Delaware Rejects Expanding Sports Gambling

This story from ESPN was unfortunate to read:

“Delaware lawmakers have voted down a bill that would have authorized sports betting in the First State. Gov. Jack Markell had proposed expanding gambling in hopes of raising an estimated $55 million in revenue for the state. But on Tuesday night, the measure fell two votes short of the three-fifths majority needed for the bill to clear the Delaware House of Representatives, with 23 votes in favor, 15 against and three abstentions.

Markell proposed expanding gaming at the state’s three racetrack/casinos and a larger state share of slot machine revenues to prevent additional cuts in the fiscal 2010 budget. Markell has already proposed an 8 percent salary cut for all state workers.”

Not only does gambling raise state revenues, it creates economic growth. It is a business just like any other. And it was clear from the opposition to the bill. In a true Bootleggers and Baptists moment, the bill was challenged by the current gambling community, who feared the competition, and wanted the government to protect their oligopoly. It was also fought against by the NFL and anti-gambling advocates.

What Delaware should have done is not just try to expand the ability of the state to operating gambling businesses, but expand the law to let private firms come in and run casinos or sports books. The state could sell (or lease) its current gambling businesses to the private sector and receive a large chunk of change upfront to use as the financial recession wears down state budgets.

As my colleague Len Gilroy wrote last year, lottery privatization makes sense in several ways:

  • First, it’s difficult to argue that running a lottery is a core function of government. Put simply, businesses are best at running businesses, and governments are best suited to a regulatory and oversight role to ensure that the public interest is protected.
  • Second, state lotteries have a fairly stable revenue stream which can be maximized under private management.
  • Third, privatization can be flexible based on the state’s desires. For instance, the state could take some money up front and a percentage every year, and continue to put that towards education, transportation, or whatever it was designed for in the first place.
  • Finally, privatization would provide a means to transfer significant risks to private sector operators, most importantly the risks from competition with lotteries in adjoining states, casinos, and internet gaming.

The same principles that hold true for lottery privatization hold true for all state-owned gambling operations.

All and all, even with this political loss, Delaware and other states with taxpayer owned lotteries should consider divesting them to the private sector, to increase state revenues, have more adequately operated business, and reduce taxpayer risk.

More from Reason on the privatization of gambling businesses here, here, here, and here.

Also see Reason’s policy work on Privatization and Government Reform.