Gambling

Making Mountains out of Molehills

molehill

I couldn’t help but think of gambling the other day while I was standing on my front lawn. Just two springs ago, I had planted new fescue grass. By springtime this year, my front yard was nearly perfect. While the neighbor’s lawn next door was full of molehills and crabgrass, mine had no trace of such mischief, thanks in part to the short rock wall that separated our yards.

But while mowing the lawn this May, I noticed a small molehill. I talked to a landscape expert, and he said having a few moles was pretty much inevitable given the fact that there were moles operating over in the next yard. Besides, he said, in North Carolina certain moles were protected under state law. I didn’t believe him so I checked, and sure enough, one kind of mole (the star-nosed mole, found primarily in western NC) is actually protected as a “special concern species” and it is illegal to kill them.

I asked a guy down at the hardware shop what he thought, and he said that if one mole got in, more would soon follow and in no time my lawn would be filled with molehills. That would uproot the good grass and kill it, and then it would be replaced with crabgrass; in other words, pretty soon, my lawn would look like my neighbor’s. He said that while I might not be able to kill this mole, I had better try to contain him and limit his sources of food by putting insecticide on the lawn. That might eventually drive him out, and would also keep my yard from becoming a breeding ground for new moles. I would have to act quickly he warned, because if I waited, the new moles would move in and it would be too late for the insecticide to work.

Well, I got busy and forgot about the hardware guy’s advice. Over time, I noticed the mole had expanded his operations and pretty soon his buddies had arrived. In an effort to do something, I would walk around and step on some of the moles’ new burrows, but that did no good whatsoever, and usually by the next day, the molehills were back. In early August, right before I went on vacation, I finally put out two rounds of insecticide. When I returned home, it was clear that I had waited too long—the moles had turned their molehills into small mountains and my lawn now looked like my neighbor’s yard. I really wish I had listened to the guy at the hardware store back in May.

If you managed to stick with my (true) story, you are probably asking how on earth it has anything to do with gambling in North Carolina. Not much at all, unless you can somehow think of my lawn as the state of North Carolina, the first star-nosed mole as the Cherokee casino, the mole’s buddies as other forms of gambling, the crabgrass as the negative social and economic consequences of gambling, the hardware guy as the North Carolina Family Policy Council, and me as every North Carolina governor and General Assembly since 1994. You see, my giving ground to the moles parallels with how policymakers are letting gambling reshape North Carolina’s landscape.

Gambling Tunnels In

North Carolina’s laws prohibiting gambling date almost as far back as the state’s founding. Consistent with an appreciation of the dangers of that activity, the state refrained from recognizing any form of legalized gambling for over 200 years. When asked about the possibility of creating a state lottery in 1982, Gov. Jim Hunt said, “I just don’t think that’s the right thing for the state to be doing. Inevitably, it means people losing money they really need.” North Carolina’s neighboring Bible belt states maintained the same reservations toward gambling until 1986, when Florida became the first state in the South in the modern era to authorize a state lottery, and Georgia followed suit in 1992.

Up into the 1980s, you still had to go to Nevada or Atlantic City for big-time casino gambling, but in 1988, Congress passed the Indian Gaming Regulatory Act (“IGRA”). IGRA provides a statutory basis for the operation of gambling by Indian tribes on tribal lands and categorizes “gaming” into three classes. Typical casino games (such as poker, slots, video poker, and blackjack) are classified as “class III gaming.” In order to offer class III gaming, a tribe must enter into a compact with the state in which it is located, and the state is required to hold “good faith” negotiations with the tribe regarding a compact. IGRA also initially allowed a tribe to bring a lawsuit against a state that refused to enter into compact negotiations or that did not conduct the negotiations in good faith.

Major tribal operations were flourishing in other parts of the country by the early 1990s, and the Eastern Band of Cherokees came knocking on Gov. Hunt’s door demanding that he negotiate a compact allowing class III gaming on Cherokee land. Although Gov. Hunt had concerns that casino gambling would lead to more crime and gambling addiction, he understood that he was compelled to make a deal given the IGRA requirements. In 1994, he signed what some considered a restrictive compact on class III gambling that had a sevenyear term and allowed one casino with limited floor space featuring only raffles and certain video gambling games, but no live table games.

Giving Ground to the Moles

Through the Cherokee compact, North Carolina compromised with its first gambling mole. Some justified the casino, arguing that the state was forced by federal law to allow it in, and that at least it was confined to the westernmost corner of the state. Groups like the North Carolina Family Policy Council, however, warned of the dangers of allowing casino gambling in the state, and that more gambling would soon follow unless policymakers acted proactively. When the Cherokee casino opened in 1997, the National Gambling Impact Study Commission was in the middle of a three-year investigation of the social and economic impacts of legalized gambling. The Commission’s final report, issued in 1999, highlighted the negative impacts associated with the wildfire-like spread of legalized gambling, including increased addiction and crime rates, and the policy problems created when state governments become partners in the gambling business dependent on gambling revenues. In its conclusions, the Commission recommended a complete moratorium on the expansion of legalized gambling in the United States.

North Carolina did not heed the advice. Despite having the benefit of a recent U.S. Supreme Court decision holding that tribes could not sue to force a state to enter into a compact, the state executed an amendment to the Cherokee compact in 2000 that extended its term to 30 years and provided more concessions, including the elimination of all limits on the casino area size. During this same period of time, a different species of a gambling mole, the lottery, was tunneling into North Carolina. In 2005, this barbarian finally slid under the wall, and under extremely suspect circumstances, succeeded in getting the last state on the East Coast without a lottery to legalize a state run “education” lottery. This new mole did not have to be let in, but many legislators agreed with the argument that a lottery was “necessary” because all of North Carolina’s neighbors had one. Once in, the lottery mole’s tunnels spread throughout the yard, and overnight the state became a partner in the gambling business.

For years, video poker machines, a mole species described by law enforcement officials as the crack cocaine of gambling, had been operating underground in North Carolina bars and convenience stores. In 2000, the state attempted to step on this mole’s tunnels by banning new “video gaming machines.” When it became clear that the ban on only new machines was ineffective, the legislature enacted N.C. GEN. STAT. §14-306.1A in 2007, which banned all video gaming machines and presumably rid the state of the video poker mole.

Almost immediately, however, that mole returned in the form of a more evolved species. In order to deal with the ban on video gaming machines, the gambling industry renamed their video poker games “electronic sweepstakes” games, and reprogrammed their machines to offer a purported free method of play. “Electronic sweepstakes” games are not sweepstakes at all; instead they are games of chance played like the video poker and slot machine games found at the Cherokee casino, and they violate North Carolina’s long standing gambling laws. In specific attempts to drive out the electronic sweepstakes moles, the General Assembly put out rounds of legislative insecticide in 2008 and 2010, the most recent of which is codified as N.C. GEN. STAT. 14-306.4. The moles fought back through two lawsuits, and in March 2012, the North Carolina Court of Appeals held in their favor, ruling that the 2010 law was an unconstitutionally overbroad regulation of free speech. Both decisions were appealed by the state and as of this writing are pending before the North Carolina Supreme Court.

So for now, in a state that supposedly only permits the Cherokees to operate a casino, electronic sweepstakes “mini-casinos” litter the landscape, and many cities and counties are attempting to regulate and tax them. According to reports, 31 electronic sweepstakes casinos are operating in the city of Raleigh, and Durham has more than twice as many electronic sweepstakes casinos as it has movie theaters. Electronic sweepstakes addiction now accounts for the majority of calls referred to treatment by the state’s problem gambling helpline.

Making Mountains out of Molehills

When the General Assembly convened for its 2012 short session, it was apparent that many legislators had become resigned to the presence of gambling in North Carolina. As the session progressed, it also became disturbingly clear that some policymakers were more willing than ever to join the gambling business in order to add a few more dollars to the state’s coffers.

Gov. Bev Perdue signed a new class III gaming compact with the Cherokees in November 2011 that radically expanded their rights by allowing them to operate unlimited class III games, including live table games. Before the new compact could go into effect, however, the General Assembly had to enact special legislation authorizing the new forms of gambling. Enticed by a provision in the new compact that requires the tribe to make payments to the state of a small percentage of the gross revenues derived only from live table gaming, the legislature quickly passed the required legislation over objections that it constituted an unconstitutional “exclusive emolument” by authorizing a special class to conduct otherwise unlawful activity.

The new compact was signed by the Governor in June 2012 and has a 30-year term. It allows the tribe to build two additional casinos of unlimited size, and to expand its gambling operations to include unlimited class III gaming, including new forms of gambling machines, live table games (such as craps, roulette, blackjack and poker), and expanded forms of raffles and video gambling. The tribe was also given exclusive rights to live table gaming anywhere west of I-26, secured by an agreement that the state will forfeit its revenues under the new compact (projected to average only $2-$3 million per year), if live table gaming is ever permitted for anyone else in that area.

Several other pro-gambling bills were filed in 2012, but did not pass. H1180 would have legalized and taxed “electronic sweepstakes,” creating a monstrous “second state lottery” with the North Carolina Lottery Commission overseeing all electronic sweepstakes operations. H1180, which would make the state an active partner of the gambling industry, will undoubtedly reappear in 2013 unless the Supreme Court reverses the Court of Appeals’ decisions in the electronic sweepstakes cases.

Another 2012 bill, H1188, would have expanded gambling by legalizing “casino nights” and authorizing casino table games for licensed nonprofit “exempt organizations.” H1188 was withdrawn after the North Carolina Family Policy Council pointed out that if casino nights were held anywhere west of I-26, the state would forfeit its live table gaming revenues under the new Cherokee compact.

A Reshaped Landscape

It is now early fall. The Cherokee casino is finishing a $650 million expansion project that will make the 56-acre gambling resort one of the largest in the United States. On August 21, Gov. Perdue visited the casino to officially welcome Las Vegas style casino table gambling to North Carolina and to complement the Tribe and the state leaders on a “job well done.”

In less than 20 years, gambling has dramatically changed North Carolina’s landscape. Today, when returning to North Carolina from trips out of state, residents may find themselves feeling like George Bailey after his encounter with the angel in It’s a Wonderful Life, staggering through an area that was once idyllic Bedford Falls but had become Pottersville, with its blighted landscape and flashing casino signs. Drivers crossing the state line near Franklin now pass dozens of Harrah’s casino signs and at least eight electronic sweepstakes “mini-casinos” within a few minutes of entering North Carolina. Former Governor Jim Hunt recently commented in a newspaper article on the growth of gambling in North Carolina, saying, “I’m still a little bit uncomfortable with people losing some of their resources if they’re poor. But I’m not as uncomfortable with it as I used to be.” The title of the article pretty well summed things up: “Over Time, NC Gives in on Gambling.”

It is not too late to save North Carolina’s landscape from being completely destroyed by the gambling moles, but like me with my yard, it is going to take some hard work come next Spring.

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