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Excerpt: "Organized gambling is a scam. And it particularly preys upon people with lower incomes - who assume they can't make it big any other way, who often find it hardest to assess the odds, and whose families can least afford to lose the money. Yet America is now opening the floodgates."

Portrait, Robert Reich, 08/16/09. (photo: Perian Flaherty)
Portrait, Robert Reich, 08/16/09. (photo: Perian Flaherty)

Turning America Into a Giant Casino

By Robert Reich, Robert Reich's Blog

03 April 12


nyone who says you can get rich through gambling is a fool or a knave. Multiply the size of the prize by your chance of winning it and you'll always get a number far lower than what you put into the pot. The only sure winners are the organizers - casino owners, state lotteries, and con artists of all kinds.

Organized gambling is a scam. And it particularly preys upon people with lower incomes - who assume they can't make it big any other way, who often find it hardest to assess the odds, and whose families can least afford to lose the money.

Yet America is now opening the floodgates.

In December, the Department of Justice announced it was reversing its position that all Internet gambling was illegal. That decision is about to create a boom in online gambling. Expect high-stakes poker to be available on every work desk and mobile phone.

Meanwhile, states are increasingly dependent on revenues from casinos, lotteries, and the "Mega Millions" game (in which 42 states pool their grand prize) to partly refill state coffers.

Given who plays, this is one of the most regressive taxes in the nation. In the most recent Mega Millions game - whose winning tickets were drawn last week and whose jackpot rose to $640 million - lottery ticket buyers shelled out some $1.5 billion, most of which went to state governments.

And then there's the "Jumpstart Our Business Startups" or "JOBS" Act, which President Obama is expected to sign into law Thursday. It allows so-called "crowd funding" by which people whose net worth is less than $100,000 can gamble away (invest) up to 5 percent of their annual incomes in any get-rich-quick scam (start-up) that any huckster (entrepreneur) may sell them.

Forget the usual investor disclosures or other protections. In the interest of "streamlining," Congress has streamlined the way to fraud. Although start-ups will have to market themselves through third-party portals approved by the Securities and Exchange Commission, this is like limiting Bernie Madoff to making pitches over the radio. The SEC can barely keep track of Wall Street let alone thousands of Internet portals. Small wonder SEC Chair Mary Schapiro has been one of most outspoken critics of bill.

The bill was sold to Congress as a way to promote jobs (note the acronym) on the supposition that small start-ups create huge numbers of them. Wrong. That assumption comes from research by the Kauffman Foundation, which counted as a "start-up job" every laid-off worker who morphed into an independent contractor.

I'm all in favor of more entrepreneurship, and it's good to give investors another way to participate in emerging companies. But this bill doesn't do nearly enough to protect the vulnerable.

America's capital market was already a giant casino. Why now turn the rest of America into one?

Robert Reich is Chancellor's Professor of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written thirteen books, including "The Work of Nations," "Locked in the Cabinet," "Supercapitalism" and his latest book, "AFTERSHOCK: The Next Economy and America's Future." His 'Marketplace' commentaries can be found on and iTunes. your social media marketing partner


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+27 # Scott479 2012-04-03 09:24
With passage of the "Jobs Act" the banksters place their hands upon the air pump handles and start inflating the next bubble...someho w it never blows up in their faces.
+30 # MidwestTom 2012-04-03 09:27
In Indiana the citizens in each town considering a gambling boat had a vote to proceed or reject. The poor areas voted in favor by 65%, while the suburban areas voted to reject by 68%. In all cases the poor outvoted the middle class. If you watch to people entering a gambling boat in Illinois or Indiana you cannot help but notice that the majority of the customers look like they are spending all of the money they have for that week. Robert is absolutely right. Casinos take money from the poor and the governments then use the money in many cases to build facilities used mainly by the middle class, such as soccer fields and ice skating facilities, and green ways.
+18 # AndreM5 2012-04-03 10:13
This issue is even more tragic than that. It turns out there is no real boost to state revenue from lotteries. The services the profits are supposed to augment (education, for example) are actually funded at a lower lever AFTER implementing state lotteries. It is a complete sham.
-46 # Robt Eagle 2012-04-03 10:49
So, the Obama Administration now is hoping that more poor people lose their money to government sanctioned gambling and then go after the entitlements they so richly deserve because they are poor. Give me a break, this is not a regressive tax, it is sheer stupidity on the part of those irresponsible enough to gamble away what they need to live on. Get rid of the entitlements and you will see how much less gambling goes on by the poor. Simple math in the equation!!!
+10 # tbcrawford 2012-04-03 09:35
Hope springs eternal and is willing to believe any wolf in sheep's clothing. Caveat emptor!
+4 # MJnevetS 2012-04-03 09:36
Can't have it both (all) ways. While I generally agree with Professor Reich, I disagree with a nanny state of undue government intervention. If people wish to gamble, let them. No one is holding a gun to their head. They should make their own personal choices (after educating themselves) I don't disagree that (based upon odds), it is a losing game. Nonetheless, it my be ENTERTAINMENT. I can take my family (2 adults, 2 children) to the movies and spend $80.00 for 2 hours of entertainment or I can play on-line poker for several weeks and not spend that amount of money. Just because gambling is a 'SIN' by somebody else's terms doesn't mean the government should prevent me from engaging in such conduct. (I take the same position when considering other people's consensual) sexual activity, IT IS NONE of the government's business
-23 # lcarrier 2012-04-03 10:19
Playing poker online sharpens one's analytical skills. Sure, the less-skilled players will consistently lose over the long run. But since life is already a gamble, why not have fun along the way?
-7 # bugbuster 2012-04-03 11:35
I agree. Poker is a game of skill if you play well and consistently. Everyone has the same luck in the long run. Those who win are the skilled players. It's a subtle and complex game playable at such a high level that some players at the table, the fish, have no idea what they should be thinking about.

It is only gambling when done poorly. I would only play with players at my own unskilled amateur level. Even entry level tournament players would clean my clock.

I believe in strong regulation to avoid outright fraud and deceptive practices in all business. Beyond that, I think that there is a limit to the legitimate need for a nanny state to protect me from my own stupidity.
-15 # Citizen Mike 2012-04-03 10:27
Gambling is a racket for fleecing chumps, and there will always be chumps. So why should the state not take advantage of them and invite them to pay "voluntary taxes" through gambling? They are chumps, that is what chumps are for, they invite exploitation. Better to turn their stupidity into some publicly valuable resource than to surrender the opportunity to big bizniz or the mob. Never give a sucker an even break!
+7 # bobby t. 2012-04-03 10:29
internet poker has been around for years. a few years ago, the old wire act was pulled out to stop in, and all the legitimate companies,mostl y in england were they pay taxes, etc. stopped allowing americans to participate. money from three web sites were impounded. the english companies partitioned the u.s. goverment to allow them to operate and begged them to pay taxes. no dice. however illegal companies made fortunes. what does that tell you? people are going to gamble, and in england it is all legal, with taxes being paid to the queen. why not here? because there is too much money to be made, and the crooks use the church and morality while making, in new york state alone on pro football alone, a couple of billion in the vig. you want a huge infusion of revenue, let drugs and gambling be legal. tax them. they are there anyway, and only the mob and the polititions are benefiting, along with crooked cops. (see serpico)...the corruption is disgusting here. no wonder the europeans think we are all idiots.
+13 # RMDC 2012-04-03 10:32
I agree with Robert Reich. Gambling is a scam or con game. It is OK to have a few gambling centers like Vegas or Atlantic City, but the growing reliance of states on gambling income is just horrible. Gambling is being mainstreamed as a form of taxation. The fact that states count on revenue tells us that that the "house" always wins in the long run. States take a cut of the house's winnings.

Gambling is fun for some people and as a form of entertainment is should be OK. But as a mainstream form of government revenue, it really stinks.

Tax the rich. Why are investors who are also gamblers only paying 15% tax rate when workers pay 36%?
+1 # bugbuster 2012-04-03 11:39
The thing is, if a person with a gambling addiction can't buy a lottery ticket, he will gamble away the same money betting on two flies crawling up a wall.

State-sanctione d gambling revenues should be tightly regulated, and it should help pay for gambling addiction treatment. States should not do it unless they do it right.
+14 # John Whiting 2012-04-03 10:57
Dr Johnson had the final word: A [state] lottery is a means whereby the poor are made to tax themselves."
-8 # dick 2012-04-03 11:12
You can place a bet with a mobster who might switch the odds, or with a state lotto. The odds at an Indian casino today are a lot better than with Wall St. 2006-2009. I lost 2/3 of the value of my house gambling on Democrats to protect me from rapacious GOPers. Now I trust start-up hucksters with cure-all elixirs more than I trust Democrats. I like Reich, but his buddies in the Democratic Party enabled the Crash & insane aftermath. Failed, corrupt lotto directors don't get $90M performance bonuses.
+18 # artful 2012-04-03 11:27
I remain much less concerned about literal Internet gambling than with the gambling being conducted by the nation's banks. They have converted our entire banking and financial systems into a huge organized gambling ring. Mafia chiefs should be aware that our banks have now moved into their territory.
+7 # Billy Bob 2012-04-03 11:41
I missed becoming a republican last week. I was one of the 100 million losers who still can't afford it.
+7 # futhark 2012-04-03 13:03
James Howard Kunstler, in his book "The Long Emergency" comments on how activities that were considered shameful and illegal, like gambling, when he was a kid in the 1950s (I was, too) are now promoted by the government. His moral objection was the delivery of wealth to people who had contributed no corresponding return of value. Of course, even back then we had real estate speculation and the stock market.
0 # nealjking 2012-04-03 13:33
I'm in favor of the lottery! Why?
- A perfect tax raises money;
- A perfect tax discourages something we need to discourage.

Well, a lottery raises money by "punishing" the belief that a losing proposition is a winning proposition. In short, a lottery punishes stupidity.

There are few things in this world that need to be discouraged more than stupidity.

The fact that this is a "recessive" tax is accidental and irrelevant. A lottery is fundamentally a tax on stupidity. Smart people, however poor they may be, are not going to waste the money they have on a lottery.
-2 # harris.carlus 2012-04-03 13:40
I find it curious that, in a time when many are clamoring to get the government out of their affairs, the lack of governance in such "choice" issues, like abortion and gambling, is lambasted by both the right and the left. I understand the concerns, but either we're free to make decisions about how we live, or we're not.
+2 # bobby t. 2012-04-03 14:17
they gambled for christ's robes. dice. been around forever. the english have casinos and tax them. they have legal bookmakers all over the place. they pay a tax on every bet, including who is gonna win the american presidency...or the masters this week. we don't because organized crime runs each government locally or nationally. been that way forever. who do you think taught the indians how to build and maintain casinos? make it legal. tax it. same with drugs and prostitution (which spreads disease because of the lack of legality. the real sin is keeping it illegal.) the church and the mafia work together and you all still don't get it. all parties protect illegal gambling and drug running. hash from syria, heroin from afganistan, cocaine from china, etc. the war on drugs and gambling puts kids in jail and costs us trillions. kid has two ounces of grass and he goes away for five years? come on. this has to stop. single payer and legalized gambling and drugs will not happen because of greed. will not happen in america. sugar kills more people than drugs. think that will be stopped?

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