Initiative aims to protect consumers, jobs and restore revenues to state and local governments
(In keynote address to National Association of Attorneys General in Biloxi, American Gaming Association CEO Geoff Freeman invited AGs to partner in cracking down on illegal gambling)
Good afternoon, and thank you for inviting me to speak before this distinguished group. Today I am going to talk about legal and illegal gambling.
Now I know you have no shortage of law enforcement priorities demanding your time and stretching your already-overstretched resources.
You’ve heard a good deal this morning about new and evolving issues that also demand your attention – and you’ll discuss several more today and tomorrow: intellectual property theft, cybercrime, digital currency, patent trolls.
All that said: Today I want to tell you why I believe illegal gambling should be right at the top of the list.
The illegal gambling industry is fueling criminal networks and large criminal enterprises that profoundly harm your state, your schools, your consumers, and your law enforcement.
Let me begin by drawing a sharp distinction between legal and illegal gaming in this country.
HIGHLY REGULATED, LEGAL GAMING INDUSTRY
I represent legal casino gaming. My members include Wynn Resorts, Las Vegas Sands, Penn Gaming, MGM Resorts – who own this fine property – and suppliers like Scientific Games and IGT.
They are some of the most heavily regulated companies in America. Every key individual providing fingerprints and detailed background information on their finances, career path and criminal history, or lack thereof.
These companies have built a compelling product that Americans are embracing in record numbers. As you can quickly see by walking around this great property, casino gaming is an incredibly popular form of entertainment.
- Today, nearly 1,000 casinos across the United States operate in 40 states.
- Nine out of 10 Americans find gaming acceptable.
- The gaming customer regularly attends church, is well-educated and is a homeowner.
Gaming has grown, matured and prospered as result of its lawful, regulated status.
- Legal gaming now supports more than 1.7 million American jobs.
- Legal gaming generates $38 billion in tax revenues to local, state and federal governments. Gaming tax revenues go to schools and hospitals, health care and other essential services.
- Our industry brings in more than $14 billion for businesses in local communities. Biloxi is living proof of what legal gaming can mean to a town.
ILLEGAL GAMBLING: A PREDATORY INDUSTRY
The illegal gambling that is rampant across our country is a completely different story.
And I believe that my organization and the National Association of Attorneys General have a shared interest in maintaining a bright line between legal gaming and illegal gambling.
Consider the fact that every dollar diverted by illegal operations is a dollar siphoned away from legal activities that contribute taxes to support education and public safety.
Illegal gambling operations are willing to take all comers. They don’t exclude underage gamblers. They are not licensed or subject to criminal background checks. Illegal gambling preys on the vulnerable.
In contrast, our industry spends millions of dollars on responsible gaming programs to help the 1 percent of the adult population prone to compulsive gambling. For illegal operators, such people are their target customers.
A PERNICIOUS VENTURE CAPITAL INVESTMENT
Many of your states are working hard to attract capital investment to build up a tech sector or grow the manufacturing base.
But in all of your states illegal gambling serves as a pernicious form of venture capital investment – the mother’s milk for a host of violent criminal activities.
Criminal networks use the proceeds from illegal gambling to fund human trafficking, drug trafficking, money laundering schemes and other large criminal enterprises.
EDUCATE AGs ABOUT ILLEGAL GAMBLING RACKETS
Illegal gambling comes in four major forms:
Illegal Sports Betting: Conservatively, illegal sports betting in the U.S. is a $150 billion enterprise – but some estimates put it as high as half-a-trillion dollars. Illegal operators are free to cheat and skim, pay no taxes and their proceeds can fund violence.
- This market thrives in the shadows. During the Super Bowl, about $120 million was wagered legally in Nevada sports books. We estimate that $3.8 billion was wagered illegally.
Black Market Machines: Slots, video poker and blackjack, commonly in bars and taverns, managed by the bartender, and presented with the disclaimer, “For amusement only.”
- Who verifies the fairness of these black-market machines? Who owns them? Where does the money go?
- In an article two weeks ago, The New York Times estimated up to 150,000 of these illegal machines proliferate across an underground $1.9 billion industry in Texas.
Internet Sweepstakes Cafes (ISCs): They can be found in storefronts, gas stations and convenience stores in more than a dozen states. These modest operations together represent a criminal Fortune 500.
- As many as 5,000 storefronts that rake in an estimated $10 billion a year.
- In Ohio, a Cuyahoga County prosecutor reports that a single ISC vendor earned almost $50 million in proceeds.
- They take advantage of state sweepstakes laws by purporting to sell unwanted products – Internet time or long-distance telephone minutes.
- The customer receives a supposed bonus of “entries” in the sweepstakes to be redeemed in online games indistinguishable from gambling … games such as “Pot of Gold Poker.”
- ISCs are flourishing, even in Utah, the most anti-gambling state in the nation.
Illegal Online Operators: They rake in $4 billion a year from Americans.
- These websites – operating out of Central America or places like the Isle of Mann – are easy to mistake for a legal operation, look legitimate with a sleek, corporate presentation. Yet if a customer finds his online account cleaned out, there is no one he or she can turn to.
LAW ENFORCEMENT TAKING STRONG ACTION
The public needs to be warned about illegal gambling. They need to be protected and illegal operations need to be shut down. Thanks to strong action of AGs, DAs, sheriffs and police chiefs around the country, we are seeing progress.
- Connecticut: In Connecticut, state and local police raided an Internet Sweepstakes Cafe last year. They found dozens of seniors playing slot style video games and winning real cash. This helped spur the state General Assembly to ban these outfits.
- Oregon: Authorities busted an illegal gambling ring, which was also laundering money and distributing marijuana around the United States.
- Mississippi: In Mississippi, Attorney General Jim Hood has led an effort to work with local law enforcement to seize and destroy 176 electronic video monitors. “Getting rid of the machines,” General Hood says, “is more effective than prosecution.”
Each of you, from Vermont to California, could tell similar stories…and more action is desperately needed.
LAUNCH OF INITIATIVE
I have come to Biloxi today to take action – to announce formation of a large, comprehensive and forceful public initiative, called “Stop Illegal Gambling — Play It Safe.” This initiative will be a full-fledged effort to partner with law enforcement and public officials to protect consumers, communities and the vital public services that depend on tax revenue. Through the initiative, we will:
- Launch Groundbreaking Research: We will dig into the roots of this problem – launching new research to identify clear criminal patterns, ties to criminal enterprises and clear trails of illegal activity; we will develop actionable intelligence to attack the central hubs of illegal gambling.
- Create Cutting-Edge Online Tools: We will create a comprehensive central repository for illegal gambling resources – a one-stop shop for law enforcement and the public, including ways to refer tips to law enforcement, provide capacity- building resources, an interactive map, and a real-time illegal gambling ticker providing the latest legislative updates and breaking news.
- Coalesce Experts on New Advisory Board: To guide our strategy we are forming an advisory board on illegal gambling to be composed of subject matter experts with experience in every level of law enforcement – local, state and federal – including former FBI agents, Attorneys General and District Attorneys, former police chiefs, sheriffs, and criminologists and other third parties. We will be announcing members of our illegal gambling advisory board in the coming weeks.
- Vigorously Advocate for Change: No organization will be more outspoken on the illegal gambling problem than the AGA. We will use our position in the industry to call attention to the issue – and to push lawmakers to dedicate the resources you will need to take down illegal gambling operations.
- Partner with Law Enforcement: We will strike new partnerships with law enforcement leaders – but none will be more vital that the partnership we’d like to develop with the men and women in this room.
- That’s why we have been meeting with General Hood about creating a possible NAAG Committee on Illegal Gambling.
- We will join Arizona Attorney General Mark Brnovich in leading a panel at the Conference of Western Attorneys General in July.
- We have had productive partnership conversations with the National District Attorneys Association.
AGs, A CRITICAL LINK
As we launch this new initiative, we need your help. Lobby your legislatures – educate them on illegal gambling and urge them to provide more law enforcement resources to address the problem;
I’m going to be speaking out on this issue around the country – I urge each of you to do the same. Use events like this to call attention to the problem we’re confronting and make clear to the bad guys all around the country: industry and law enforcement are working together to stamp out illegal gambling in every state and territory.
CLOSE
Law enforcement is a team sport. We need to work together to put an end to illegal gambling. I have often heard illegal gambling equated to a speeding ticket – or even called a victimless crime.
Well, tell that to the resident in your state who had his savings taken by an illegal gambling operation; tell that to the community that’s been wracked by drug trafficking; tell that to the children caught up in human trafficking rings. All of these crimes are enabled by illegal gambling.
As I said at the beginning of my remarks – I know you have no shortage of action items on your daily agenda. I know you have limited resources. But if we work together to stop illegal gambling, we can pull up these criminal networks by their roots.
It takes state attorneys general and other elected representatives, DAs, sheriffs, police chiefs and public support. There is no group better positioned to lead such an effort than you. That is why I came to Biloxi today – we want your advice and your partnership.
I look forward to working with you to make this initiative the beginning of the end for illegal gambling.
Thank you very much.
