Gambling in the Golden State 1998 Forward By Charlene Wear Simmons, Ph.D. Assistant Director ISBN 1-58703-137-X Table of Contents EXECUTIVE SUMMARY .............................................................................................. 1 A FAST GROWING AND PROFITABLE INDUSTRY ........................................................... 1 STATE REGULATION....................................................................................................... 2 ECONOMIC BENEFITS AND SOCIAL COSTS .................................................................... 2 Problem and Pathological Gambling ........................................................................ 3 Crime .......................................................................................................................... 5 Public Revenues ......................................................................................................... 6 AN EVOLVING INDUSTRY ............................................................................................... 6 BACKGROUND................................................................................................................. 7 PARTICIPATION IN GAMBLING ACTIVITIES .................................................................. 9 WHO GAMBLES? .......................................................................................................... 11 REGULATION ................................................................................................................ 13 Electronic Technology is Morphing Gambling ...................................................... 14 CALIFORNIA’S GAMBLING INDUSTRY ......................................................................... 16 INDIAN CASINOS IN CALIFORNIA......................................................................... 17 THE BASIC LEGAL FRAMEWORK ................................................................................ 17 Tribal Gaming .......................................................................................................... 17 CLASS III INDIAN GAMING IN CALIFORNIA ................................................................ 18 California State-Tribal Compacts for Class III Gaming........................................ 18 Where Indian Gaming Can be Located–the “Indian Lands” Requirement.......... 24 THE GAMES .................................................................................................................. 32 Class I Games........................................................................................................... 33 Class II Games ......................................................................................................... 33 Class III Games........................................................................................................ 35 THE REGULATORY FRAMEWORK................................................................................ 37 Tribal Regulation ..................................................................................................... 37 State Regulation ....................................................................................................... 38 Federal Regulation .................................................................................................. 42 California Lobbying and Campaign Contributions................................................ 43 GAMING TRIBES AND REVENUES................................................................................. 44 California State Library, California Research Bureau i Restrictions on Expenditures................................................................................... 48 Non-Gambling Revenues......................................................................................... 49 TAXES AND REVENUE SHARING WITH STATE AND LOCAL GOVERNMENTS .............. 49 Commercial Casinos ................................................................................................ 49 Indian Casinos ......................................................................................................... 50 California ................................................................................................................. 51 State and Local Taxes .............................................................................................. 53 CALIFORNIA INDIAN TRIBES WITH CASINOS .............................................................. 55 SOCIAL AND ECONOMIC IMPACTS OF INDIAN CASINOS.............................................. 67 On Tribes .................................................................................................................. 67 On Communities and Consumers............................................................................ 72 Environmental Impact ............................................................................................. 78 Public Health Impact ............................................................................................... 79 CRIME ........................................................................................................................... 81 Problem and Pathological Gambling ...................................................................... 83 CALIFORNIA STATE LOTTERY .............................................................................. 87 BACKGROUND............................................................................................................... 87 COMPETITION, INNOVATION AND EXPANSION............................................................ 88 Video Lottery Terminals .......................................................................................... 89 Multistate Games...................................................................................................... 89 Internet Lottery Games ............................................................................................ 90 REVENUES..................................................................................................................... 90 Displacement Effect ................................................................................................. 92 PUBLIC EDUCATION—CALIFORNIA’S STATE LOTTERY BENEFICIARY ..................... 93 CONSUMER IMPACT—PROBLEM GAMBLING.............................................................. 94 CALIFORNIA HORSE RACING................................................................................. 99 BACKGROUND............................................................................................................... 99 CALIFORNIA RACE TRACKS....................................................................................... 100 ACCOUNT WAGERING ................................................................................................ 101 REGULATION .............................................................................................................. 102 RACINOS ..................................................................................................................... 103 REVENUES................................................................................................................... 104 County Fairs........................................................................................................... 105 ii California State Library, California Research Bureau SOCIAL IMPACT .......................................................................................................... 105 CALIFORNIA’S CARD CLUBS ................................................................................ 107 BACKGROUND............................................................................................................. 107 POKER......................................................................................................................... 108 SHARED STATE AND LOCAL CONTROL ..................................................................... 108 REVENUES AND TAXES ............................................................................................... 110 CRIME ......................................................................................................................... 112 OWNERSHIP ................................................................................................................ 113 LOCATIONS ................................................................................................................. 113 INTERNET GAMBLING............................................................................................ 121 BACKGROUND............................................................................................................. 121 PLAYERS ..................................................................................................................... 122 THE LEGALITY OF INTERNET GAMBLING IN THE UNITED STATES .......................... 123 An International Business..................................................................................... 124 SOCIAL AND ECONOMIC COSTS OF INTERNET GAMBLING....................................... 125 SOCIAL IMPACTS OF GAMBLING........................................................................ 127 PROBLEM AND PATHOLOGICAL GAMBLING ............................................................. 127 Background ............................................................................................................ 127 Clinical Definition.................................................................................................