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October-17-2006,
The Governments are Going after the Wrong Gambling Vices...By Hartley Henderson

The recent bill signed by George Bush and the private member's bill issued by Jeff Leal in Ontario, Canada, are designed to curtail online betting. In both cases, the governments want you to feel that they are somehow making a dent in the area of problem gambling, particularly among young people by stomping out sports and poker betting online. At the same time, the U.S. government has created an exemption for horse racing and lotteries and in Canada, Jeff Leal himself stated that the main concern with online gambling is that it is taking away revenue from the lotteries, race tracks and the video lottery terminals located at the racetrack.

So the question has to be asked? Who exactly bets online and who plays the land based lottery and video lottery terminals. I've taken a random sample of lottery fact sheets posted online by 5 states, Texas, Tennessee, Florida, New York and Oregon. As well I looked at the fact sheet posted by the Ontario Lottery and Gaming Commission. In each case the demographics are fairly constant. About 70% of the population play the lotteries and the demographics are similar to the general population. 53% of the players are female and 47% are male, education of lottery players was identical to the population but one figure did stand out, the amount spent by low income individuals. In fact those making less than $30,000 per year spent almost 4 times as much as those making over $50,000 per year. And those with less than a high school diploma spent almost 4 times as much as those who had a college degree. Video lottery terminals in states that offered it showed similar results. It's no wonder the lottery has been called a tax on the poor and stupid.

In Ontario, the 2005 annual report wasn't much better. For the year ended March 2005, almost $4 billion was wagered in lotteries, in charity casinos and on video lottery terminals at racetracks. The payback to the bettors was 70%. Yikes! The sports lottery pro line had a disproportionate number of young, male bettors, far less than what sportsbooks get. This shouldn't be surprising, after all pro line requires the player to wager a minimum 3 team parlay and the payout is similar to the lottery at 60%. A pick 'em game on pro line has a dividend of 1.7 on either side which equals about -142 on both sides. Multiply that by 3 to 6 and one can see why the payout is so low. When pro line first came out they made some mistakes and had several lines that were out of whack with reality. As such, even a ridiculous game with odds of 1.7 was tempting if the true line on that game was say 1.33 (-300). In fact on a famous weekend in Ontario the government had insanely high odds on several hockey games with odds as high as 8/1 on the Ottawa Senators against Montreal. All the longshots won and the lottery got clobbered by these young shot takers who wagered $5 to win upwards of $25,000. But today the lines are sharper and to protect themselves the OLGC waits until the day of the game to post odds and takes games off the board very quickly at the first inclination that the lines may be off. Hence any advantage at all that existed for the player was quickly eliminated.

Contrast all that to online sportsbooks and poker rooms. Studies done by the various casinos have shown over and over that online bettors are of all ages but are predominantly over the age of 30. They also have higher incomes and are much better educated. As such, players demand fair payouts and wouldn't accept the usurious odds offered by the lotteries. As well, since money has to be sent by credit card or similar and since almost all sportsbooks demand a fairly high minimum deposit, this ensures that minors and those who are extremely poor can't afford to pay unlike the lottery. After all anyone can find a dollar or two.

So the question has to be asked as to whether the U.S. and Ontario provincial governments are on the right track by trying to stop online gambling if their stated goal is to stomp out problem gambling and gambling by minors. Given the above facts, the answer would seem to be "no". But the best source to answer of course is Gambler's Anonymous which helps those who are pathological gamblers. According to studies done by problem gambling groups, 2/3 of people in their programs are there as a result of video lottery terminals. And 1/3 of the people at the problem gambling programs play the lottery on a regular basis. Contrarily, less than 5% of the problem gamblers are there due to horse racing or sports betting. In fact video lottery terminals have been deemed "the crack cocaine of gambling" because it is so highly addictive. Most vlt players become addicted to gambling in less than a year. Contrarily sports bettors and poker players take over 4 years of playing before they start becoming problem gamblers.

The government will argue that gambling revenues are important because they fund other initiatives but many studies today show that most gambling revenue goes into general revenues. But that's another issue.

So it seems that the government is on the wrong track with their crackdown on online sportsbooks and poker and should actually be going after the lotteries and video lottery terminals. Oh and one other note of interest. Bill Frist was the Senator in place when Tennessee first legalized the state's lottery. But that's a topic for another article.

by Hartley Henderson, MajorWager.Com



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