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The New Numbers Racket

by JAMES ROTHENBERG

Should we, or shouldn’t we? Vote to authorize casino gambling in my home state of New York? The back and forth on this issue is foaming with publicity rituals, press releases and crowded opinion pieces. The state is backing it. Opponents say forget it, beginning with direct refutation of the proposition’s selling points. If you live in an area that has been sliding economically for decades and might be in line for a casino, you’re likely for it. If you live in an area remote from a site that is vying for a casino permit, you’re likely less interested either way.

Lost in the discussion is not that the state isn’t already in the gambling business – that’s well known – but what kind of job is it doing? And I don’t mean in raising money for state projects, salaries, and expenditures. Since the state is purported to perform a useful social service, and since organized gambling exploits a recognized facet of the human personality, i.e., the propensity to gamble, would it not be extremely hypocritical for state run gambling not to give the player an even break?

Let’s start with an example at a New York racetrack. We know straightaway that if the daily handle is $2M, the track’s take (what it takes in advance from each wagering pool) could be $360K. The takeout percentages range from 15-24% depending on the type of wager. This figure assumes an average 18% take. Maybe conservative, and then not taking into consideration the breakage (the difference the track keeps because it doesn’t pay off in exact amounts, but rounds depending on the size of the payoff, from10 cents to $1).

This example illustrates the difficulty of winning at a racetrack, but here’s an even better one. Let’s say 10,000 people arrive at the track for the first race, each with exactly $100 in their pocket. That’s $1M that comes to the track. The track comes with zero dollars! Understanding that is crucial. Technically, it comes with some, but it’s only necessary for making change for the bettors.

Now let’s say that everyone bets all their money in the first race, all million dollars. At the end of the race, the track will have $180K and the remaining $820K will be in the hands of the bettors. Some have to go home at this stage because they are tapped out, as will happen at each succeeding race. Now on the second race, all those remaining bet all their remaining money, all $820K of it. After that race the track has gained another $147.6K, giving it $327.6K in total, with only $672.4K distributed among the bettors that are still alive.

Not to prolong this progression, at the end of a 10-race session, the track, once broke, now has (in round figures) $862K and the remaining $138K is spread amongst the “lucky” winners, lucky there’s no more races. Eighteen percent is an awful lot to overcome.

In casino gambling, players do not bet parimutuel style against each other like at a racetrack, but against the house, usually at fixed odds. The odds against the player can be quite low comparatively, even in the very low single digits. The player is going to lose anyway, but it will take a little longer. Of course, the rapidity of the betting moves this along.

But, and it’s a very big but, privately owned casinos have no sanction to operate their business in the public good. Despite the pseudo-gracious behavior on the part of the host (the hook and line part) to draw in business, there exists the requisite adversarial relationship between those that have money and those that are trying to take it away (the sinker). And it’s completely in their right. It’s their business model. To take your money and have you feeling good about it. The casino owes you nothing.

By contrast, let’s look at the New York State lottery. That’s run by an entity that does owe its people something, that exists by, of and for, as the saying goes. Again we see the same pseudo-gracious behavior to lure business that has given us carefully crafted slogans such as all-you-need-is-a-dollar-and-a-dream. Accent on the dream because in this game the takeout percentage is a monumental, state-sanctioned 60%.

But people do dream, and as the economy worsens for the have-less, they dream continuously. Hey, somebody wins, right? Yes, that’s so, but it’s the same somebody. The state.

With an idealized example, the 60% problem can be intensified. Assume 10 people, and 10 people only, play the NYS lottery. They each bet $1M for the grand prize and somehow, we’ll assume, pick the exact same number. That number wins. Lucky for them. They each “win” $400K, actually a $600K loss. Out of the original $10M that was wagered on the grand prize, the state now has $6M and only $4M remains in the hands of the players.

There is a numbers racket in New York City. Been there for generations. You pick a number between 1 and 1000 and if it wins, you are paid 600/1. The racketeer’s take is 40%. It’s illegal. And hidden. When New York State takes 60% it’s legal. And shouted from the rooftops. And taxed. Bookies don’t tax you.

To make matters worse, the state is deceptive where the casino, and the bookie, aren’t. The lottery falsely advertises a prize as double of what it really is. A “million” dollars when you’ll only get half a million “right now”. The million we were talking about? Yeah. That’s spread over 20 years. Same thing.

Is that so?

This ruse, accepted perhaps out of fealty, is identical in structure to a corporation advertising a position with a salary of a million dollars, and then giving the hire a 20-year contract at 50K yearly.

If you can’t tell whether I’m personally pro or con on the casino amendment, I’ve done my job. It shouldn’t matter. My position on the hypocrisy of a state that exploits the very people it claims to serve, using grandiose and deceptive claims, taking 60 cents out of every dollar in advance, and then having the gall to make winners pay state tax, well, on that I’m clear.

I should note that I single out New York because I live here. I assume other state lotteries operate along the same lines. I further assume, should we have the great fortune of having a national lottery in our future (the ultimate strainer), that will deserve another essay.

James Rothenberg can be reached at:  jrothenberg@taconic.net 

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James Rothenberg can be reached at:  jrothenberg@taconic.net

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