Columbus Monthly / September 2012 / Game Changers

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Game Changers

Just a few years after debating whether Ohio would ever see its first casino, the state is betting on an explosion of gambling options

Scioto Downs sounds a lot like Las Vegas these days. On a busy Saturday night at the South Side casino and race track, the familiar ding-ding-ding of slot machines punctuates the efforts of gamblers looking for a little luck. Theme songs from Wheel of Fortune and Wizard of Oz games compete with quiet cheers from winners and groans from losers.

Just three miles north on High Street, a hand-painted sign on a dark storefront window urges visitors to “Win cash now.” The Internet Cafe offers none of the glitz of the nearby racino, but they have one thing in common: the chance to win money.

There are at least 770 internet cafes just like this around Ohio, and they might have more machines—as many as 7,700—than the open casinos and racino combined. Nobody knows how much money they make because the industry is unregulated.

Soon, a full-scale casino will join the mix in Central Ohio. The Hollywood Casino Columbus, set to open Oct. 8 on the West Side, will feature more than 70 game tables and more than 3,000 slots. Casinos are already open in Toledo and Cleveland; the Cincinnati casino will open next year.

This is the vast world of Ohio gaming, and everyone seems to want a piece of it. While state and local governments take a cut of the revenue generated by the casinos and racino, internet cafes—capable of making hundreds of millions, investigators say—operate out of the state’s reach.

“There’s a lot of gambling in the state,” Ohio Attorney General Mike DeWine said. “But all of it that’s out in the open is regulated by the state of Ohio. What’s different about the so-called internet cafes is that they’re unregulated. They’re an anomaly.”

 

There has long been gambling in Ohio. The state legalized betting on horses in 1933. Voters approved the lottery in 1973, and this year the Ohio Lottery turned over a record $771 million to the state education fund.

But four times since 1990, voters rejected plans for casino gambling. Each time a proposal would fail, casino proponents hatched a new plan. Even as voters rejected the proposals, they seemed to be warming to the idea.

A poll in 1998 showed the majority of Ohioans would approve of a casino near their homes. In 2000, another poll showed most felt casino gambling should be legal in the state. Still, voters turned down casino proposals two more times, in 2006 and 2008.

Finally, in 2009, desperate for anything that would bring money and jobs and barraged with a $50 million campaign by supporters, Ohio approved a constitutional amendment allowing four casinos.

Earlier that year, then-Gov. Ted Strickland pushed a controversial plan to allow slot machines at race tracks as a way to balance the state’s budget. While he opposed casinos, some argued he opened the door for gambling in the state. That issue died after a lawsuit, but in 2011 Gov. John Kasich signed new legislation allowing slot machines at race tracks.

Scioto Downs opened its racino June 1. On Aug. 4, it added a buffet, sports bar and about 300 new machines, bringing the slot total to more than 2,100.

So why now?

“Part of this was driven by the economy. In 2009, Ohio’s economic climate was much more desperate,” said William Eadington, director of the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada, Reno.

Opposition to casinos is often driven by moral factors such as fear of crime or addiction problems. Many may think the potential tax revenue isn’t worth the risk during good economic times. In lean years, though, voters might consider anything that could bring jobs and money. The Columbus casino alone plans to hire 2,000 workers.

Whether gambling will help boost Ohio’s economy remains to be seen. In 2009, the Ohio Department of Taxation estimated the casinos’ gross tax revenue at $643 million, or $470 million if slot machines were allowed at Ohio’s race tracks. In its first month, Scioto Downs reported revenue of $11.1 million, $3.7 million of which went to the Ohio Lottery to distribute to schools.

Rob Walgate, vice president of Ohio Roundtable, opposed the casinos and still thinks they are bad for Ohio. His group continues to fight the racinos. But he’s not surprised that after so many attempts, the issue passed.

“They spent over $40 million to buy a piece of the Ohio constitution. They just had the perfect storm,” he said of casino proponents. “Obviously we didn’t raise the money to counter that.”

Ameet Patel, general manager of Hollywood Casino Columbus, is counting on fine dining, bars and buffets to keep the thousands expected at the casino opening coming back. Patel said he expects the casino to attract many out-of-state visitors as well as Ohio gamblers.

“We learned from the opening of the other casinos not to underestimate the enthusiasm for the casinos,” Patel said.

Eadington said that with all the competition, drawing out-of-state visitors is unlikely. But the Ohio casinos should be able to capture the business of Ohioans who once left the state to gamble.

 

While the state scrambled to draft regulations governing casinos and race track slot machines, storefronts tucked in strip malls around Ohio quietly advertised another way of making money: internet cafes.

Internet sweepstakes machines typically work like this: Customers buy phone cards or internet time. With the purchase, they receive “points” that can be used to play computer games that look like video poker or slot machines. Winners are paid cash prizes.

Operators of internet cafes say the games are promotions for customers who buy internet time or phone cards, and winners are predetermined, so it’s not gambling. DeWine disagrees.

“It’s a real risk for consumers,” he said. “If you go into casinos, the law tells the casinos what amount of money has to be paid out by those slot machines. If you go into an internet cafe, no one has a clue what is being paid out or where the money is going.”

The state ordered internet cafe owners to register their businesses and issued a moratorium on all new internet cafes until June 2013, giving the legislature time to figure out how to regulate them. To DeWine’s surprise, 772 cafes put themselves on the list. The last time investigators counted, there were approximately 280.

You won’t convince Jen Clegg that internet cafes aren’t gambling facilities. As gambling program supervisor for Recovery Resources in Cleveland, she’s seen enough people who struggle with addiction to the sweepstakes machines.

“The reality is they are gambling,” said Clegg. “They’re very similar to slot machines.”

The Rev. Joseph Mauriello has lamented another side effect of gambling—particularly internet gaming—on his Columbus church. He’s written to legislators, begging them to allow charities to have slot machines, too, so they can replace the income lost by the downward slide of bingo revenue.

While he works to change lawmakers’ minds, Mauriello tried another approach: He started an internet cafe. “We just want a fair chance to compete,” he said.

Internet gambling nearly killed bingo, charities say, and casinos might mean the end. The Christopher Columbus Educational Foundation, which relied on bingo revenue to supply scholarships to students pursuing secondary education, closed its bingo games after profits plummeted.

Director Yvonne Aschinger hasn’t given up on gaming as a revenue source for scholarships. She’s looking for a bar, bowling alley or restaurant to sell instant bingo tickets for the foundation. The seller could keep six percent of the profits.

“Casinos are great for the city. They bring jobs. They’ll bring a lot of money to Ohio,” she said. “But they will not be good for charities.”

Kelly Lecker is the Digital News Editor at the Columbus Dispatch.