Just What Delaware Needs

March 28, 2012 By

Last week, my wife and I attended an ABA meeting in Las Vegas. On our last day there, I played the “quarters” slots machines for less than an hour. I told my wife that I would stop if I lost $40. On the first machine, I won $30. On the second machine, I lost $10 back, but not before getting “comped” for a Bud Light. (I even offered to pay for the swill.) Back to the first machine, where I lost another $5. Being $15 ahead on a net basis, I cashed out and left the floor. I knew when to fold ‘em. But my home state is hooked.

I awoke this morning to read that Delaware, in its infinite wisdom, wants to get into Internet gambling. The ostensible reason is that our three casinos are being pressured by increased regional competition and declining slots revenue. Under the plan, aggregate casino license fees will be reduced by $7.75 million. The casinos could use that money only for capex, marketing and debt reduction. The state would make up for the lost license fees by expanding Keno and sports parlay betting to other venues, although the casinos would not share the revenues from those new venues.

Most interestingly – taking advantage of a federal DOJ legal opinion that a statutory ban on Internet gambling applies only to interstate sports wagers – Delaware would permit Internet gambling as well: both lottery tickets and “casino games.” Delaware would keep 100% of the first $3.75 million in profits from Internet casino games and slots, and thereafter share the wealth with the casinos and racetracks according to a formula. Supporters of the plan figure that Internet gambling – so recently believed to be illegal on its face – is the “way of the future.”

What’s wrong with this picture? Let’s consider a few things.

First and foremost, we have additional State facilitation of addictive behavior. The gambling poorhouse is now only a few mouse-clicks away. Why drive all the way to Harrington to lose your home? Any Delawarean with an iPad and a credit card will be able to get in on the action. Won’t there be added treatment costs in that respect as well?

Second, will casinos become irrelevant in the face of Internet gambling?  Who will still go to the casinos to play table games and buy overpriced food and drink if you can save gas and time by playing at home for “free”? How many casino jobs will be lost? Who will bother to watch Wayne Newton or Dolly Parton in person?

Third, it’s a classic example of the State and the casino owners whistling past the graveyard. The News Journal article candidly said that “the addition of sports betting and table games has only helped Delaware casinos tread water, rather than gain ground on nearby competitors.” Delaware is already projecting decreased slots revenues because of the imminent opening of a mammoth casino in Maryland. Other states will offer Internet gambling, and Delaware isn’t the first.

Finally, the plan demonstrates the folly of pinning so much of the State’s budgetary hopes on gambling. For an over-governed state like ours, revenues can be increased in only a limited number of meaningful ways: higher income tax rates, introducing a sales tax, higher corporate franchise taxes, or an increased cut of casino revenues. The first two are political dead letters; the third will hurt Delaware’s competitive position in entity formation; and the last is plainly regressive. Health care and public pension costs will only increase. Hey, General Assembly, why not look harder at cutting State spending while you have the chance?

As for Las Vegas? You can keep it. Tackiness squared.

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    Vernon Proctor, a resident of Centreville and Bethel, Delaware, is an attorney in Wilmington.

    One Response to Just What Delaware Needs

    1. avatar

      Annilawrie Reply

      March 28, 2012 at 7:54 pm

      Great article.  I would love to meet the author.  He appears to be very astute!

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