The Tribune

TOUGH CALL

By LARRY SMITH

When I was young, people called me a gambler. As the scale of my operations increased I became known as a speculator. Now I am called a banker. But I have been doing the same thing all the time. - Sir Ernest Cassel (1852-1921)

In gambling, the many must lose in order that the few may win. - George Bernard Shaw (1856-1950)

THE gambling debate in the Bahamas has always been surreal – part of a weird fantasy world that is difficult to navigate with logic.

There are two zones to this strange world – one in which three or four hotel casinos operate legally as a tourist amenity, and another populated by hundreds of illegal Numbers sellers catering to tens of thousands of Bahamian gamblers.

The casino zone originated in the 1920s, when Prohibition in the US offered a chance to make huge profits from bootlegging. Money flowed freely, and millions were invested in real estate, with new resorts like the Colonial and Montagu Hotels coming on stream.

Although organised gambling was officially banned nationwide, a small casino called the Bahamian Club began operating seasonally in 1920 on New Providence, catering to a very restricted clientele. It was located on West Bay Street, east of Fort Charlotte.

The Numbers zone dates back to 16th century Europe and has been thriving here since the 1800s at least. This game of chance is associated with poor communities around the world because punters can bet small sums of money and get credit from their bookies.

Our first anti-gambling law was passed in 1901, and was gradually strengthened to create an absolute ban on the operation of lotteries and gaming houses for profit. But in 1939 the law was amended to allow exceptions to this rule.

According to the 1967 Commission of Inquiry on casino gambling, “This change...was prompted by the opening of a small casino on a seasonal basis at Cat Cay and the realisation by those in government at that time that this venture – and a casino which had been openly operated since 1920 at the Bahamian Club on the western outskirts of Nassau – were quite illegal.”

The amendment – piloted by a young lawyer named Stafford Sands – allowed the government to exempt any person, club or charity from the law’s provisions. The effect was to create a licensing procedure, and the two small foreign-owned casinos were immediately regularized.

These early certificates of exemption carried few conditions, but they always excluded minors, persons born here, employed residents, and civil servants from gambling. Only visitors and non-Bahamian retirees living here could legally gamble in the casinos.

Between 1939 and 1963, there were several applications for casino licenses from reputable groups. But all were denied on the basis that the exemption law was not designed to provide for the introduction of casino gambling on a large scale or on a permanent basis.

“It was regarded primarily as a means of permitting lotteries for charitable purposes or to provide for the sort of small lottery or gaming activity which is a feature of specific social functions,” the inquiry report said. “The discreet seasonal operations of the two existing casinos do not appear to have been regarded as offending the spirit of the 1939 legislation.”

In 1964, Shirley Oakes Butler (a daughter of Sir Harry Oakes) tried to acquire the Bahamian Club to operate as a year-round casino, with half the profits earmarked for charity. But plans were already in place to transfer the club’s exemption to a new casino in Freeport.

The following year, a group of top hoteliers met with Sir Stafford Sands (who was then Tourism Minister) to propose a government-controlled casino and convention centre, from which the entire industry could benefit. But planning was already in hand for a private hotel casino on Paradise Island.

This dramatic expansion of casino gambling (in Freeport and on Paradise Island) was a direct result of the Cuban Revolution, which had forced American casino operators to look for new territory. The Bahamas was right next door, and the developers of Freeport were desperate to build a resort industry on the island of Grand Bahama.

The United Bahamian Party government saw this demand as a chance to earn payoffs from foreign gambling syndicates while boosting the country’s attraction as a tourist destination. But the pro-casino policy promoted by Sands and others was hugely controversial due to intense opposition from the powerful religious community.

When the Progressive Liberal Party took office in 1967 it continued the exemptions for casinos on Grand Bahama and Paradise Island, but passed a new law in 1969 to set up a regulatory agency (the Gaming Board) and provide for the taxation of casinos. Restrictions on Bahamians and residents gambling in casinos were left unchanged.

Some commentators have claimed that these restrictions were racially motivated, but the record is clear that they were the result of opposition from the churches – an attempt to insulate the issue from public concern in the belief that casinos were important for the economy. Bahamians of any race have always been able to be entertained in our hotel casinos – they just can’t gamble.

No efforts to challenge this bizarre status quo have gone anywhere over the past 50 years. Casinos remain legal but Bahamians cannot use them legally, while the Numbers racket is illegal but patronized by most Bahamians without any consequence whatsoever.

The last FNM administration floated the idea of a referendum to change this by legalising lotteries and ending the ban on Bahamians gambling in casinos. But former Prime Minister Hubert Ingraham eventually backed off in deference to the views of the Bahamas Christian Council. He promised a referendum in his next term, should he be re-elected.

The PLP promised the same thing. And Prime Minister Perry Christie has confirmed that a referendum on the matter will be held before the end of this year. This move is widely seen as a payback to Numbers operators for their funding of the PLP’s recent election campaign, but it will hopefully bring some clarity to a long-running and very peculiar debate.

Aside from a few Islamic countries, the Bahamas is almost alone in not permitting its citizens to gamble in one form or another. According to the Economist magazine, the legal gambling market totalled $335 billion globally in 2009. Nearly two-thirds of that came from lotteries and casinos – which operate in at least 100 countries these days.

Meanwhile, online gaming is valued at about $30 billion, and growing fast. Just as the internet disrupted other business models, it is also changing the gambling industry. Over the last decade, anyone who had an internet connection and wanted to gamble was able to do so.

This is why web shops are able to operate openly here. The Lotteries & Gaming Act makes no reference to internet gambling because there wasn’t any internet when it was passed in 1969. So these businesses are licensed and legal. The law does refer to the printing and selling of tickets or chances in a lottery or drawing, and this is what makes the Numbers draw illegal.

Retired assistant police commissioner Paul Thompson told me recently that one of his first postings as a young officer in 1952 was to a special squad of detectives that raided the Numbers houses. “We did it from time to time, but it never stopped anything, and after a while CID left it to the uniform branch. We considered it more important to focus on serious crime.”

And it has been that way ever since – occasional raids, followed by long spells of non-interference. In fact, at one time, the biggest Numbers boss on the island was the treasurer of the PLP. And it is common knowledge that you can go almost anywhere today and buy numbers easily and painlessly. As one letter writer recently put it, “the Numbers has become intricately woven into the fabric of Bahamian society.”

In 2006, Minister of Tourism Obie Wilchcombe reported that there were at least 45 illegal gambling houses on New Providence and 12 in Grand Bahama. He said 60 per cent of the population was spending as much as $2 million locally and abroad on games of chance every week. We don’t know how much of this revenue is retained as profit in the Bahamas.

According to the Ministry of Tourism, hotel casinos in the Bahamas netted just over 14 per cent on revenues of more than $1 billion in 2011. While there is no way to know what the Numbers operators earn, it is clearly a hugely profitable business with no regulatory oversight other than the occasional fine or political contribution.

Our “official” attitude towards gambling parallels the American experience up to a point. Restrictions were gradually strengthened in the US during the 19th century in response to abuses, so that by 1910 virtually all forms of gambling were prohibited – even bingo.

But attitudes began to change during the Depression, when legalised gambling was seen as a way to stimulate the economy. Growing opposition to tax increases helped to establish state-run lotteries in the second half of the 20th century. Today, 43 states have lotteries, mostly marketed as voluntary taxes for education, and 12 allow commercial casinos.

So what are the key issues in the Bahamian gambling debate?

Let’s start with the economic argument. Many politicians see legalisation as an easy way to extract more revenue from the private sector. It has been said that the government could gain an extra $40 million a year in revenue from a legal lottery.

But this would not be a matter of “pumping more money into the economy” as some have suggested. It would instead amount to a simple transfer of money via a voluntary tax on gamblers, many of whom would gamble anyway – whether the lottery is legal or illegal.

Those opposed to prohibition point to concerns about enforcement costs, not to mention the huge incentives to lobby and bribe public officials to allow illegal gambling to continue unmolested. These arguments are similar to those made about the prohibition of drugs and alcohol, which are also subject to abuse.

Clearly, any widespread demand for an illicit activity will create an illicit market. Prohibition of alcohol made smugglers rich but did nothing to curb drinking. Outlawing drugs has been a similarly spectacular failure, draining billions of public funds for enforcement costs.

Those in favour of legalisation and regulation also point to the economic benefits that would accrue to the state through the elimination of enforcement measures. But it is more likely that the enforcement burden would simply shift from prohibiting gaming to ensuring that the operations are free from corruption and rigging – a much more complicated task.

Religious fundamentalists argue that gaming is a sin based on greed, although there is no biblical injunction against it. As Pastor Rex Major once put it, “Gambling encourages a reckless parasitic approach to life in which one human fleeces another with no personal regard for his neighbour’s welfare.”

But some denominations are less bothered than others, and it could be said that this high-flown moral argument amounts to arch hypocrisy in the face of widespread illegal gambling on a daily basis by Baptist congregants and others.

The social argument against gambling is that it exploits the poor, who waste their limited resources on rigged games. In this view, gambling corrupts and hurts people, causing absenteeism, financial hardships, family tensions and increased crime to support the habit.

In Russia, for example, the government shut down the gambling industry overnight in 2009 to control spiraling addiction and organised crime. Only a handful of Las Vegas-style casino zones are now allowed in isolated areas. Prior to the ban, Moscow alone had 550 gaming halls, including 30 casinos.

The gambling industry argues that its product is simply a form of entertainment, like going to the movies. And locally, our web shop owners (and presumably the Numbers chiefs) are running ads extolling the virtues of gaming in terms of employment and contributions to charity.

There is also the question of discrimination. Some people are upset over the fact that Bahamians are not allowed to gamble in Bahamian casinos. But the Christie administration has said that its proposed referendum will not address this issue, allowing this ban to continue.

If a majority votes against the legalisation of lotteries in the upcoming referendum, the question of what to do with the existing illegal Numbers industry will remain. If legalisation is approved by voters, the government will have to enact legislation to regulate the industry.

Some commentators have suggested that a “no” vote in the referendum will place the Christie administration in an awkward position in terms of what to do with the Numbers business. But why should that be the case? We would simply revert to the original surreal status quo.

A “yes” vote would force the government to develop and implement a comprehensive gambling infrastructure with a transparent regulatory regime. Exactly how this would impact or incorporate the existing Numbers operators is difficult to say because the government has not given any clues to its thinking.

The bottom line is which approach – prohibition or regulation – will provide the most benefits to the most Bahamians at the least cost. Either way, gambling will surely continue.

• What do you think? Send comments to larry@tribunemedia.net or visit www.bahamapundit.com