All bets are off for the gambling industry. As rising joblessness forces Americans to wager less, revenues for state lotteries and casinos are dropping. The decline defies the old notion that gambling is recession proof – or an easy ticket to riches and cheap entertainment.
Now, if only this fading delusion of a "lady luck" could be turned into a lasting desire to make an honest buck.
For an industry that doesn't create wealth but simply transfers it – mostly from the poor to the already rich – the future is not rosy. More people are now acutely aware of financial risks from subprime mortgages to shaky stocks to lottery scratch tickets.
State governments are scrambling to make up for an average 2 percent dip in lottery revenues in the third quarter compared with the previous year. Companies that run casinos saw their stock prices drop by more than 60 percent in 2008, while on the Las Vegas Strip, gambling revenues have fallen nearly 10 percent.
Nevada, in fact, faces a sobering moment about the risk of risk. Not only is its gaming industry suffering, but the state has the highest rate of home foreclosures. It seems the gambling mentality extended to buying homes, on the assumption that prices would always go up. That belief – nationwide – is now as dubious as the pull of a slot machine.
This drop in gambling is unusual considering that the Great Depression saw a gambling boom.
In 2007, the legal side of the industry earned $94 billion in revenues, up 70 percent in a decade. That figure doesn't include wagering outside the law, such as bets on the Super Bowl – estimated at $8 billion – or the estimated $2.5 billion gambled away during college basketball's March Madness.
But state lotteries are particularly pernicious because elected officials, supposedly the guardians of public morality, prey on the most vulnerable to supplement their budgets. About 1 in 5 people plays the lottery regularly, and they are the wrong people. Those who spend the most on tickets earn less than $12,400 a year, parting with about 9 percent of their income.
Some states, such as New York, want to expand gambling to make up for budget shortfalls. Others are more aggressive in their "get rich quick" marketing, especially to hook young people. Some tickets are infused with smells like chocolate. Others are tied to the Advent season or Hollywood flicks.
With the housing and Wall Street crisis, Americans should have by now learned much about risk. A new study by University of Texas business professor Alok Kumar shows that individual investors who buy inexpensive stocks perceived like a lottery – highly volatile with histories of big gains that defy the market – are also regular lottery players. They tend to be young men who seek upward mobility from poorer, less educated lives, often in regions with high unemployment.
"As gambling attains wider acceptability in the society and the level of gambling activities increases, the level of speculative trading in financial markets could rise," the author states.
One bright spot in this deep recession is that gamblers might be saying "Enough!" to the lure of easy money and calling it quits. States, too, should call it quits on lotteries and not peddle this vice.