The Growing Third Wave of Legal Gambling

We are in what I call the Third Wave of Legal Gambling. Twice before in American history, legal gambling has spread across the nation, only to crash down in scandal and complete prohibition. The prior crashes left legal debris, which is still on the statute books.

So much time has passed that sometimes the meaning of the term “lottery” has been lost or warped to include other forms of gambling, creating enormous problems for proponents of bingo, parimutuel wagering and casinos.

The Second Wave began with the Civil War and the continuing expansion of the western frontier. The South turned to state-licensed lotteries as a painless way to raise revenue. Legal gambling is often seen as a voluntary tax. This is the reason we are seeing so many attempts at expansion during the current Great Recession.

The most important legal debris of the crash of the Second Wave were the federal anti-lottery laws passed in response to the Louisiana Lottery scandal, and other problems in the late 19th century associated with legal lotteries licensed by various states. These were later incorporated into the federal radio and T.V. statutes, and still exist in the U.S. mail laws.

We are now in the Third Wave, which started with the Great Depression: In 1931 Nevada re-legalized casinos.

Every year since then there has been an expansion of legal gambling: horse tracks reopened in the 1930s, charities gained the right to operate bingo legally in the 1940s, social gambling was mostly decriminalized in the 1950s. Then New Hampshire rediscovered the state lottery in 1963. And 13 years later, New Jersey became the second state to have legal casinos.

The impact of the Third Wave on the established forms of gambling has been dramatic and devastating. Horseracing had a monopoly for 50 years. Now, the only thing that is preventing many tracks from closing is off-track betting and the introduction of slot machines, creating racinos.

Technology is the wild card. Although it is possible to see the general trends and cycles in gambling, it is impossible to predict how exactly it will develop, because the games are so much dependent on technology. The development of the Internet in general and online gaming in particular, illustrate how invention creates a demand that did not formerly exist, because the technology itself did not exist.

The most potent machines spread throughout and dominate everywhere they go. Every form of gambling can now be played on a computerized video screen.

Inventions expand experience — technology creates its own demand. One of the most popular forms of gambling in 2011 is on video poker machines: Did anyone want to play video poker, before it was invented?

So, it is easy to predict, in general, what will happen over the next few years: more legal gambling.

But just as no one in 1909, or even 1959, could predict that Oregon would have more forms of legal gambling than Nevada, it is impossible to know what invention will take the place of the video poker machine in the year 2029.


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