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Some pieces of legislation receive far less attention than they deserve. House Bill 171 – Wyoming gaming commission, sponsored by the travel committee, looks to be one such under-the-radar measure this session. 

Early legislative comments focused on the idea that it regulates gambling. It’s more accurate, however, to describe the measure as legalizing instant-gratification gambling on a new level for the state. And the high number in its name reveals, the bill surfaced late in the game, allowing very little time for public scrutiny. 

Wyoming has historically approached gambling pretty conservatively compared to most other states. Sure, the state’s never been a complete stranger to games of chance, but since consistent enforcement of the McGill Act took hold in the 1950s, opportunities for legal gambling have been limited for the most part to bingo, charity raffles and pull tabs, a little pari mutuel horse racing, and, more recently, Wind River Indian Reservation casinos. 

That started to change in 2013 when lawmakers passed two bills expanding gaming opportunities for Wyoming citizens. 

One bill established a state-sponsored lottery, allowing citizens to participate in national lotteries such as PowerBall and eventually lotteries unique to Wyoming. This bill very narrowly passed, and only did so with an amendment that specifically prohibited instant gratification games such as scratch-offs. These latter game is more closely linked to problem gambling and addiction behavior. A major justification for enacting the state lottery at the time was that Wyoming residents were already playing the lottery in neighboring states. If our residents were spending money on gaming, Wyoming might as well reap the benefits too.

House Bill 25 also passed in 2013. Sponsors characterized the gaming it legalized as historic horse races taking place on a machine. The product was explained in terms similar to pari mutuel live horse racing. What materialized instead were instant gratification games that had — and still have — questionable relationships to actual past horse races. 

In one instance the state attorney general declared these electronic machines were effectively no different from slot machines, and ordered them closed down for more than a year until they could be reprogrammed to meet state law. These machines are allowed to be located in counties where live horse racing has taken place. A portion of the profits were distributed to horse breeders, the counties in which they were located and the Pari Mutuel Commission. These video games have been very popular — well over a half billion dollars have been wagered by players since their inception.

This year’s proposal would build on and greatly expand the changes made in 2013. House Bill 171 would reconstitute the Wyoming Pari Mutuel Commission into the Wyoming Gaming Commission and add one new commissioner. The new commission would operate under expanded responsibility to regulate and oversee basically all gambling in the state.

The bill contains many other routine language changes to statute. The main purpose of the bill, however, is to legalize what are referred to as “skill games.” 

These are actually electronic video game machines. They feature an element of skill coupled with chance. Think bartop video poker and the like.

At a glance these “skill games” may look indistinguishable from the standard electronic gambling machines found in other states with legalized gaming. Today these gray-area skill machines are found in many establishments in Wyoming communities and are producing wins and losses to players that reach well into four figures.

In recent years the attorney general has declared certain versions of these games don’t conform to state law. Currently, the responsibility of analyzing the legality of skill games has fallen to county attorneys and local law enforcement agencies, who are not technically able to do so.

Under HB 171, the Wyoming Gaming Commission would determine specifications and rules for these games going forward. It would also require licensing or permitting of all video game vendors as well as establishments hosting these machines. The bill limits each establishment to five of these video devices.

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The bill also defines taxes, fees and profit levels and who gets what. The owner of the gaming establishments would be entitled to 19.4% of the net proceeds according to the bill. Local governments stand to receive 13.5% of the net proceeds. The Wyoming Gaming Commission would receive 3.375%. Another 3.375% would be deposited in the state’s Legislative Stabilization Reserve Account — better known as the rainy day fund. In total, state and local governments would receive 20.5% of net proceeds. The bill does not specify the allocation of the remaining 60% of proceeds. 

Clearly, this type of gambling could produce very substantial revenues for state and local governments. The experience of other states suggests the income could equal about a half-percent increase in the sales and use tax. This perhaps explains why leadership referred the bill to the appropriations committee instead of the committee that developed the bill.

There is an important provision in the bill that maintains local control by requiring an election by local citizens to approve skill gaming in their community. Unfortunately, this local provision is unlikely to survive the  considerable pressure exerted by pro-gambling lobbyists.

The bill offers an alluring cocktail of positive features to lawmakers struggling with shrinking tax revenues. First, it provides about four times the funding to state and local governments than equal expenditures would yield in sales tax revenue. Another appealing aspect is that gambling taxes are voluntarily paid; that is, if a citizen doesn’t want to pay the tax they have the option to forego gambling. Furthermore, it provides a path for the state to reduce revenue distributions to local governments. It is this set of advantages that has caused many state governments to become as addicted to gambling as many gaming patrons

Is it any mystery why nearly every state that has expanded gambling did so in periods of fiscal shortfalls?

To paraphrase Milton Friedman, however, there is no such thing as a free lunch.

Little time will be afforded during the next three weeks of this budget session to fully explore the negative social impacts that come with expanding instant-gratification gaming. Much research has been accomplished in this regard, and some of the findings include significant social costs.

Although proponents point out that each dollar the public spends on gambling yields at least four times as much revenue to state and local governments as other purchases, the negative social impacts of reduced spending in other sectors should be equally considered. Some issues that have been documented in other states include the tendency for a small but significant segment of the population becoming problem or even pathological gamblers. This brings increased bankruptcy rates, real estate foreclosures, marital breakups, suicide, unemployment and even certain crimes. 

One recent study from Baylor University summarizing several other gambling studies suggests the social cost per year of one pathological gambler is $9,393. It is interesting to note also in other studies that social impacts are much more evident when gaming is spread over an entire state than is the case for individual casino-type operations.

Evidence suggests that most other states either included mitigation expenses to deal with problem gambling in their original gaming legislation or found a need to establish formal programs after gaming had been launched. As currently drafted, HB 171 contains no specific language that makes reference to problem-gaming mitigation.

The next few weeks of legislative activity will reveal whether or not Wyoming’s Legislators will take the next step in the evolution of gambling activity in their state. One thing is certain though: Their decision will have far-reaching effects on the future of Wyoming.

Michael Madden

Michael Madden served 12 years in the Wyoming House as a Republican representative from Buffalo, including seven years as chairman of the House Revenue Committee. He is an economist and holds a doctorate...

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  1. Mr. Madden’s article contains several inaccuracies. Historic Horse Racing machines absolutely are based on previously run races. The location, date and names of horses are masked, but the races did run and you can click on the jockey, horse, track history and place a bet just as you would on a live race. Secondly, the machines can only be in “pari-mutuel” counties. There does not need to be live racing in that county, but the people of that county have voted affirmatively to allow this type of gaming. And finally, the biggest benefit of this bill is that it gives the Gaming Commission the ability and authority to reign in the massive growth of illegal games.

  2. I did not grow up gambling, but I came to enjoy and study it. In my study, it is apparent that the best form of gambling is one that benefits society the most and that is horse racing. No other form of gambling requires the amount of local resources from labor, veterinarians, agricultural production. People that cannot stand being around people makes working with horses perfect. Gambling on horse racing also provides an excellent opportunity for people to use their skills in divining a winner as there are so many variations in the placing of a bet. Gamblers with math skills (not me) will evaluate the odds and the pools of money to place bets or they will look at the past performances to pick out a winner. Some gamblers like jockey or the trainer or the color of the silks or the color of the horse, while others look at the genetics of the horse through the mother and father’s lineage. My preferred method is to look at the form, but also observe the horse on the track, because I can swear one can see the horse that looks and “thinks” they are the best! No other bet offers so much educational potential than horse racing.

    I have also participated in a NFL football pool where the picks are based on the point spread and after being in this pool for more than 25 years; it is apparent no one can win betting football. The only winners are in Vegas. However, understanding the spread can certainly make each game a little more exciting but this bet does not distribute the dollars in Wyoming and neither do those electronic gambling machines. They will make money for the State and the bar owner as those that love the sound of ding, ding, ding seem to be enthralled by it. I see no skill or thrill in those games and if they are legalized those proceeds should be directed to beneficial uses as they participant is not gaining any skill.

    Horse racing is legal in Wyoming thanks to the Lottery legislation and I am extremely happy that I can get my racing form and divine a winner. A great number of people ask me why I waste my money on this sport? My retort is usually “A golf outing or a trip to the baseball game can get expensive and you have no shot at winning; I would rather spend my discretionary dollars in an attempt at the thrill of winning or figure out why I did not see that horse coming”.

    People that have addictions are always going to be with us, and legislating to protect this small group at the expense of the whole is not the legislation we should be passing. But we should discern which type of gambling benefits the most people in Wyoming and make that bet the most attractive from a tax perspective.

    We make hay, horses and cowboys in Wyoming, but not electronic gambling machines.