Goals Achieved, Lessons Learned, Challenges Ahead

Once again this year, I am honored to participate in the Governor’s Conference on Travel & Tourism. Coming as it does each December, this important conference is a timely opportunity to review the year about to end and take stock of where we are headed as a new year dawns.

At the end of this December we will experience not only the end of a single year, but the end of a decade in which commercial casino gaming spread to a total of eleven states. The evolution of casino gaming as part and parcel of the mainstream entertainment and economic lives of so many consumers, communities, employees and investors is one of the major stories of U.S. travel and tourism this decade. At the same time, a small but vocal minority of activists on both the ideological Left and Right in each political party who do not approve of casino gaming have sought to impose their entertainment preferences on other Americans by force of law.

Thanks to the hard work of those present today, Nevadans more than met the challenge this decade of providing an increasingly diverse and exciting travel and tourism product to tens of millions of satisfied customers each year. The growing visitor counts, room rate increases, new resort and restaurant openings, exciting entertainment offerings, expanded convention schedules, and growing gaming revenues tell a story of gaming’s success in Nevada going into the New Millenium.

In addition to acceptance in the travel marketplace, we enjoy the broad support of the American people in the court of public opinion. The results of the Gallup Poll released last June, the work done for the AGA by Republican pollster Frank Luntz and Democratic pollster Peter Hart, and the numbers in GTECH’s annual public opinion survey, show that two—thirds or more of Americans support the right of individuals to decide for themselves whether to spend their hard—earned dollars on the range of entertainment we offer. The most striking feature of the Luntz—Hart research is that this support extends to regular church—goers, a group that might be expected to side with our adversaries.

Our mission at the AGA is to defend commercial casino gaming’s interests in Washington and throughout the country. Each and every day we work on public and media education, and political and legal advocacy, that are essential to protecting the right of Americans to make gaming decisions for themselves, and the opportunity for those affected by our industry to prosper. Rest assured that the vocal anti—gaming minority is not asleep at the switch in their drive to deny consumers that freedom of choice.

So, how did we do in 1999 to fulfill that mission, and what lies ahead in the year 2000?

Let me first make a very important comment about what I mean by “we” in this context. “We” means every person at this conference, and all of the leaders of the gaming industry as well as rank—and—file employees. “We” also includes hard working elected officials from Nevada and other gaming states without whom we could not successfully make our case in the halls of Congress and the councils of the Executive Branch. Nevada may be a small state, but we are represented by leaders of both political parties who are among the most effective lawmakers in our nation’s capital. We are also indebted to other gaming stakeholders, such as the Culinary Union and those who provide goods and services to our industry, for their support. In other words, the “we” to which I refer is not just the American Gaming Association. This is truly a team effort.

To answer the central question about the past year and the year ahead, I want to concentrate on three simple themes: Goals Achieved; Lessons Learned; and the Challenges Ahead. Let’s start with Goals Achieved.

Throughout the first four years of the AGA through mid—1999, we first had to contend with legislation to create the National Gambling Impact Study Commission, a flawed version of which was well on its way to enactment when we opened our doors. Once the enabling legislation was enacted, we then had to navigate the lengthy process of appointing commissioners to assure balance. Finally, for the past two years the commission undertook exhaustive work across the country with numerous field hearings, research projects and drafting sessions. This consuming multi—year effort ended with the release of the commission’s Final Report in June. That report reflects our achievement of several fundamental goals that are now the building blocks for our on—going advocacy efforts on specific issues:

The report reaffirms the primacy of state regulation of gaming;
The report confirms the significant economic and social benefits of commercial casino gaming;
The figures in the report on gaming’s social costs and the extent of pathological gambling are a fraction of those claimed for years by anti—gaming activists;
The report applauds the commercial casino industry’s efforts to combat pathological and underage gambling, and in issuing voluntary advertising guidelines;
The report draws a sharp and favorable distinction between the destination resorts that are the mainstay of Nevada’s travel and tourism industry, and other venues for legal wagering that the commission found to be far less desirable;
The report does not call for federal taxation of the gaming industry as many rightly feared when the commission was created; and
The report dispels the myths that we have had to live with for far too long: the report puts to rest the notions that organized crime is still involved in Nevada’s casinos and that gaming is a leading cause of bankruptcies, suicides and other social ills.
In addition to the largely favorable nature of the Commission’s Final Report, this year we achieved our goals on Capitol Hill, at federal agencies and in the courts as well. For the second year in a row, no federal anti—gaming legislation became the law of the land. When I made a similar comment last January about 1998, I was taken to task by some for what was misinterpreted as a boastful statement that only reflected the industry’s perceived political effectiveness apart from the issues themselves. To the contrary, we succeeded this year, as we did last year, because we have a compelling story to tell and finely honed, factually based, persuasive arguments on the merits of individual issues.

Let’s look at some specific examples.

Through concerted action on Capitol Hill, in the courts, at the Treasury Department, and before the Internal Revenue Service, we finally removed from over the heads of our employees and their employers the specter of a grossly unfair tax on employer—provided meals. This victory, achieved last summer following a favorable court ruling based on legislation enacted last year, capped a prolonged multi—year campaign. This victory means millions of dollars in tax savings and peace of mind to gaming employees and employers alike.
The U.S Supreme Court, in a unanimous ruling, ended decades of discrimination against broadcasters and commercial casinos by declaring unconstitutional the ban on radio or television advertising of casino gambling. We made certain, through the filing of a friend—of—the—court brief, that the Supreme Court had the facts about our industry and the real impacts of commercial casino gaming, not the groundless anti—gaming rhetoric that the Justice Department borrowed to defend the ban.
Again to avoid discriminatory treatment, the author of legislation last year to make gambling debts unenforceable in bankruptcy proceedings was persuaded not to proceed with it this year. Our concern was not the minimal financial impact, but rather it was the precedent of unfounded discriminatory treatment of legal wagering.
Now let’s turn to the lessons learned during the course of these successful efforts.

The first lesson is that the vocal opponents of legal gaming will stop at nothing to pursue their narrow agenda. Apparently almost anything goes in political debate these days. Gaming’s opponents once again prodded government agencies to examine aspects of our industry, but when we pass a test with flying colors, they either change the subject or seek to bury the results. Two recent cases illustrate this disturbing pattern.

Several years ago our leading critic in Congress, Congressman Frank Wolf, mandated that the Treasury Department spend several hundred thousand dollars looking into the alleged relationship between gambling and bankruptcy. In July, to no fanfare, the Treasury Department released its report. The conclusion: the Treasury Department, known for its keen analytical abilities and independence, found “no connection between state bankruptcy rates and either the extent of or the introduction of casino gambling.” The silence from Congressman Wolf was deafening.
When it was clear in December of last year that the evidence before the federal study commission did not support the wild claims of anti—gaming activists, and even self—described “anti—gaming” commissioners were acknowledging casino gaming’s economic benefits, Congressman Wolf tried to preempt the very commission he claims to have created. He asked the investigative arm of Congress, the General Accounting Office, to duplicate the work the commission was in the final stages of reporting on, apparently because the commission was not doing so to his liking. Presumably he thought an agency of the legislative branch under his influence might give him the answers he wanted to hear. To its credit, the GAO just pursued the facts.
For example, despite our critics’ attempt to portray the gaming industry as some sinister political force in order to deny us our First Amendment free speech rights, a GAO report confirmed that the level of gaming’s political contributions is smack dab in the middle of the nearly 90 interest groups evaluated. Similarly, after GAO auditors conducted a case study of gaming’s impact on Atlantic City and briefed Congressman Wolf on the largely favorable findings of that review, Congressman Wolf instructed them not to look at the impact of gaming on Las Vegas and other commercial casino markets. Instead he changed the subject and asked them to look at video poker in South Carolina.

The second lesson is as old as the founding of our country when Benjamin Franklin said we must hang together or we shall assuredly all hang separately. There is no substitute for as much coordination, consultation and coalition—building as we can muster within an industry noted for fierce competitors. The same holds true among states that to some extent view their jurisdictions as competing for gaming patrons.

For example, in fighting the employee meal tax and throughout the work of the federal study commission, John Wilhelm and the Culinary Union were essential partners. During the Supreme Court case on the ad ban, advertising and broadcasting interests were in the forefront of the debate with us. During daily jousting on Capitol Hill and in state legislatures, other gaming interests such as the pari—mutuel industry, Native American gaming groups, lotteries, and suppliers and vendors, joined forces with the AGA and state gaming associations to present a united front whenever possible. That is not always easy to do, but staying together and working together mean we succeed together.

The importance of coalition building has not been lost on our adversaries. Just last month, representatives of organizations as disparate as the Christian Coalition and Common Cause met to discuss a common anti—gaming agenda for next year. We cannot afford to be any less effective in assembling our own coalitions.

A third lesson learned is the importance of marshalling the facts. Our best ammunition is the incredible success story we have to tell about this industry and its many contributions —— economically, socially, and charitably —— at the national, state and local levels. The AGA this year stepped up its long—standing efforts to bring the best research to the attention of policy—makers. We issued a comprehensive Industry Report during the final stages of the study commission’s deliberations to pull all of our information together in one place as the commission was making critical decisions; we published a report by a noted academic that refuted claims that casino gambling contributes to white collar crime; we released what will become an annual “State of the States” survey with state—by—state information on commercial gaming operations and nationwide public opinion survey data; and we assembled a multi—media package of information on how to conduct responsible gaming programs for which we receive orders from around the world.

Let me now turn to how the goals achieved and the lessons learned this year bear on the many challenges we will face in the year 2000.

First, there are several matters at various stages of the legislative process awaiting Congress when it reconvenes on January 24th. The most likely to be enacted into law is the so—called Kyl Bill, co—sponsored by Senator Richard Bryan. This bill would amend the Wire Communications Act to make it illegal to conduct any form of gambling over the wide open and unregulated Internet, whether the World Wide Web is accessed by telephone or other means. Most, but not all, of the drafting issues of concern have been addressed in the Senate or House versions of this legislation. The Senate bill passed that body by unanimous consent on the day the Senate completed its work for the year last month. A House subcommittee approved its version in October.

Beyond Internet gambling, legislation is pending in the House Banking Committee that would needlessly impose federal regulation on the placement of ATMs and cash advance terminals. The bill would ban such devices from the immediate area of the gaming floor. While the federal commission made a similar recommendation, it was directed at states, not the federal government. I think we would all agree that Federal Reserve Board Chairman Alan Greenspan has better things to do than carry around a tape measure to determine whether ATMs are far enough from the gaming floor. This is a matter best left to the states and on that basis the AGA strongly opposes the pending federal legislation.

Second, on the regulatory front several federal agencies have projects in the works. The Financial Crimes Enforcement Network at the Treasury Department plans to complete action on its proposal to impose “suspicious activity” reporting requirements on casinos. The “suspicious activity” program here in Nevada has worked well and we continue to urge the Treasury Department to use it as a model for the rest of the country, rather than impose the more rigid system it proposed last year. I recently met with the new director of FinCen to express our concerns and to reaffirm our continued cooperation with federal law enforcement efforts.

Also on the regulatory front, the AGA Tax & Finance Task Force will continue its important work with the Internal Revenue Service on a series of technical tax issues of vital interest to our industry because of their potential financial and administrative implications.

Third, the challenges ahead also include working with those in and out of government who are conducting research on a wide range of gaming—related topics. Just prior to adjourning for the year last month, Congress passed multi—billion dollar appropriations bills with hundreds of pages of legal text and accompanying report language that included instructions to several agencies to undertake further research on gaming topics.

For example, with our support, the Senate directed the National Institutes of Health to pursue federal funding of rigorous peer—reviewed research on pathological gambling. The industry has been in the forefront of funding such research by the nation’s best and brightest scientists through the National Center for Responsible Gaming; it is long past time for the considerable resources of the NIH to be brought to bear in this field. Congress also made requests of the National Science Foundation to undertake a detailed analysis of the benefits and costs of gaming; of the Labor Department on the attributes of casino employment; of the Education Department to collect statistics on youth gambling behavior; and of the Substance Abuse and Mental Health Services Administration to pursue demonstration projects on effective strategies to prevent and treat pathological gambling. This research could affect future policymaking so we will work closely with these agencies as they proceed.

When it comes to the challenges facing us in the New Year, there is no greater threat than the unfounded attack launched by the NCAA against our sports books. In a transparent attempt to divert attention from its own failure to adequately address illegal gambling on college campuses, the NCAA has been walking the halls of Congress seeking sponsors for legislation to repeal the exemption that permits Nevada to offer legal wagering on college sports. While no such legislation was introduced this past session, several senators are actively considering the NCAA’s request.

Because their case is so weak, the NCAA has, regrettably, taken to launching ad homonym attacks on the AGA centered on the theme of a David and Goliath struggle with the NCAA as the underdog.

I believe in calling things as I see them, and this is what I see, and what, I submit, is crystal clear to any independent observer. Even the NCAA concedes that the problem on college campuses is a result of rampant illegal gambling, yet this illegal activity is unrelated and unconnected to the small amount of legal sports wagering that has been going on for years by persons physically present in Nevada. The numbers do not lie. The federal commission’s report cites estimates that illegal wagering of all kinds was between $80 billion and $380 billion in 1998. This illegal gambling dwarfs the relatively meager amount wagered legally in Nevada, which was only two billion dollars, or about one or two percent of all sports wagering.

Furthermore, legal sports books have as much interest as college administrators in protecting the integrity of athletic contests. From a practical perspective, you cannot operate a financially balanced legal sports book if the games on which wagers are taken are improperly influenced. For this reason, and as responsible businesses, our sports books have been in the forefront of assisting law enforcement and the NCAA.

If every sports book in Nevada closes down, does anyone with a full command of their mental faculties really think that illegal wagering on college campuses, through office pools, and at corner taverns would cease, or even suffer a decline in illegal wagering? Of course not, and I suspect the NCAA privately knows better. Yet to hear the NCAA tell it in public, but for our sports books there would not be point spreads on college games published by newspapers, and but for those point spreads there would not be any or nearly as much illegal gambling.

I kid you not, that is the reasoning the NCAA offered when we met in early October. I thought the meeting was to discuss how our two organizations could work together to combat underage gambling. Wrong! All the NCAA wanted to talk about was the terms of Nevada’s surrender, even though not once did the NCAA suggest to the federal commission that Nevada’s sports books were the primary cause of illegal campus gambling. The NCAA made several recommendations to the commission, but closing our sports books was not among them. Yet, their legislative proposal only addresses Nevada’s status under federal law. The NCAA has repeated its party line about point spreads even after we pointed out that this information comes from a variety of sources independent of our sports books that would continue to be available long after our books would be forced to close if the NCAA has its way.

Congress made the fair and equitable decision in 1992 when, concerned that lotteries might introduce games based on college and professional sports, Congress prohibited states from sponsoring or authorizing such wagering, but did not apply the new ban to those states where it was already legal. The irony is that should Congress re—open that decision as the NCAA now proposes, states such as New Jersey that might want to allow sports wagering would be given an opportunity to amend the federal statute to permit them to do so.

The cavalier approach of the NCAA is truly sad because illegal gambling is a serious problem. I submit who is in a better position to address a major problem on college campuses than those in the NCAA and in our nation’s colleges and universities who are responsible for the very campuses where this illegal activity is openly taking place? In our meeting and in numerous press accounts, the NCAA attacked Nevada’s resorts for, in their words, “making money on the backs of teenagers.” You can imagine my reaction when I picked up the newspaper recently only to read that the NCAA signed an 11—year contract with CBS for the broadcast rights just to the men’s college basketball tournament, in exchange for SIX BILLION DOLLARS; yes, that’s BILLION with a capital “B”. One can only exclaim, “who is really making money off the backs of America’s teenagers?”

We welcome a thorough factual review of the nature of illegal youth gambling and the full range of measures needed to combat it. The fact is that young people who gamble do so largely with each other, whether playing cards or making sports bets, not by gambling at casinos. The federal study commission’s report confirmed these facts about the nature of youth gambling.

While the extent of youth gambling is not a problem of our making, we want to be part of the solution. The National Center for Responsible Gaming began funding research to help solve this problem long before the NCAA belatedly came to our office in October.

Given the seriousness of this problem, several federal commissioners took the NCAA to task when this subject was discussed at a commission meeting last February. For example, why doesn’t the NCAA use more of its considerable revenues from television and radio rights to address illegal gambling? Where are the Public Service Announcements on a regular basis? Why doesn’t the NCAA have detailed criteria that its members must meet in order to remain members of the NCAA?

Should Congress elect to look into this subject, we believe a broader range of countermeasures should be considered. For example, a recent article in one college newspaper said there were no sources of gambling counseling available on campus. Congress should establish minimum standards for colleges and universities to meet in terms of education, prevention and treatment of gambling disorders as a condition for the receipt of federal education funds. As I said, the problem is literally in their backyards, their students are gambling illegally on their property (not here in Nevada), and the games on which students are wagering illegally are usually contests between college teams conducted under the auspices of the NCAA.

While the facts are on our side, the easy sound bite and raw emotion are on the their side. Nevada has only two of 100 U.S. Senators and only two of 435 Representatives in the U.S. House. No other state (including the other ten states with commercial casinos) is affected by the NCAA’s proposal. The NCAA has already joined forces with the most militant anti—gaming groups to advance its misguided proposal.

The NCAA is right about one thing: this is a struggle between David and Goliath, but it is we who are the underdogs. However, this is not the first time the NCAA has chosen to unfairly take aim at Nevada, as I can attest from personal experience while in the private practice of law in this state. Despite the odds, we won then, and we will prevail again as long as decision—makers in Washington are open to reason and they subject the NCAA’s proposal to the full critical examination it deserves.

Nevada’s sports books have relied on existing federal law to invest millions of dollars in their facilities, which directly employ thousands of people and indirectly help employ tens of thousands more. We will fight to protect those jobs and the fundamental, bedrock principle affirmed by the federal study commission that, except only for the Internet and Native American gaming, states, not the federal government, are in the best position to determine the scope and regulation of legal wagering within their borders.

In a similar vein, there is an even more recent challenge to state regulation of gaming. In a desperate attempt to smear us with the demonizing broad brush used in the wholly unrelated context of tobacco, nearly two dozen signatories from a range of organizations recently asked congressional committees to investigate the use of television shows and other themes in new slot machine games. The baseless allegation is that use of these themes is part of an effort to market casino gaming to children. Amazingly, the signatories included four former federal commissioners who only a few months ago voted to affirm the primacy of state gaming regulation.

As you know, this issue is actively being considered by regulators in Nevada who must approve new gaming devices. The relevant issues and concerns are being debated and discussed. Unlike the products of other industries, in this case we are talking about gaming devices used by adults in a controlled and heavily monitored setting where it is strictly illegal for those under 21 to loiter, much less wager. That said, I have every confidence that state regulators, gaming manufacturers, and casino operators are in the best position to decide how to proceed in the public interest. The rush to judgment by anti—gaming activists to request a congressional investigation even before state regulators have completed their deliberations undermines the sincerity of those who signed the letter seeking federal involvement. Just last Friday, the Senate Commerce Committee announced that it is looking into the matter in response to the letter. We will be pleased to assist them in their review.

As you can tell, we have had a full plate in 1999, and while the highly visible federal commission ended in June, we remained very engaged at the federal level. The goals achieved this year should be satisfying to the millions of people who work in our industry, invest in our companies, and enjoy the entertainment we provide. The lessons learned this year will serve us well going forward. The challenges ahead are, if anything, even more serious than those we successfully met this year.

With your continued support and good work, the casino entertainment industry will remain at the heart of a growing travel and tourism industry in Nevada. Thank you for once again inviting me to join you. All the best to you for a successful conference and for a very prosperous and enjoyable New Year.