Chapter 8 historical development reflects the changing competitive environment
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Chapter 8 HISTORICAL DEVELOPMENT REFLECTS THE CHANGING COMPETITIVE ENVIRONMENT. Robert McMullin East Stroudsburg University. Introduction. Since colonial times, government has either banned or taxed gambling revenues. To cross the Atlantic Ocean, the Puritans must have been risk takers.

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Chapter 8 historical development reflects the changing competitive environment l.jpg


Robert McMullin

East Stroudsburg University

Introduction l.jpg

  • Since colonial times, government has either banned or taxed gambling revenues.

  • To cross the Atlantic Ocean, the Puritans must have been risk takers.

  • Several cycles of gambling proliferated; social problems forced a government ban.

  • As each jurisdiction or tribe opens another casino, the industry grows.

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Early Settlers and History

  • The East Coast

  • Every civilization developed gambling devices such as cards and dice.

  • To obtain money for the Mayflower’s voyage, the Puritans created a lottery.

    • Organizers stole a great deal of the money.

    • Laws were written to forbid gambling because of presumed addictive, sinful nature.

    • Continental Congress used lotteries to finance the American Revolution.

    • Eventually, the Colonies started taxing people, ending the need for lotteries until current times.

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  • The Mississippi River

  • Louisiana Purchase (1803) expanded America and gambling.

    • In 1806, Louisiana prohibited gambling, except in New Orleans.

    • New Orleans is first gambling mecca; licensed and taxed casinos, donated benefits to charity.

  • By 1830s,1000 to 1500 professional gamblers worked the steamboats.

    • Other forms of transportation created

      competitive environment.

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  • The West Cost

  • During 1840s Gold Rush, gambling made its way from New Orleans (main port of embarkation) to San Francisco:

    • Many gold miners were gamblers by nature with appetite for high risks with big rewards.

    • Gold mining stimulated gambling because it encouraged people’s trust in luck and speculation.

    • Competition was high in San Francisco, since there were hundreds of gambling saloons in town.

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  • Gambling and Government

  • Government continued to ban gambling:

    • States believed the growth of the professional gambler negatively impacted society.

    • In 1814, Missouri Territorial Legislature passed first law against gambling.

    • By 1862, lotteries were banned in all states except Kentucky and Missouri.

    • In the latter part of the Nineteenth Century, the federal government outlawed lotteries.

  • Baseball and the Mob

  • Organized crime developed an interest in gambling.

  • 1919 World Series fixed by New York gambler Arnold Rothstein – darkest moment in history of baseball.

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    The Development of Las Vegas

    • Gambling legalized in 1869; outlawed in 1910.

    • “Wide Open Gambling Bill” legalized gambling again in 1931.

    • Siegel opened Flamingo in 1946

      • One of first modern hotel casinos

      • Included elegant restaurants, nightclubs, and entertainment

  • Nevada Legislature passed a gaming revenue tax in 1945

    • Also given power to investigate backgrounds of individuals seeking licenses

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    • In April 1967, Howard Hughes purchased Desert Inn from a Cleveland mobster.

      • Within a year, Hughes spent $65 million, acquired four of the top fifteen hotels on Las Vegas strip.

      • Hughes was a successful businessman; helped legitimize the industry and took it to an era of corporate business.

  • Corporate Gaming Act passed in 1969.

    • Legitimized gaming to corporate America.

    • 1972, Harrah’s was the first solely gaming corporation placed on the NY Stock Exchange.

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    The Ocean, Emotion, and Promotion Cleveland mobster.

    • Early 1900s – Atlantic City was major destination, luring visitors to the ocean, beach, & boardwalk.

      • Draw of illegal gambling, drinking, and late night entertainment perpetuating the excitement.

      • By 1913, police raids confiscated and destroyed gambling devices worth tens of thousands.

      • Air travel in the 50s and 60s lead public to further destinations; Atlantic City experienced decline in tourism dollars and a physical deterioration.

      • Regarded as the “Slum by the Sea.”

  • November 1976 – New Jersey voters approved gaming for Atlantic City.

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    Native Americans Get Their Chance Cleveland mobster.

    • Within boundaries of tribal reservations:

      • Federal law upholds tribes having powers of self-government over their lands.

      • State has little/no say inside reservations.

      • Congress only has “plenary power” to place limits on Native American tribes’ sovereign rights.

  • Indian Gaming Regulatory Act (IGRA) of 1988

    • Provided regulatory framework for Indian gaming

    • Consists of three classes of gaming:

      -Class I: traditional tribal games

      -Class II: bingo; regulated by tribe and federal Indian Gaming Commission

      -Class III: casino gaming; IGRA requires compact between tribe and the state government

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    • Financial impact of Native American gaming: Cleveland mobster.

      • In 1988, tribal gaming earned $288 million.

      • By 2003, earnings were $16.2 billion.

      • That’s a growth rate of about 5500%.

      • Tribal casinos employ over 400,000.

      • Roughly 75% held by non–Native Americans.

  • Some problems faced by tribes:

    • No American banks would touch the ventures.

      - Foxwoods found a Malaysian investment group.

    • Many early management contracts had clauses that robbed tribes of much of the profits.

    • Tribes who divided profits among members had no specific definition of members; people claiming tribal bloodlines demanded their share.

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    The Return of “Maverick” Cleveland mobster.

    • Riverboat gambling returned to its historic roots.

      • Concept was appealing; would lock gaming into small areas next to the Mississippi River

      • Iowa first to introduce riverboat casino, April 1991

        – Riverboat casinos were unhappy with restrictions in Iowa

        – Politicians forgot that riverboat required to sail can easily move its home base

      • Riverboat jurisdictions expanded in early 90s.

      • In 1993, potential markets start voting against riverboats.

      • Competition increases; cities agree to improve infrastructure for better access.

      • The tax rates are the highest of any industry.

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    Mega Resorts and the Future of Gaming Cleveland mobster.

    • Las Vegas created Mega Resorts as the newest casino attraction.

      • Goal: lure visitors to all-inclusive experience without venturing to competitive properties.

      • All-inclusive: dining, entertainment spas, shopping, casino all under one roof.

      • Steve Wynn’s Mirage opened in 1989; one of the first mega casinos.