Gambling vs. Marijuana: A Tale of Two “Vices”

It’s been nearly six months since the voters approved Question 4 to legalize and tax recreational marijuana. But we’re still at the starting line, because in December the Legislature pushed back by six months all the timelines that the ballot question had established. The regulatory commission that was supposed to be appointed by March won’t be appointed until September, the review of license applications that was supposed to begin in October won’t start until next April, and so on.

And now it’s possible that the finish line may be moved. There’s a brand new legislative committee that will review the 44 bills that were filed at the start of the new 2017-2018 session responding to the passage of the new law.  With only a few exceptions, the bills are far more wary than enthusiastic. They propose stricter local control over retail marijuana establishments, a reduction in the amount of marijuana that can be grown at home, restrictions on potency (the law, as approved by the voters, provided that such restrictions would be imposed by the regulatory commission), restrictions on advertising, etc., etc.

Which is at least a little odd considering that the Department of Revenue has estimated that marijuana sales could bring in $64 million in new revenue in the first year of the law’s operation, and once again this year the state is digging through the sofa cushions for loose change to fix the perennial hole in the budget.

But before we conclude that our lawmakers are skittish about any new enterprise that may strike some members of the citizenry as morally problematic even as it brings in new revenue, let’s review the launch of the casino law.

At a comparable time (six months after the law was passed), the members of the new Massachusetts Gaming Commission had been appointed and staked to a $15 million line of credit.  The buzz was all about the new jobs that were shortly to arrive and the new revenues that were shortly to replenish our recession-depleted treasury.  (The marijuana law has gotten only a measly $300,000 to cover costs to date.)

The Gaming Commission got the licensing process underway with an award to Penn National Gaming to operate a slots parlor in Plainville. They did so with the rosy understanding that it would bring in as much as $300 million in revenue annually. But whoops. After the first year of operation, the revenue number was $160 million, barely half of the original estimate. What happened?

According to the Commission’s account, which the Globe reported credulously, the initial revenue projections were “extravagant” guesses offered by casino industry consultants. Well, okay, but what about the Commission’s due diligence in investigating that guesstimate? “We thought there was a flaw in their methodology but we couldn’t find it,” Crosby said.

Indeed. The Commission could not find the flaw, even when aided by the research of their own consultants, who also predicted that Plainville’s annual revenues would yield far more than $160 million — and who were rewarded by the state for such prognostications to the tune of a million bucks.

Water under the bridge, apparently. Anyway, now all is well.  The Commission “could not be more pleased” with the Plainridge revenues, which are half of the original estimates and which is totally okay, because we now know the estimates were unrealistic to begin with. Construction has begun on two other casinos, with who knows how many more to follow, as Massachusetts duels Connecticut for supremacy in the gambling wars. Gambling is clearly the Legislature’s favored child, (as compared to marijuana), and even more cossetting may be on the way — the House of Representatives is proposing to let casinos continue to serve alcohol for hours after bars and restaurants must close. Meanwhile, marijuana legalization is in danger of being strangled in its crib.

Did the Legislature ever take note of the discrepancy between revenue expectations and revenue reality in Plainville? No evidence that they did, and if it’s brought to their attention, many seem prepared to laugh it off like Commissioner Crosby did: “we all seemed to be smoking something.”

 

Outstanding Achievement by a State Agency in Public Records Law Evasion: The Award Goes To…

The Massachusetts Gaming Commission, in a unanimous decision by the judges.

State and municipal agencies are prone to resisting public records requests (sometimes for reasons that may be understandable — like a lack of resources — but are nonetheless insufficient).  We’ve seen their trailblazing efforts at evasion in such areas as dilatory response tactics, exaggeration of the costs of compliance, and the fearless use of redaction.

Meanwhile, the Gaming Commission truly has been thinking outside the box. Rather than evading the law by withholding records that are in its possession (shutting off the outflow pipe), the Commission has pioneered a new approach: evading the law by declining to accept records in the first place (shutting off the inflow pipe).

Here’s what won the award for the Gaming Commission:

By statute, casinos have to file reports with the Commission about the complimentary services — “comps” in the trade lingo — that they provide. Comps are things like a free drink, a free meal, a free room — whatever will keep the gambler on the premises. In one famous case, a very wealthy casino patron was treated to comps in the form of private jet flights to Las Vegas, which contributed to her betting a billion dollars at casinos and racking up thirteen million dollars in gambling losses.

Information about comps is certainly not something the casinos favor disclosing, and they sought relief from this filing requirement. The Gaming Commission, agreeing with the casinos, recommended to the Legislature that it eliminate the requirement, but the Legislature failed to act. So the Gaming Commission stepped in to take care of the problem.  They used their regulatory power to excuse the casinos from having to file the reports, while continuing to require that the casinos maintain them and provide them to the Commission upon request.  Since the Commission has already stated that it “cannot envision a compelling use for this data,” don’t expect a request for the records anytime soon.

So the Gaming Commission has no records, for example, of the comps from the Plainville casino, which opened last year. If they did have them, those records would be subject to the public records law and we could have them too.  But no. Not so far anyway.

It’s certainly possible to argue that the statute requiring that casinos “shall submit” reports to the Commission doesn’t give the Commission leeway to decline them.  That the statute would result in the records being available under the public records law while the Commission’s regulation results in their being unavailable seems relevant to this whole analysis.  The right plaintiff could make things interesting.

(An earlier version of this post cited a source that misstated the amount of gambling losses accrued by the wealthy casino patron. Error, which author regrets, has been fixed.)

 

The Gaming Commission’s Hurry-Up Offense: Dispatch from the “ATM’s in Casinos” Battlefront

The latest episode in the drama concerning the legality of placing ATM’s in casinos here in Massachusetts.

Quick recap. At present, a state law says that no ATM “shall be located upon premises where there occurs legalized gambling.” This law presents an obstacle of major significance to the casino industry, under whose business model casino patrons must have ready access to all of their assets. In a very lightly attended legislative session on Christmas Eve, the State Senate included a repeal of that law in an amendment to a much larger bill concerning the regulation of state-chartered banks. The maneuver did not go undetected, and those who favored more careful deliberation on this policy question succeeded in removing the proposed repeal before allowing the bill to pass.

The Gaming Commission, in sympathy with the casino industry, had earlier asked the state’s Division of Banks for its views, and last week the agency responded: no repeal of the law is necessary because it has already happened. Their argument goes like this: the 2011 gambling law included a directive to several state agencies to ensure that casinos do not allow “any credit card or automated teller machine that would allow a patron to obtain cash from a government-issued electronic benefits transfer [EBT] card.” This prohibition against EBT cards, the Division of Banks reasons, also operated to repeal the earlier law prohibiting the placement of ATM’s in casinos altogether. Despite the fact that the Legislature did not expressly repeal the ATM prohibition (as it did with seven other statutes it regarded as inconsistent with the gambling law), the repeal nevertheless occurred “by implication,” because no other interpretation is conceivable: the prohibition against the use of EBT cards can mean only that the Legislature intended that ATM’s capable of rejecting EBT cards are permissible.

Whether the Division of Banks is correct in its interpretation is certainly a matter of dispute. (Courts are very relucant to conclude that repeals “by implication” have occurred: the test for the principle of implied repeal is “whether the prior statute is so repugnant to, and inconsistent with, the later enactment that both cannot stand.”) For one thing, the Legislature evidently lacked confidence that the gambling law repealed the entire ATM prohibition “by implication,” or else it would not have attempted to repeal it expressly last month.

In any event, now that it believes it has a green light of sorts from the Division of Banks, the Gaming Commission has a hurry-up offense going. Draft regulations allowing ATM’s as long as they are 15 feet or more from the gaming area have been issued and the Commission is requesting comments from the public by 4:00 pm on this Monday, January 19 (yes, it’s a federal holiday).

The Commission’s decision on ATM’s is far from the final word. And they should know what you think. So this weekend, maybe while you’re watching the Patriots’ hurry-up offense, drop a line to the Commission with your thoughts — and remember, the wisdom of the ATM policy is fair game, too. Use ‘draft regulation comment’ in the subject line and email to mgccomments@state.ma.us.

Licenses in Hand, Casinos Are Coming Back for More

The day after last week’s election, in which the pro-casino forces spent $14 million to defeat the casino law repeal effort, the state’s Gaming Commission officially awarded the casino licenses that beforehand had been only provisional, pending the outcome of the vote.

So you might well think that now that the licenses have been awarded and the i’s have been dotted and t’s crossed, everything is ready for takeoff. But that’s not how things work in the gambling world. As casino opponent Steven Abdow told the Globe yesterday, from the experience of other states we know what happens next: the casinos return to the Legislature with another wish list. Turns out that the law they lobbied so hard for is, well, not quite all of what they want.

For the past few months the casinos been working hard, and successfully, to get the state’s Gaming Commission on their side. The Commission, for example, now supports the notion that casinos should be exempt from the responsibility of checking to see if gambling winners are on the list of persons who are delinquent in paying child support or past due taxes before they make payouts. The state lottery isn’t exempt, but the Commission (which, incidentally is charged with protecting the lottery’s interests) appears to be of the view that casinos deserve an easier time.

And here’s another of the many changes the gambling industry wants. The law the Legislature passed three years ago requires casinos to file reports on the complimentary services — “comps” in the trade lingo — that they provide. Comps are things like a free drink, a free meal, a free room — whatever will keep the gambler on the premises. In one famous case, a very wealthy casino patron was treated to comps in the form of private jet flights to Las Vegas, which contributed to her racking up a staggering $1 billion in gambling losses. It’s hardly surprising that the Legislature regards the complimentary services a casino provides as worthy of the state’s regulatory attention.

But the industry has complained that these reporting requirements are administratively burdensome and wants them to be eliminated, and again, the Gaming Commission has taken the casinos’ side. The reports on complimentary services are unnecessary, the Commission agrees, not only because they would burden the casinos but also because the Commission itself cannot even “envision a compelling use for this data.” Well, here’s an idea — maybe a compelling use for the data is to see if complimentary services are playing any role in increasing compulsive gambling — like the casino law contemplated?

The Legislature will not return to formal sessions until January, so one might expect that bills to tilt the gambling law further in the industry’s favor will not emerge until then. But don’t count on it. You, like most of the members of the House of Representatives, were probably unaware that this past summer House Speaker Robert DeLeo quietly (very quietly) added a pro-casino provision to an otherwise uncontroversial bill on state-chartered banks. The House passed the bill without comment on the gambling law change (which reads opaquely as follows: “the second paragraph of section 3 of said chapter 167B, as so appearing, is hereby amended by striking out the last sentence”) discreetly tucked inside. If the bill is enacted during the remaining months of 2014, the casino industry will have defeated a law now on the books that prevents ATM’s from being placed inside casinos. If it’s not enacted, it will undoubtedly be back again in 2015, along with who knows what other requests.

So the lesson from other states is that now that the Massachusetts licenses have been issued, it’s time for us to really be on our toes. Eternal vigilance is the price of the “responsible gaming” the Legislature promised us. Assuming that one can even envision such a thing.

Gaming Commission Has to Try Some Fancy Footwork to Get Around ATM Ban

Last week’s meeting of the Massachusetts Gaming Commission included some lip service about responsible gambling, specifically, a discussion of the “Responsible Gaming Framework,” which the Commission says “is based on the commitment by the Massachusetts Gaming Commission and their licensees to the guiding value of ethical and responsible behavior.” (You may add your comment about oxymorons here.)

Among the topics addressed by the responsible gaming folks was how to prevent casino customers from emptying their bank accounts — I mean rather, how to encourage casino customers to empty their bank accounts responsibly. To this end, it was recommended that ATM’s be placed at least fifteen feet away from gaming areas, the idea being that a fifteen-foot stroll would suffice to deter a problem gambler.

Which is pretty funny, especially when you consider that there is a law on the books right now that says that no ATM’s “shall be located upon premises where there occurs legalized gambling, other than a state lottery.” Just how the Commission was planning to get around this law in order to allow ATM’s in the first place is not quite clear, but it would seem to involve a very restrictive definition of “the premises where there occurs legalized gambling” — so restrictive, in fact, that seven or eight steps will take you off the premises entirely and put you in front of an ATM.

Or maybe there’s another way around the law. How about getting rid of it altogether? Last month, our House of Representatives voted to do just that, as one small part of a big bill entitled “An act modernizing the banking laws and enhancing the competitiveness of state-chartered banks.” (Wonks: see section 31 of the bill.)

The repeal of the ATM casino ban was quietly added to the banking bill in January by the Joint Committee on Financial Services, whose House Chairman, retiring Representative Michael Costello of Newburyport, has been known to engage in clandestine efforts at lawmaking that only House leadership seems to be aware of.

Thankfully, the State Senate did not act on the bill before the Legislature’s formal sessions ended on July 31. So the Gaming Commission will likely have to rely on its fancy (fifteen) footwork to try to circumvent the law that now prohibits ATM’s at casinos.

(Imagine where we’d be if the gambling industry’s guiding value was not ethical and responsible behavior.)

Casinos’ Newest Ask: Let Us Take Food From the Mouths of Children

You’re probably thinking that I’ve got to be exaggerating with the headline on this post. But I’m not – here’s the story.

Some of the corporations pursuing casino licenses in the state say that in order for them to operate profitably here, some changes need to be made to our gambling law. One of the changes they want is to be relieved of the responsibility of checking to see if casino winners are on the list of persons who are delinquent in paying child support that they owe and to deduct those past due amounts before making payouts (this requirement also applies to past due taxes).

The public policy objective here — that obligations to family and community come first — is universally recognized: people who fail to pay child support can have their paychecks garnished, their personal property seized, their driver’s licenses suspended. The state lottery cannot make payouts without first checking for these unsatisfied debts.

But the casinos are of the view that they should not have to play by the same rules requiring them to deduct past due child support from a gambler’s winnings. And — the Gaming Commission agrees with them (a pause here to note that a poll released yesterday shows public confidence in the Gaming Commission to be under water). This week, the Commission went to bat for the casinos and asked the Legislature to suspend this requirement. But only for the casinos — it would remain in effect as to lottery winnings, paycheck garnishment, etc.

Yes, we totally get that being identified as a deadbeat parent can take the sizzle out of a gaming excursion. And, as the children who are being deprived of their parents’ resources can tell you, that’s no picnic either.

There are 71 days remaining in the Legislative session — stay tuned to see what happens.

PS – the Gaming Commission has not attempted to reconcile its proposal to exempt casinos from child support checks (while leaving the lottery subject to that requirement) with its obligation under the gambling law to enhance and support the performance of the state lottery. Surely the prospect of more take-home winnings from casinos would draw a certain class of gambler away from the lottery,