New England Casino Gaming Update: Patron Origin Analysis and a Critique of its Critics

Abstract

The U.S. gaming market is divided into five major segments consisting of charitable gaming,1 pari-mutuel wagering,2 state lotteries,3 commercial casinos, and tribal casinos. Currently, 47 states and the District of Columbia allow charitable gaming, 41 states allow pari-mutuel wagering, 43 states and the District of Columbia have lotteries, 11 states license commercial casinos, 12 states operate licensed racetrack casinos (racinos), and 28 states have Class II or Class III tribal casinos. Nevada was the first state to legalize casino gambling in 1931 and it was not until 1976 that New Jersey became the second state to legalize casinos in Atlantic City. However, growth in the U.S. casino gaming market accelerated a decade later when the federal Indian Gaming Regulatory Act (IGRA) was passed in 1988 and states other than Nevada and New Jersey began to legalize commercial casinos and racinos.4 Since 1989, nine states have legalized commercial casinos, including South Dakota (1989), Iowa (1989), Colorado (1990), Illinois (1990), Mississippi (1990), Louisiana (1991), Missouri (1993), Indiana (1993), and Michigan (1996).5 In 2008, these 11 states had 453 operating commercial casinos with 176 (39%) of the casinos operating outside the traditional venues of Nevada and New Jersey. In 2008, commercial casinos had combined gross gaming revenues (GGR) of $32.5 billion, with 48 percent of the total GGR generated by casinos in the nine nontraditional venues. In 2008, commercial casinos employed 351,445 persons with a total payroll of $10.4 billion and paid $4.9 billion in gaming taxes alone (i.e., not including corporate income, payroll, sales, meals, lodging, and property taxes).6 Racetrack casinos—or racinos—are an even more recent development in the nation’s gaming industry. Rhode Island was the first state to authorize racinos in 1992 at its Newport Grand jai-alai fronton and Lincoln Park greyhound track. Subsequently, ten other states established racinos, including West Virginia (1994), Delaware (1994), Iowa (1994), Louisiana (1994), New Mexico (1997), New York (2001), Oklahoma (2004), Pennsylvania (2004), Maine (2004), and Florida (2006).7 In 2008, these 11 states had 44 racinos with GGR of $6.3 billion. In 2008, racinos employed more than 30,000 persons and generated $2.6 billion in revenues for state and local governments.8