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Chapter 1
Gambling: America's Biggest Industry
AMERICA'S $500 BILLION GAMBLING HANDLE
Gambling in the United States, despite all the Federal and state restrictions against it, is the leading industry in the country, both in the number of participants and the amount of money involved. Its handle surpasses the combined total money volume of the 100 largest industrial organizations in the country, including such giant corporations as U.S. Steel, General Motors, General Electric, Metropolitan Life, Ford Motor Company and any others you care to name. Today about 90 million adult Americans -- of whom 43 million are men and 47 million are women -- are gambling the astronomical sum of $500 billion annually.
Almost 90% or $450 billion of this huge amount is wagered illegally only $50 billion legally.
The number of illegal gambling operators in America, race bookies, operators of Poker and dice games, etc., has been reduced with the enactment and enforcement of additional Federal interstate antigambling laws. This loss of gambling revenue has been more than made up by gigantic increases in other forms of gambling: (1) The Numbers game, despite Federal and state police harassment, has increased considerably in participants and money wagered. (2) The huge national interest in sports generated by television (football, basketball, hockey, etc.) has resulted in billions of fresh dollars being bet among gamblers and with illegal sports bookies. (3) The legalization of many state race and dog tracks, lotteries, raffles, Bingo games and off-track betting has contributed hundreds of millions more to the national betting handle.
Gambling, in general, is a constant growing industry, increasing the number of participants and gambling handle, except for some occasional economically "bad" years. There is no doubt in anyone's mind, that is, if he gets around at all, that gambling is big business. How big? Nobody knows exactly. As for me, I'll stick with my nationwide gambling survey of a few years ago, which revealed a yearly gambling handle of over $500 billion, a figure which has since been accepted by the U.S. Senate Subcommittee on Gambling Investigations, the Department of Justice and the Internal Revenue Service.
Note that this $500 billion handle does not represent gambling industry income or profits it is the annual gambling exchange. It is all the money handled it is the total amount wagered. Many of the dollars in the $500 billion are duplications because they are bet and rebet back and forth many times between players, and between players and gambling operators, before they are finally won or lost.
Of the $500 billion handle, the actual cost to the betting public for their yearly gambling pleasure -- the annual gambling revenue from all forms of gambling -- amounts to about 10% of the $500 billion, for a gross revenue of $50 billion. Of this, an average of 60% or $30 billion goes for building and maintenance of gambling establishments. Examples: upkeep of racetracks, Las Vegas hotel casinos, Poker rooms and Bingo parlors. This leaves $20 billion as the nation's net gambling revenue. The $20 billion is divided almost equally between (1) professional or organized gambling and (2) private gambling. The $10 billion yearly net revenue from all forms of organized gambling includes betting, both legal and illegal, at the various types of banking games such as Craps, Black Jack, slot machines, Roulette, casino side games, carnival games, and punchboards with race and sports bookies in lotteries, Bingo, baseball and football pools, Keno, raffles, Numbers and all other forms of gambling in which a professional operator or banker is involved. The $10 billion yearly net revenue of private gambling entails illegal betting among friends, acquaintances and strangers at all kinds of card games (Poker, Gin Rummy, Black Jack, Skarney, Pinochle, Bridge, Canasta, etc.), at Craps, Scarney Dice and other dice games, at guessing games and sports and at any other form of illegal gambling in which a professional operator or banker is not involved.
The recipients of this $20 billion annual net gambling income include the millions of male and female gamblers who possess some sort of edge over the others. They are the operators of gambling schemes, the experienced or skilled gamblers, gambling hustlers and cheats and racketeers and their henchmen who are the behind-the-scenes bosses of most of file illegal and some of the legal gambling activities in this country. Also included among this group, since they derive income from gambling, are the unscrupulous law-enforcement agents and politicians who accept graft to permit illegal gambling to operate free of police interference.
Strange but true, most of the above group including the so-called "smart gamblers" have one thing in common with the average gambling chump. They can't resist gambling at someone else's game, or even their own, and in turn they recontribute several billions of their annual new gambling profit to the $20 billion annual take.
DOES THE MAFIA CONTROL GAMBLING IN AMERICA?
My lifetime of study of all forms of bigtime illegal gambling operations reveals that it is not controlled by the mythical Mafia or by any single mob or syndicate. This is, of course, contrary to what many racketeers, Federal and state law-enforcement agencies, Federal and state district attorneys, judges, legislators, politicians, television programs, books, magazines and newspapers keep saying. What rubbish! First, there is no such an animal as the Mafia. Secondly, such statements by these sources -- some of which are ill advised, others for ethnic reasons and some for personal gain -- are welcomed by the real mobster bosses, especially when their names appear in print as Mafia figures. It's good for their business. It puts fear in the hearts of people they deal with and makes their money deals and collections much easier to achieve.
Most major news sources and many book authors in this country seem to have a policy of labeling every arrested gambler big or small who has an Italian name as a member of the Mafia, and those gamblers who do not possess Italian names as non-voting Mafia members. But the truth of the matter is that most towns and hamlets have their own racket bosses who control the local gambling and seldom team up with any outside operators. Occasionally a few racket bosses using fronts may become partners in purchasing a casino in Europe, the Caribbean or elsewhere, but there is no single mob or syndicate that controls gambling throughout the United States. Las Vegas, Nevada, the biggest gambling bonanza in history, is the best example of the non-existence of the Mafia. Check the names of the old and the present-day operators and you find very few so-called "Mafia names." The same holds true for the casino managers, shift bosses and other major casino employees.
Professional gamblers and race and sports bookies should not be confused with mobsters or racket guys. Generally speaking, race and sports bookies or operators of Poker rooms are local sportsmen who break the law by giving the local populace a place or chance to gamble. Many of the new breed of bookmakers are college graduates. In fact, mobsters or racketeers are as different from the bookies or Poker room operators as night from day. These "animals," as they are commonly called by bookies and gamblers, think nothing of torturing a victim by breaking his legs, head, and even killing him when it serves their purpose.
Today illegal race and sports bookies are constantly being arrested by the FBI and other state law-enforcement agents. But as soon as one bookie is jailed, another takes his place. It's an endless chain that never seems to stop. As to the employment of FBI agents in tracking down bookies all over the country, I agree with my friend, the late J. Edgar Hoover, former Director of the Federal Bureau of Investigation, who said, "The FBI has much more important functions to accomplish than arresting gamblers all over the country." In spite of Mr. Hoover's opinion, today FBI agents are constantly playing the cat and mouse game with bookies all over America.
THE LAW VS. GAMBLING
From early 1950 to May 1951, the U.S. Senate Committee to Investigate Organized Crime in Interstate Commerce, headed by Senator Estes Kefauver, conducted the greatest anti-gambling crusade in this country's history, with the end result that Congress enacted several Federal anti-gambling laws, including the one that requires the operator of a race or sports book, lottery, policy or Numbers game, baseball or football pool, etc., to purchase a $50 Federal occupational stamp and pay a 10% Federal excise tax on the operation's gross betting handle. Failure to buy the stamp is a misdemeanor punishable by a term of imprisonment for one year or less and a minimum mandatory fine of $1,000. Failure to pay the 10% excise tax is a felony punishable by imprisonment for five years or less and fine of not more than $10,000.
The immediate result was for the next two or three years illegal organized gambling almost came to a standstill. Most of the nation's bigtime gambling operators and race bookies closed shop and were either in hiding, jailed or being investigated by Federal or state authorities. Those who continued to operate retained only a small percentage of their former business.
This situation didn't last long. In 1954, a bolder and much less law-abiding generation of gambling operators made their appearance. Most of them were former employees of the retired operators. They picked up where their predecessors left off, and one of the greatest gambling binges in American history took place.
Then came 1961 and another U.S. Senate Subcommittee Investigation of Organized Gambling, headed this time by Senator John McClellan. This probe resulted in Federal enactment of the most severe anti-gambling statutes in our history. Under the new law it became a Federal crime to travel interstate to promote or participate in illegal gambling (this, for example, handicapped agents or "collectors" in carrying money for gamblers from one state to another).
Another portion of the Federal law prohibits the interstate transportation in whole or in part of slot machines, Roulette wheels, wheels of fortune and various other kinds of gambling equipment. Still another Federal interstate law prohibits transmitting bets by wire or telephone, or transporting betting paraphernalia (policy slips, sports parlay cards, etc.). But a great increase in gambling occurred in spite of the Federal anti-gambling laws and the thousands of local and state gambling probes throughout the country. The result of the Senate Committee's exposures and its various other "witch hunts" was the enactment by state legislatures of many stiff anti-gambling laws.
While anti-gambling campaigns, which usually take place for obvious reasons just before national or state elections, may result in additional anti-gambling legislation, the publicity that accompanies these crusades also focuses the attention of the average citizen on gambling activities. The net effect often is that he begins to gamble more frequently and in greater numbers than before. Today, in spite of all the additional anti-gambling laws, the United States is the largest gambling nation -- both legal and illegal -- in the world.
It's a curious situation when the greatest part of a country's biggest business is conducted outside the law. Only one state, Nevada, legally permits casinos (as does Puerto Rico). However, debate on casino gambling is attracting considerable interest in several eastern states. Two states, New York and Nevada, and Puerto Rico, permit off-track betting. There are 30 states in which pari-mutuel betting at racetracks is legal 9 permit betting at dog tracks, 25 or more have legalized Bingo or raffles or both 5 states allow slot machine operations in varying degrees of activity, and I permits the operation of carnival games. The fastest-growing form of legalization is, of course, the state lottery. More than a dozen states operate or are in the process of legalizing their own lotteries. Puerto Rico, which bars slot machines in its casinos, has the oldest legal operating lottery on American soil. Incidentally, New Jersey's successful state lottery, upon which most other state lotteries are patterned, was developed from the Treasury Ticket information in this book with additional information by your author.
ANOTHER SCARNE GAMBLING SURVEY
My work as a gambling authority takes me into every type of place where Americans gamble: the plush legal gambling casinos of Las Vegas, Reno, Puerto Rico, Curaçao, the Bahamas, Latin America, Europe and North Africa, also the plush and dingy illegal gambling dives that are spread all over this country. Recently on one of my periodical visits to Las Vegas, I was impressed by the crowded casinos. A closer look, however, revealed that most players were so-called "average Americans." Generally speaking, they placed minimum limit bets and their play appeared amateurish. Gone were most of the "high rollers" (big-money gamblers) of yesteryear who lined the dice and Black Jack tables placing maximum limit bets of $500, $1,000 or more on each decision. Even the Baccarat-Chemin de Fer tables had reduced their $20 minimum limit bet to $5. It became obvious to me that with the recent acquisition of most of the big casinos by giant corporations and syndicates a new breed of small gamblers had taken over the Strip casinos. The high roller, if not dead, was fast on his way to extinction.
This drastic change in Las Vegas casino gambling habits led me to the decision to undertake another gambling survey -- to determine lust what was what in the gambling world. I wanted, among other things, facts and figures about the new breed of players. I wished to know why they gambled and what kind of gambling they preferred. To avoid any bias in these results I carefully avoided questioning anyone I saw gambling and did not include in my survey count anyone ! knew in advance to be a gambler. This survey was made from a random sampling of our populace.
My questionnaire included, among many others, such questions as: "Do you gamble?" "What is your favorite gambling activity?" "Why do you gamble?" "If you do not gamble, why not?" "Are you in favor of legalized casinos?" Answers were obtained from people in all walks of life and in varied urban and rural areas throughout the United States.
I found as in earlier surveys that most people were interested in the subject and the questions and eager to supply answers. Aided by several assistants, I obtained replies from 10,000 women, 10,000 men and 5,000 professional gamblers, a total of 25,000 adults. Here were my findings from the answers to the questions above:
1. Do you gamble? "Yes" was the answer given by 80% of the women and 76% of the men.
2. What is your favorite gambling activity? The replies show that the various types of gambling rank in order of number of participants as follows: (1) card playing (2) lotteries, raffles, Numbers and Bingo (3) horse racing (4) betting on sports events (5) dice games (6) carnival games (7) slot machines and consoles (8) punchboards and sales cards.
The majority stated that they did not confine themselves to the one form of gambling they listed as their favorite but also indulged in one or more other gambling activities.
3. Why do you gamble? The big majority, 75%, replied that they gamble primarily to win money. Another 20% said that they gamble for pleasure, and, of this group, one-fifth put it in stronger terms by saying that they had found nothing more exciting or thrilling. The remaining 5% gamble for reasons that have nothing to do with the nature of gambling itself, such as the character who goes to the Poker parlor to watch his girl friend dealer, or the lady who plays Bingo just to get away from her husband.
4. If you do not gamble, why not? Half of this group said they could not afford it 30% said they do not believe it is possible to beat the game 10% said they used to gamble but had stopped because they usually went broke 4% said they know nothing about gambling 2% stated that they believe all forms of gambling are sinful and the remaining 4% gave assorted other reasons, such as the woman who replied, "My husband said he'd leave me if he ever caught me gambling. I love my husband, so I don't gamble."
5. Are you in favor of legalized casinos? I received 10,401 "Yes" votes and 5,199 "No" votes for a favorable edge of about 2 to 1.
In the field of private card playing I found that 70% of my sample stated that they played cards regularly. The proportion of men to women in this group is about 50-50. I found that Poker had more devotees than any other card game. Rummy was a close runner-up as the favorite game, and Bridge was in the number three spot. Here is how the card players voted on their favorite game.
POKER
Men 36%
Women 38%
RUMMY
Men 35%
Women 32%
BRIDGE
Men 8%
Women 22%
OTHERS
Men 21%
Women 8%
Most card players, of course, play more than one card game this table shows only how they voted on their favorite game.
With reference to all money wagered in private card games, Poker led with 51%, Gin Rummy was second with 30% and Bridge ran far behind with less than 1%. The remaining 19% was wagered at all other card games: other forms of Rummy, Pinochle, Skarney, Cribbage, Hearts, Canasta, Skarney Gin, etc.
Why is this country now experiencing the greatest gambling boom in its history? The reasons I give below are based not only on the results of the surveys but also on a lifetime of observation and study of every facet of gambling.
1. The legalization in some states of horse racing, lotteries, off-track betting, greyhound racing, casino games, Bingo, raffles, etc., has created new opportunities for gambling legally. The fact that these operations are under state supervision gives reasonable assurance that they are honestly run, and because of this, millions who did not gamble before now do so.
2. A great many people have more money today than ever before and can for the first time afford to gamble.
3. The constant daily publicity which the nation's newspapers and television give to horse racing -- their listing of the daily entries, results, payoff mutuels, ratings and handicappers' selections -- have induced millions of people who never before bet on a horse race to visit the tracks. Once there, they begin betting and become horse bettors.
4. The front-page newspaper stories about the million dollar winners in the recently legalized state lotteries such as New Jersey, New York, etc., with their pictures of the jubilant winners induce millions to purchase lottery and raffle tickets.
5. The enormous popularity of Bridge created new millions of women card players, most of whom began for the first time to play for money. Because any card game eventually loses interest when no financial stake is involved, many also began to gamble at simpler and faster games such as Poker, Gin Rummy, Canasta and Black Jack.
6. Most illegal casino operators have learned over the years (and the Nevada operation is proof of it) that more money can be made with an honest percentage game than with a flat store (crooked game). As the illegal casinos operated more honestly they acquired new customers, many of whom had not previously gambled for fear of being cheated.
7. Since casino gambling was legalized in Nevada, Puerto Rico, the Bahamas and elsewhere, the constant publicity given to its casinos by word of mouth, in motion pictures, television, national magazines and newspapers has attracted tens of millions of tourists who previously knew little or nothing about casino games. They visited the casinos, learned to play Roulette, Black Jack, Craps, the Wheel of Fortune, slot machines and other casino games, enjoyed them and, when they returned home, looked for action in other casinos.
TYPES OF GAMBLERS
There are seven different kinds of men and women gamblers. Which category are you in?
1. The occasional gambler who knows little or nothing about the hard mathematical and psychological facts of the games on which he now and then wagers some money. The vast majority of America's gamblers fall into this class, and it is their losses which make gambling our biggest industry.
2. The degenerate or habitual gambler who plays constantly and who knows considerably more about gambling but is not smart enough to know that he can't beat adverse odds. He craves action, any kind of action, and he lives in a dream world in which he hopes someday to make a big killing and then quit gambling forever. When he does win a bit, he almost always gambles it all back and, like most players, winds up broke.
3. The skilled gambler or gambling hustler who knows a lot more about any sort of gambling than the occasional or the habitual gambler, plays a much better game than they do and consequently wins more often than he loses. He is usually on hand to start the game, and he specializes in games which contain some element of skill, such as Poker, Gin Rummy, Bridge or Black Jack. The hustler plays for blood: he seldom gives another player a break because he believes that is no way to earn money at gambling. He usually knows where the favorable percentage lies in most private games of chance, such as Craps, and he makes the most of this by offering the occasional and habitual gamblers sucker odds, which, not knowing any better, they usually accept.
4. The professional gambler or gambling operator who earns his living, or most of it, by operating some gambling scheme. He is called a gambler because he runs a gambling operation, but he doesn't really gamble. He is a businessman (or woman) who runs a gambling operation and understands his trade, and either makes direct levies on the play or receives a percentage because the odds are in his favor. The professional gambler, like the legitimate banker and insurance operator, acts as a middleman in risks which the players voluntarily take or wish to be rid of, charging a commission for the service. He is not betting against the players they are actually betting against each other. His top aides are also in this category.
5. The gambling cheat or crook who makes money by cheating at cards or dice, running a fake lottery or raffle, operating a fixed carnival game, punchboard, slot machine or any other gaffed (crooked) gambling device. Also included in this category are any employees of a crooked gambling house or any participants in crooked schemes, whether or not they do the actual cheating themselves. The cheat's gamble is not so much in winning or losing as in whether or not he will get away with it.
6. The gambling chiseler who is really only a petty crook and sneak thief. He knows that he needs an edge to make money by gambling, and he gets it by inducing a friend at a racetrack or casino game to give or loan him money with which to gamble. He usually bets only part of the money and pockets the rest, and if he wins, he conceals all or part of the winnings. This is a favorite racket of women chiselers.
In a Poker game the chiseler often forgets to put up his ante at his turn of play, and he is quick to grab any sleeper (money belonging to another player which the latter has forgotten about). He will borrow money during a private game and forget about paying it back.
The chiseler -- and there are millions of these characters -- preys mostly on the habitual, chronic gambler. He is often caught, but that doesn't deter him, since he considers it an occupational hazard.
7. The system gambler who lives in a dream world all his own, believing that it is only a question of time until he finds an infallible betting system which he can use to amass a fortune. He is a perfect mark (sucker) for racetrack touts. He buys tips and most of the advertised systems, and although they fail, one after another, he buys more, always hoping to find the one that is perfect. The system horse player usually spends as much money on worthless tips and systems as he bets on the horses, and he wastes many hours trying to figure out a system of his own.
Legalized gambling's annual $50 billion handle is completely overshadowed by the huge illegal gambling handle of $450 billion. Illegal gambling flourishes in one form or another in every city and hamlet from coast to coast. It can escape the notice of police, district attorneys and politicians who are sworn to enforce the anti-gambling statutes in only one way. It pays $5 billion annually to these officials for their passive permission to operate. This graft or protection money, known as ice, enables some police chiefs to own rows of apartment buildings and some county sheriffs to retire early to fancy estates in Florida. Illegal gambling will, I believe, continue to thrive in spite of whatever future investigations may be made by well-meaning Federal and state committees and in spite of any new laws that may be enacted in an attempt to suppress it.
GAMBLING AND THE FEDERAL TAX PROBLEM
The most bewildering topic among gamblers who make a big hit is the tax procedure employed by the Internal Revenue Service in the collection of income taxes on a player's gambling winnings. From a technical and legal standpoint, the IRS regulation states "that a gambler's total yearly winnings must be included in his income. However, he is permitted to deduct his gambling losses incurred during the same year, but only to the amount of his winnings." That is the law, but since all consistent gamblers who buck adverse odds are losers over the long run, where does that leave the poor sucker who happens to be lucky enough one day to win $1,000 or more in a Las Vegas Keno game or a state lottery or to hit a $2 daily double ticket for $600 or more?
To begin with, few gamblers (and none that I know of) keep a record of every bet they make during the year. So even assuming that in early December in any given year, a Craps shooter in Las Vegas gets lucky and manages to get a hot hand at the dice table and wins $1,000 or more, who is to say whether this puts him in the winner's circle for the year? To further complicate matters, no legal casino, racetrack or legal gambling operation keeps records of an individual's gambling transactions -- especially those on a cash basis. Therefore, the matter of what to report is up to a gambler's conscience. Sure, there are many cases where gamblers report winnings of $25,000 or more made at a racetrack or at a gambling casino, but many of these individuals are racket guys who list their alleged winnings as earnings rather than reveal illegitimate sources of revenue.
At racetracks, any $2 ticket whose payoff is $600 or more means that the winner must fill out tax forms at the track which in turn will deliver them to the Internal Revenue Service. The same holds true for winners of state lotteries.
From a practical standpoint there is only one game played in Nevada today where the Internal Revenue Service requires that a report be made of any sizable wins. This is Keno. Some of the Keno lounges, in fact, post a detailed schedule citing the size of the winning tickets that the casino must report to the IRS. The schedule is as follows:
COST OF TICKET
.00- .59
.60- .89
.90-$1.19
$1.20-$1.79
$1.80-$2.39
$2.40-$2.99
$3.00-$3.59
$3.60-$9.99
$10.00 and over 10,000
MINIMUM WINNINGS WHICH MUST BE REPORTED
$600
1,200
1,800
2,400
3,000
3,600
4,200
6,000
10,000
The IRS policy creates for winning Keno, lottery and horse players, etc., as many questions as it does answers. For example, a horse player buys several $2 daily double or exacta tickets and gets lucky and wins $2,000. In accordance with racetrack policy, a report of the winnings is made to the Internal Revenue Service, whom we will assume expects the $2,000 winnings to be added to the taxpayer's gross income for that year. The trouble is that during the same year the player lost more than $2,000 at Las Vegas and at various racetracks. However, since no records were kept of these betting transactions, the player has no way of proving this except by his own statement -- which the IRS will not accept unless it is documented. At the racetrack such documentation is possible by evidence of losing bets. The player can produce losing tickets on horse races, Keno and lotteries, canceled checks to casinos, etc.
On the basis of the above information, we would have to conclude that anyone who plays the horses, buys lottery tickets, plays Keno, or gambles in Las Vegas, and intends to apply gambling losses against potential gambling winnings, better start keeping records of his gambling transactions -- the more comprehensive the records are the better. Because based on past performances, it's a sure bet that your word and undocumented records won't carry much weight with the Internal Revenue Service. But, on the brighter side, there are probably 50 million gamblers in America who just for once would like to make a big winning of $2,000 or more and be faced with the problem of whether or not the IRS will permit them to deduct their gambling losses on their income tax returns.
In concluding this first chapter I want to point out that this book, the first of its kind -- for gamblers of both sexes and covering all the major forms of gambling in America -- was not written to encourage gambling. You will see, as you read, that it does just the opposite. The more knowledge a person has about the mathematics and the inside workings of gambling the less likely he is to become a habitual gambler. I firmly believe that if the gambling information in this book is read and studied by enough people it will do more to cut down the annual betting handle in this country than all the sermons that have ever been preached on the evils of gambling.
The moral question aside, habitual gambling is still an undesirable economic activity. For any person who is already a habitual addict inoculated with gambling fever, I am convinced that the best medicine anyone could prescribe, the one most likely to cure the patient, would be a copy of this book.
This book contains the most extensive mathematical analysis of gambling ever written, and yet it can be read and clearly understood by anyone who knows simple arithmetic. This book is the first attempt in the history of gambling to correct the sucker or chump situation in all phases of gambling in America. It is the first book to tell what makes every gambling operation tick, and to give the up-to-date rules and methods of play of each gambling scheme. It is the first book that explains how to gamble sensibly, that gives the player's best bet at each game and the adverse odds or percentages each player must buck at his favorite form of gambling, as well as the methods by which the player can detect those wily and affable crooks who try to cheat him, and thus avoid cheating himself.
You will also find here considerable evidence to prove that gambling against adverse odds is not one of the more trustworthy methods for reaching and staying on Easy Street.
Copyright ©
1961, 1974 by John Scarne
Library of Congress subject headings for this publication: Gambling, Gambling systems