal the loss limit at this time.

1) The $500 Loss Limit was an idea proposed by the Casinos themselves: The $500 Loss Limit was originally proposed by the Casino industry as a safeguard against problem gambling. The original proposed amendment to the Missouri Constitution to allow casinos -- written by the casinos -- contained the requirement, "Five hundred dollar maximum loss limit per person per excursion." The concept was the idea of the Casinos and the Gambling Industry, not gambling opponents.

2) The $500 Loss Limit Does Not Interfere With "Recreational Gambling": Under current law, someone may lose (and the Casinos may gain) $500 per every two hours, $6000 per day, $42,000 per week and $168,000 per month at a casino. While it may be understandable that the gambling industry desires that gamblers lose more than this, it is fair to inquire who would fund the losses in excess of the existing limit. Gamblers losing in excess of the loss limit are largely problem and pathological gamblers. This means that a disproportionately greater cost is paid by businesses and by society in general to allow casinos to benefit from gamblers losing more than $500 per every two hours or $6,000 per day. Indeed, it would almost be the definition of compulsive gambling for an individual to continue gambling after sustaining losses in excess of these limits. It is surely not "recreational" or "ntertainment" for a gambler to continue gambling after such losses.

"Many problem gamblers have binge activity extending over long hours. If casinos would have closing hours, (or loss limits) even if only for two to four hours an evening, such binge behavior could be temporarily stopped, and a problem gambler could be brought back to reality." The Social Costs of Gambling in Wisconsin, Published by the Wisconsin Policy Research Institute, Inc. a study prepared by William Thompson, Ph.D. Ricardo Gazel, Ph.D. and Dan Rickman, PhD.

3) The $500 loss limit helps to reduce pathological gambling: The "Recreational Gambler" is able to gamble and lose up to $500 per "cruise" and $6,000 per day. The loss limit does not restrict this "recreational" gambling. The loss limit only prevents gambling in excess of the $500 loss. Those who gamble and lose more than $500 per every two-hour "cruise" or more than $6,000 per day are mostly the pathological gamblers who are least able to control their gambling and who are most responsible for the societal costs of problem gambling. Consider the statements of two leading national mental health professionals who treat gambling addiction.

"I state with confidence that removing loss limits at gambling establishments will lead to an increase in compulsive gambling and an escalation of the gambling by those individuals in the early throes of addiction." Statement of Valerie C. Lorenz, Ph.D of the Compulsive Gambling Center, Inc. of Maryland made to the Missouri General Assembly January 27, 1999.

"To increase the limit from $500.00 to no limit would be disastrous for problem and compulsive gamblers and their families." Edward J. Looney, Executive Director of the Council on Compulsive Gambling of New Jersey, Inc. to the members of the Missouri House of Representatives Ways and Means Committee, February 25, 1997.

4) Gambling, Especially Pathological Gambling, Imposes a Significant Cost Upon Businesses and Upon Society as a Whole: The societal costs of gambling -- especially pathological gambling -- are well documented and significant and are paid by the community at large. Specifically:

"The annualized Social Costs for one serious problem gambler in Wisconsin amount to $9,469. … The total social costs of serious problem gambling in the state (of Wisconsin) amount to $307,023,246." The Social Costs of Gambling in Wisconsin.

Recurring sales tax revenues would experience a net decrease of at least $84.7 million as Floridians diverted some of their existing taxable spending to casinos. "Casinos in Florida: An analysis of the economic and social impacts." A report prepared by the Executive Office of the Governor, Office of Planning and Budgeting. State of Florida.

"Crime and Social costs attributable to casinos would total at least $2.16 billion annually." "Casinos in Florida: An analysis of the economic and social impacts."

"A Maryland Department of Health and Mental Hygiene task force determined that its 52,000 adult gambling addicts cost citizens $1.5 billion in lost work productivity, monies stolen and embezzled, bad checks and unpaid taxes. (Worsnop, 1990, page 644). The cost per individual compulsive gambler exceeds $28,846 and significantly increases when related costs for social services, health care, bankruptcies, legal and correctional fees are considered. *** The American Insurance Institute estimates that 40 percent of all white-collar crime has its roots in both legal and illegal gambling. Problem gamblers are responsible for an estimated $1.3 billion worth of insurance-related fraud per year." "Casinos in Florida: An analysis of the economic and social impacts."

"According to Nobel Prize winning economist Paul Samuelson, it is basic economics that: '[Gambling] involves simply sterile transfers of money or goods between individuals, creating no new money or goods. Although it creates output, gambling does nevertheless absorb time and resources. When pursued beyond the limits of recreation, where the main purpose after all is to "kill" time, gambling subtracts from the national income. U.S. National Security and the Strategic Economic Base: The Business/Economic Impacts of the Legalization of Gambling Activities." John Warren Kindt, St. Louis University Law journal, Vol 39, No 2 (Winter 1995) Quoting Paul A. Samuelson, Economics 425 (10th Ed. 1976). See Also, "Legalized Gambling Activities As Subsidies By Taxpayers", John Warren Kindt, Arkansas Law Review, Vol 48, No. 4, 1995 and "The Economic Impacts of Legalized Gambling Activities", John Warren Kindt, Drake Law Review.

"Another temptation in this tight budget year will be to expand gambling. Let me say two words about that. Be. Careful. We must make decisions on gambling based on its total impact on the Commonwealth and her citizens -- and not just because we see a big honeypot of revenue right in front of us. When it comes to gambling, there are winners -- but there are many, many losers. Remember, this is not your money that you are playing with." Governor Tom Ridge, Farewell Speech as Governor of Pennsylvania, now U. S. Director of Homeland Security.

"In addition to the costs of problem and pathological gambling borne by the individual and his or her family, there are broader costs to society. NORC [National Opinion Research Center at the University of Chicago] estimated that the annual average costs of job loss, unemployment benefits, welfare benefits, poor physical and mental health, and problem or pathological gambling treatment is approximately $1,200 per pathological gambler per year and approximately $715 per problem gambler per year.

***  NORC calculated that the aggregate annual costs of problem and pathological gambling caused by the factors cited above were approximately $5 billion per year, in addition to the $40 billion in estimated lifetime costs." National Gambling Impact Study Commission Report. June 18, 1999. This report was unanimously adopted by all commission members including: J. Terrence Lanni, Chairman of the Board and Chief Executive Officer of MGM Grand, Inc.. Mr. Lanni was previously a senior executive in the Ceasers World, Inc. organization; William A. Bible, former chairman of the Nevada State Gaming Control Board and member of the Nevada Ethics Commission; John W. Wilhelm, General President of the Hotel Employees and Restaurant Employees International Union (HERE). HERE represents more than 75,000 casino employees, more than any other union. Mr. Wilhelm has been HERE chief negotiator for the 45,000 member Las Vegas local and most of the unions members are employees of casinos and hotels.

5) The $500 Loss Limit is a Significant Deterrent to Use of Casinos as a vehicle for illegal Money Laundering. The federal government is currently expanding regulation necessary to limit money laundering by drug cartels and terrorist organizations. The federal government has found that existing federal regulation of, and reporting requirements for, casino transactions are not sufficient to limit or reduce money laundering and that additional regulation is needed. News reports indicate that terrorists were using casinos (including Missouri casinos) in the course of the recent terrorist attacks. Thus, in this climate, it is not a time to loosen the regulations on casinos but a time to -- as the federal government is doing -- consider additional money laundering regulations for casinos and other gambling enterprises.

An investigation by the United States General Accounting Office concluded that, "As the amount of money wagered annually has increased, casinos may have become more vulnerable to individuals who attempt to launder their illegal profits in the fast-paced environment of casino gaming." United States General Accounting Office: Money Laundering - Rapid Growth of Casinos Makes Them Vulnerable, January 1996.

Casinos, including Missouri casinos, are being investigated for possible use by suspected terrorists. See, Las Vegas Review-Journal, "Possible LV Link Probed", September 22, 2001 (Article detailing involvement of suspected terrorists with Missouri and Las Vegas casinos.). Las Vegas Review-Journal, "Evidence Suggests Sinister Business, Not Fun, Brought Terrorists Here." October 3, 2001 (Article outlining continued investigation into terrorists' connection to casinos, including inquiries into whether, "Did hijackers come here to bust out credit cards, or pick up cash?") See also, San Francisco Chronicle, "Agents of Terror Leave Their Mark in Sin City." October 4, 2001, Page A-8.

In light of this situation, recent federal regulation and legislation proposed the U.S. Department of Treasury and the U.S. Department of Justice, "The 2001 National Money Laundering Strategy", September 2001 focuses upon casinos for additional tighter regulation on financial transactions. Existing federal regulation of casinos and money laundering through casinos is perceived to be inadequate and needs to be tightened. See, Department of Treasury Financial Crimes Enforcement Network, Extension of Regulations concerning Money Laundering at Casinos, July 9, 2001. Also, proposing new regulations tightening the existing $10,000 federal suspicious transaction reporting requirement.

6) The Casino's Arguments Seeking Repeal of the Loss Limit Are Not Valid: The principle arguments advanced by the casinos for the repeal of the $500 loss limit are: (1) The loss limit places them at a competitive disadvantage to casinos in other states because the casinos in surrounding states do not labor under the same restriction; and, (2) Missouri casinos are not able to be profitable because the $500 loss limit puts them at a competitive disadvantage relative to casinos in surrounding states who do not have the loss limits and gamblers are patronizing casinos in other states instead of Missouri casinos. The facts do not support these arguments.

While it is true that other states do not have a $500 loss limit, it is also true that the other states have their own regulatory climate which includes restrictions not imposed in Missouri. For example, other states limit the number of slot machines, one of the most significant sources of casino revenue, while Missouri does not limit the number of slot machines. "Craig Travers, general manager of the Casino Queen in East St. Louis, quickly cited one advantage the Missouri casinos enjoy [that Illinois casinos do not have]. 'They can put on as many slot machines as they want. They're expanding their capacity and the Illinois boats do not have the ability to do that,' he said." St. Louis Post Dispatch, "Revenue From Missouri Casinos is Growing Faster Than Those on Illinois Side." August 23, 2001.

In essence, this argument boils down to a contention familiar to every parent, namely, "the other mommies let their kids do it, so why shouldn't we."

Missouri casinos are having their most profitable year ever with the $500 loss limit in place and it is simply not true that they can not be profitable with this limit in place. Indeed, Missouri casinos are more profitable than their competitors in adjoining states. "Revenue at President Casino on the Admiral has hit $71 million this year -- the highest mark since the casino opened in 1994. That has Jim Zweifel, President Casino executive vice president and general manager, anticipating revenue from the casino to reach $75 million by fiscal-year end." St. Louis Business Journal, October 26, 2001.

"Revenue is growing much faster at St. Louis-area casinos on the Missouri side than at casinos on the Illinois side. The casinos' take rose an average of 19.7 percent last month at the three Missouri-based boats, compared to three-tenths of a percent at the two boats on the Illinois side. The rate compares the casinos' revenue to the previous July, the usual industry yardstick. The Missouri-based casinos - Harrah's in Maryland Heights, Ameristar St. Charles and the President on the Admiral - have been outpacing their Illinois counterparts in overall revenue growth for at least the last several months." St. Louis Post Dispatch, "Revenue From Missouri Casinos is Growing Faster Than Those on Illinois Side." August 23, 2001.