Category Archives: Gambling

Tribal Gaming Operations

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Gaming - RouletteThe year 2018 marks the 30th anniversary of federally regulated tribal gaming in the United States. President Ronald Reagan signed the Indian Gaming Regulatory Act on October 17, 1988. It established the National Indian Gaming Commission (NIGC) and the regulatory structure for gaming on tribal lands.

In the 1970s and 1980s, Native American communities opened bingo parlors to provide economic opportunities to those living on the reservations. State law allowed bingo parlors in California and Florida, but the industry was heavily regulated. Some tribes did not comply with these regulations and the states tried to shut down the operations. The tribes, however, claimed the states had no jurisdiction on the reservations. The Supreme Court affirmed reservation sovereignty in the 1987 case California v. Cabazon Band of Mission Indians. The court ruled unless a state prohibits all gambling, that state cannot prohibit or regulate gaming on reservations. As a result, more tribes began opening gaming establishments. At the same time, states lobbied the federal government to pass laws that would allow them to regulate such businesses. The regulations, they argued, would help prevent organized crime. They also wanted to tax tribal gaming revenue.

Congress’s response was The Indian Gaming Regulatory Act. It established three classes of gaming and separate regulations for each. Class I gaming includes traditional gaming used in celebrations and ceremonies and social gaming for small prizes. These are exclusively regulated by the tribes themselves. For Class II gaming, which includes bingo and non-banked card games, tribes have the authority to conduct, regulate and license such businesses, but all regulations are subject to approval by the NIGC. Class III games are usually found in a casino: slot machines, blackjack, and roulette, for example. Tribes are restricted in their ability to regulate such gaming. Among other requirements, the tribe must enter into a compact with the state in which the casino will operate and this compact must be approved by the Secretary of the Interior.

Today’s market size shows the number of tribal gaming operations in the United States and total gross revenues for 1997, 2007 and 2017. In 1988 tribal gaming grossed $110 million. In 2017, $32.4 billion. The 494 gaming operations in existence in 2017 were owned by 242 federally recognized tribes.

Geographic reference: United States
Year: 1997, 2007 and 2017
Market size (number of operations): 266, 391 and 494, respectively
Market size (gross revenue): $7.5 billion, $26.1 billion and $32.4 billion, respectively
Sources: “Gross Gaming Revenue Reports,” National Indian Gaming Commission, available online here; “Indian Gaming Regulatory Act,” Wikipedia, August 20, 2018 available online here; “2017 Indian Gaming Revenues Increase 3.9% to $32.4 Billion,” National Indian Gaming Commission Press Release, June 26, 2018 available online here.
Image source: GregMontani, “luck-lucky-number-17-roulette-839037,” Pixabay, July 12, 2015 available online here.

Catastrophe Bonds

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Catastrophe bonds, or cat bonds, are bonds sold by an entity wishing to reduce its liability in the face of catastrophic losses such as the ones being caused by the seemingly increasingly violent natural storms occurring around the world. The market for cat bonds has been strong and growing as both the need for risk mitigation has risen as have the number of large investors searching for lucrative investment opportunities in an era of low interest rates.

An example of a cat bond is one issued by New York City’s transit authority in the aftermath of Superstorm Sandy. When insurance carriers, reeling from the costs associated with that storm, hesitated to underwrite the risk of future water surges, the transit authority issued a catastrophe bond in the amount of $200 million. The money will be used to repair damage to the subway system in the event of another flooding storm that reaches the same levels as Sandy within the next three years. If there is no serious storm within that period of time, the money will be returned to investors with an interest payment that—in 2012 for cat bonds—was running at 11% over the rate for Treasury Bills.

Today’s market size is the total value of catastrophe bonds outstanding as of October 1, 2013, worldwide.

Geographic reference: World
Year: 2013
Market size: $19 billion (up from $4 billion a decade ago)
Source: “Perilous Paper,” The Economist, October 5, 2013, pages 76-77.
Original source: Swiss Re Capital Markets
Posted on November 20, 2013

Online Poker

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Gambling moved onto the Internet as soon as a reliable means of exchanging funds was available on that network. One could call this industry an early adopter of e-commerce. The rules of the game, however, are not always clear and vary from country to country and jurisdiction to jurisdiction which complicates things for a system that spans geographies. Nonetheless, according to those following the market, it is a lucrative one.

Today’s market size is an estimated total number of dollars gambled through online poker sites by Americans in 2010.

Geographic reference: United States
Year: 2010
Market size: $16 billion
Source: Janet Morrissey, “Poker Inc. To Uncle Sam: Shut Up and Deal,” The New York Times, October 9, 2011, page B1, available online here.
Original source: PokerScout.com
Posted on October 18, 2011

Derivatives

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Congressional attempts to regulate the market for derivatives is bringing this market into the news again. Until the financial crash of 2008 the derivatives market was well below the radar of most people. As the financial crisis unfolded we learned how the market for derivatives had been taken over by financial speculators and financial institutions using them in… innovative ways, turning them into something quite different from what they had been for more than a century.

In a perfect world, derivatives—an agreement between two parties about an exchange in which the price of the item being exchanged is derived from the value of an underlying asset—are used, for example, by a manufacturer to lock in the otherwise widely fluctuating price of a commodity that it buys regularly. When used this way, derivatives are a sort of insurance against volatility, a so-called hedge against risk. Things get more complicated when this sort of insurance is purchased by somebody that doesn’t actually own the insured asset and that is where we enter the world of speculation which has become a large part of the derivatives market during the last two decades.

Geographic reference: World
Year: 2010
Market size: $600 trillion
Source: Aaron M. Kessler, “Carmakers Fear Restrictions of Wall Street Reform,” September 22, 2011, Detroit Free Press, page B1.
Posted on September 22, 2011

Commercial Casinos

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According to a report put out by the American Gaming Association the commercial casino business in the United States, in 2010, employed 340,564 people and paid $7.59 billion in direct gaming taxes. Commercial casinos as a category include Tribal Casinos as well as privately held land-based casinos, river-based casinos and horse racing tracks which are now referred to in the industry as racetrack casinos. While the industry saw year-over-year revenue declines in 2008 and 2009, by 2010 it was recovering.

Today’s market size is the gross gaming revenue earned in the United States by all commercial casinos. By way of comparison, it is worth noting that total commercial casino revenues in 2008 equaled 67.2% of total lottery ticket sales by all government entities ($53.7 billion). Gaming is quite a big business…

Geographic reference: United States
Year: 2002, 2007 (peak year) and 2010
Market size: $28.07, $37.52 and $34.60 billion respectively
Source: “U.S. Commerical Casino Revenue Shows Slight Improvement in 2010,” Casino Journal, June 7, 2011, BNP Media, available online here.
Original source: American Gaming Association
Posted on September 19, 2011

Lottery Ticket Sales

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The United States does not have an actual national lottery, as many nations do. That is not to say, however, that government-sponsored gambling is not a big business in the United States. Here, lotteries are operated at the state level. Total sale of lottery tickets in the United States, in all their many forms—daily numbers, pull tabs, scratch off cards, Keno, Powerball, Mega Millions, etc.—is today’s market size.

In all, 43 states have a lottery and some count 44 by including two Arkansas lotteries, one being the Arkansas Scholarship Lottery which is relatively new, having started in September of 2009. Other lotteries included in the calculation of the total national market are lotteries in the District of Columbia, Puerto Rico and the Virgin Islands. States with the largest sale of lottery tickets are New York, Massachusetts, Florida, Texas, Georgia and California which together accounted for 42.3% of lottery ticket sales nationally. Worth noting is the fact that this percentage is only slightly higher than these states’ combined population relative to the total U.S. population. Together, the populations of these six states represented 38.1% of the total U.S. population in 2010.

Geographic reference: United States
Year: 2010
Market size: $62.85 billion
Source: Patricia A. McQueen, “That Magic Word—’Growth’—Is Spoken Again as Most U.S. Lotteries Post Gains in Annual Sales,” Casino Journal, October 2010, page 8. The Federal government provides a page on its USA.gov website with links to all the state lottery websites for more details by state. That site is available here.

Native American Tribal Casino Market

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The recession of 2008 and 2009 took its toll on just about every industry, including the gaming industry. According to the source, this industry saw declines in 2009 but those declines were smaller than the declines experienced by commercial gaming nationally. Today’s market size is the size of the gaming industry run by native American tribes throughout the United States in 2009.

Geographic reference: United States
Year: 2009
Market size: Gaming Facilities: 446, Revenues: $26.4 billion
Source: Meister, Dr. Alan, Indian Gaming Industry Report, 2011 edition, highlights of which are provided in a press release about the report available online here.
Original source: Casino City Press

Commercial Casinos

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Commercial casinos represent just over a third of the total gambling and gaming industry (37%). Indian casinos—which are counted separately and are not part of the commercial casino market as presented here—are a somewhat smaller portion of the overall gaming business but still represent 28% of that market. The size of the commercial casino industry listed here includes deepwater cruise ships and other waterborne casino operations.

Geographic reference: United States
Year: 2007
Market size: $34.41 billion, gross gambling revenue
Source: “Gaming Revenue: Current-Year Data,” available online here.
Original source: Christiansen Capital Advisors LLC

Gambling & Gaming Business

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Measuring the market for gambling and gaming is tricky because of the variety of activities covered. Some studies will include aspects of the gaming industry that other studies exclude, an example being state run lotteries. Consequently, one sees citations that vary greatly about the size of the gaming business.

The measurement presented here is from the American Gaming Association, a trade association and lobbying group with offices in Washington, DC. This market size is based on gross gambling revenues for all of the following gaming types: Card Rooms, Commercial Casinos, Charitable Games and Bingo, Indian Casinos, Legal Bookmaking, Lotteries, and Pari-Mutuel Wagering.

Geographic reference: United States
Year: 2007
Market size: $92.27 billion, gross gambling revenue
Source: “Gaming Revenue: Current-Year Data,” available online here.
Original source: Christiansen Capital Advisors LLC