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States hoping to cash in on casino gambling playing a long shot

Craps tableA number of U.S. states hope to balance their budgets by allowing gambling, then taxing it. But that's a gamble in its own right; in light of new industry reports, these states could be in for a big disappointment -- as the gaming industry has been hard hit by the recession.

States such as Ohio, New York, and Massachusetts are adding casinos and "racinos" (horse race tracks with slot machines, and, in some states, table games such as poker). These will join an existing 443 commercial casinos, 456 Native American ones, 44 racinos, 588 card rooms and 11,215 electronic gaming devices sites. Overall, in the U.S. about 833,000 slot machines operate today.

The American Gaming Association's figures on U.S. consumer spending on commercial casino gaming shows that the industry peaked in 2007 with $34.13 billion spent, but by 2009 this had dropped to $30.74, a 5.5% decline from 2008. While the industry returned an estimated $5.59 billion in tax revenue to states and local municipalities, this too was down 1.6% from 2008, despite more locations being open.



If spending on gambling is decreasing and the number of gambling halls increasing, we can expect more state vs. state competition for the gambler's business. In 2009, for example, New Jersey, home of Atlantic City, saw its take drop 13.3%, while neighbor Pennsylvania, with new casinos opening in places such as Bethlehem, saw a 21.6% increase in spending on gambling.

Another threat to the states' appetite for gambling revenues is the growing popularity of online gambling. H2 Gambling Capital, a company that tracks the gaming industry, reported that remote gambling made up 7.9% of the global industry in 2009. It projects this segment to reach 8.9% this year and 9.5% by 2012. If the U.S. bill to legalize and regulate online gambling that recently was introduced were to pass, H2 estimates this market could be worth $13.4 billion within 5 years.

These threats pertain to more than tax revenue, too; the AGA reported that 328,377 people were employed by commercial casinos in 2009. The Association of Gaming Equipment Manufacturers estimated that another 51,800 employees worked either directly or indirectly to provide equipment for gambling.

That said, perhaps the falling revenue will have a positive effect not only on people's pocketbooks, but their personal lives. Compulsive gambling has reached epidemic proportions in the U.S.; the social cost of problem gambling, including addiction, bankruptcy and crime, was almost $7 billion in 2009, according to the National Council on Problem Gambling. That group supports a Senate bill, introduced in May, to fight gambling addiction.

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