Pennsylvania Gambling Expansion Recalls Lessons From the Past

While gaming continues to grow in leaps and bounds around the country, history has shown that Las Vegas reaps many benefits from this amplification.

Photo illustration by Cierra Pedro

Pennsylvania was a relatively late adopter of casinos; approved in the Racehorse Development and Gaming Act of 2004, actual gambling at casinos, racinos and slot parlors started two years later. In 2010, casinos began offering table games. But a recent expansion of gaming puts it on the cutting edge of gambling availability and raises some questions about Las Vegas’ future.

Last week, Pennsylvania governor Tom Wolf signed a sweeping expansion of gambling. First, it authorized “satellite” casinos for existing casinos. Those who wish can bid—starting at $10 million—for the right to build an operation with 30 table games and 750 slots. Airports and truck stops would also get gaming facilities.

But the biggest expansion is online, where Pennsylvania moves from prohibition to both casino-style and lottery gaming. This jump into cyberspace wagering moves the Keystone State ahead of Nevada, which still only permits poker play online.

There are two areas of interest for Las Vegans. The first is the expansion itself. In a sense, Pennsylvania’s push may be the final phase of the expansion of American gambling, which started with Nevada’s re-legalization of wide-open commercial gaming in 1931, intensified with New Hampshire’s revival of the lottery in 1964, opened again with the 1976 legalization of casino gaming in Atlantic City and accelerated following Congress’ 1988 passage of the Indian Gaming Regulatory Act. The result of this growth is that legal gambling, which in 1910 was limited to horse race betting in Kentucky and Maryland, is now the norm in the United States.

Nevada held onto its casino monopoly for a generation after states started rolling the dice on lottery, but the die was cast the moment New Hampshire voters voted to approve a state lottery in order to avoid a tax increase. It seems that no one wants to pay more and no one wants to spend less, and gambling revenues have been a way to bridge the gap between those two realities—a rewriting of the rules of finance that recalls James Kirk’s solution to the “no-win situation” of the Kobayashi Maru. Kirk’s case might be instructive: He got an accommodation for original thinking but didn’t solve the underlying problem of the test, choosing one out of several bad options.

In Pennsylvania’s case, the state legislature passed the gambling expansion to help fill a $2.2 billion budget deficit. Notably, even the state’s own projections forecast the bump in gaming taxes to satisfy about 10 percent of that deficiency—the balance will be made up by taking on debt.

Pennsylvania, of course, is not alone. It is rare to find any government at any level that doesn’t have a disparity—sometimes an eight-figure one—between what taxpayers can give and what governments want funded. So it’s reasonable to believe that Pennsylvania will not be the last state to expand its gambling.

In the past, this scenario caused nightmares in Las Vegas—the approval of casinos in Atlantic City garnered reactions from disbelief to despair—but now, people in the gaming-tourism complex have fewer concerns. Gambling has, for more than two decades, steadily shrunk proportionally when compared to non-gambling revenues. Last year, for the first time, Downtown Las Vegas casinos earned the bulk of their revenues outside of the gaming floor, and that’s been status quo on the Strip since 1999. So with room rates up, it doesn’t matter that gambling might go down, since it’s been doing that already. Truck-stop gambling in Pennsylvania isn’t going to destroy the casinos of Las Vegas any more than casinos on California tribal lands did—although Reno and Lake Tahoe (and Atlantic City) will argue that not everyone wins when gambling expands.

But, numbers being numbers, politics being politics and human nature being human nature, expect to see other states follow Pennsylvania’s example and expand their gambling offerings, sooner rather than later. And, with either a favorable Supreme Court decision or congressional action, Nevada’s last vestige of monopoly, sports betting, will also be on the table.

The second area of interest for Las Vegans is the nature of the discussion about the expansion, which seems to be mostly about pragmatics, not philosophies. The conversation isn’t about whether gambling is right or wrong on any kind of ethical level or desirable on a personal one. Instead, it’s about dollars and cents—how much money can more gambling bring in? It’s important to note that unlike in earlier years, gambling isn’t being asked to bear the complete or even primary burden of patching the budget. Now, any contribution at all is deemed good enough. While there is also concern about possible negative economic and social impacts, these are presented in similarly zero-sum terms: If more gambling brings in x dollars and the potentially adverse impacts are less than x, expansion is desirable.

This is, in some sense, a triumph for Las Vegas, which is actually a bit right to the center of the gambling legislation spectrum: It still doesn’t have legal lottery. The growing acceptance of gambling, be it on lottery tickets or penny slots, is another reminder that Las Vegas is further than ever from its outlaw roots. And that, on the whole, is good news for Las Vegas.

For the casino industry in the rest of the country, Las Vegas is a case study of what lies ahead. The growth of a large locals casino industry within a landscape peppered by slot machines in bars, supermarkets and convenience stores suggests that the expansion of gambling won’t necessarily slow down full-service regional or local casinos. Similarly, the growth of online poker in the early 2000s had a net positive impact on Nevada’s poker industry; it’s fair to assume that a broader online gaming market will have a similar effect on Nevada’s gaming industry.

So while casino gaming may appear to be expanding in unprecedented ways, we are treading over ground that is at least somewhat familiar. If history is a reliable guide, Las Vegas will find a way to benefit from the current wave of growth.