An official publication of Global Gaming Expo

The official publication of the Association of
Gaming Equipment Manufacturers

AUGUST 2002 

Editorial

Standing Together
Gaming needs to make a more cooperative effort

By Jamie McKee

The summer of 2002 has been fraught with some potentially devastating blows for the gaming industry. Between the substantial tax increases in both Illinois and Indiana, the decision by one of the nation's largest credit-card processing companies to reject Internet gambling debts, and warnings of class-action lawsuits similar to those suffered by the tobacco industry, there doesn't seem to be a lot to feel good about as we head into fall.

Illinois lawmakers voted in early June to increase taxes on gaming operations by 25 percent, which makes the average gaming tax rate there approximately 39 percent, the highest in the country. They also added $1 per head to the admission tax. The state's graduated tax structure will have those operators who make more than $200 million in annual revenue paying 50 percent of that in taxes.

Gaming stocks overall sank immediately, and the price of those companies that operate in Illinois-Argosy, Hollywood, Boyd, Harrah's, Aztar and Mandalay Resort Group-continued to fall throughout the remainder of the month.

The new tax rate had some Illinois operators dourly predicting their own demise.

Indiana followed suit, increasing its own gaming taxes from a flat rate of 20 percent to a sliding scale capped at 35 percent. But at least Indiana's tax hike came with a concession: riverboats will now be allowed to remain dockside, which puts them on a level playing field with their Illinois counterparts and gives them a fighting chance of recouping their tax losses.

Then Citibank, one of the largest credit-card processing companies in the United States, announced that, like some other card issuers, it had decided that Internet gambling debts were non-enforceable. (Citibank was prompted, admittedly, by the New York attorney general's warning that the bank could be prosecuted for aiding in Net betting, which is illegal in that state.)

Meanwhile, following the class-action authorization of a suit against Loto-Quebec, Scott Harshbarger, president of Common Cause, began hinting in speeches around the country that Common Cause and the American Association of Trial Lawyers were planning to file lawsuits seeking compensation from casinos for gambling addicts. Their arguments will apparently target "deceptive" business practices in casino marketing.

Harrah's Entertainment has been singled out for the "code of commitment" to responsible gambling that governs its advertising and marketing. Many say its method is the best example of proactively addressing the problem-gambling issue.

"The enemies are at the gate," Harrah's Senior Vice President Jan Jones told the Las Vegas Gaming Wire. "[Gaming executives] better start speaking with one loud, consistent voice."

The gaming industry would do well to heed Jones' warning.

The obstacles presented here are only a sampling of the roadblocks we face and will face in the future.

And while the American Gaming Association and other industry trade groups have made significant progress in convincing their members to think in terms of their own "common causes," there is still not enough group support to adequately stave off these anti-gaming forces that threaten our very existence.

More than 40 other states are expecting budget shortfalls this fall, which means many will be looking at increasing gaming taxes, with little regard for the consequence: the exodus, or-at the very least-end of gaming expansion in those states. Argosy Gaming, for example, has already back burnered the $70 million upgrade of its Joliet, Ill., operation.

Most U.S. operators, still dipping their toes into the murky waters of Internet gaming, don't seem inordinately concerned by the Citibank decision. What they may not realize is that if it is allowed to proceed without a fight it could set a precedent that could eventually affect legitimate gaming operators' debt-collection rights.

And Gaming Inc. has only to look at the tobacco industry to see the damage that can be done when the question of liability for an individual's vice is argued before a jury.

Harrah's position on responsible gaming may very well be the best example of what should become the industry standard in that fight. It's possible there could even be a better one.

What's important is to establish some standard for dealing with these threats collectively, and for the industry's many members to get on board and look beyond their own self-interests to the greater good.

Because Jones is right. If we don't start speaking with one voice, soon enough someone else will be speaking for us. 

Jamie McKee, editor and associate publisher, can be reached at 702-735-0446 or at .

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