Freedom in the 50 States

An Index of Personal and Economic Freedom

Gambling Freedom

The gambling category includes an estimated cost of gambling restrictions and whether social or online gaming is allowed.
Choose a dimension of freedom below to see rankings on the map, or use the map to explore results by state.

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Gambling Freedom

Gambling in America is big business. Annual nationwide commercial casino revenues minus payouts (“casino win”) are over $40 billion.1 Unfortunately, no state has a free market in gaming enterprises, but an oligopolistic, state-licensed system at least permits more freedom than a total ban.

We include casino revenue data in the freedom index. We obtained these data from the University of Nevada Las Vegas (UNLV) Center for Gaming Research and state regulatory boards’ annual reports. The freedom index uses the Australian Productivity Commission’s admittedly flawed method (but a creditable and unique attempt) for deriving the consumer surplus, as follows:2

Equation 1
S=\frac{p(1-t)q}{2e}

S is the surplus, p(1 − t)q is price including tax times quantity, and e is the price elasticity of demand, assumed to be −1.3 following the academic literature and the Australian Productivity Commission’s estimate for nonproblem gamblers.3 Thus, the total gambling revenue figure is divided by 2.6 to get the consumer surplus. We also take 30 percent off for problem gamblers, whose consumer surplus might be zero (an aggressive assumption). In addition, we take two-thirds off the figure to account for interstate spillovers: gambling liberalization on the margin does not increase consumer surplus or revenue much because the national gambling market is almost saturated. For the freedom index, producer surplus is irrelevant because the producer side of the industry is heavily oligopolistic or monopolistic because of state control.

Apart from casino win, we also include dichotomous variables measuring whether states have legalized noncasino forms of gambling: sports betting (a new variable in this edition), pari-mutuel wagering, charitable gaming, and slot or video machines outside casinos. Some states put those revenue figures online, but we have been unable to obtain complete data, hence the dichotomous variables. Using the data we do have, however, we can roughly estimate the impact of legalization in each of those areas on consumer surplus. Slot and video machines seem to be far more popular than pari-mutuel wagering or charitable gaming, with sports betting between. Much policy change has occurred on legalizing sports betting, with only a handful of states prohibiting online wagers on sports.

Although the aforementioned gambling variables are worth a great deal of the index, the remaining variables in this category have very small weights: a social gambling exception, whether “aggravated gambling” is a felony,4 and express prohibitions on internet gambling.

Footnotes

1. “United States Commercial Casino Gaming: Monthly Revenues,” UNLV Center for Gaming Research.

2. Brian Dollery and John Storer, “Assessing the Impact of Electronic Gaming Machines: A Conceptual Critique of the Productivity Commission’s Methodology,” Gambling Research 20, no. 1 (2008): 1–12.

3. “Estimating Consumer Surplus,” in Australia’s Gambling Industries, vol. 3, Inquiry Report No. 10 (Melbourne: Productivity Commission, 1999), pp. C.1–C.26.

4. Alaska, Arizona, Georgia, Hawaii, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Missouri, Nevada, New Hampshire, New Mexico, New York, North Dakota, Ohio, Oklahoma, Oregon, Rhode Island, Tennessee, Utah, Virginia, Washington, Wisconsin, and Wyoming.