RESEARCH General Law

GAMBLING & THE LAW
Gambling's bad effects may make it, like tobacco, subject to lawsuits

Mark Reutter, Business Editor
(217) 333-0568; mreutter@uiuc.edu

12/1/2001

CHAMPAIGN, Ill. -- Questions about the alleged harmful effects of gambling may move from the newspaper opinion page to the courtroom, according to a University of Illinois expert.

John W. Kindt, a professor of business administration, writes that mounting evidence that casinos and video gambling machines have created "problem gamblers" makes the industry susceptible to
class-action suits along the lines of state-initiated tobacco lawsuits.

"The gambling industry appears to be vulnerable to various types of mega-lawsuits," Kindt wrote in a paper published in the journal Managerial and Decision Economics. According to the UI professor, who specializes in gambling research, the industry’s efforts to promote gambling among vulnerable groups, including teen-agers and the elderly, make it potentially liable for the harm its product causes the general public.

Kindt examined tobacco litigation and found that corporate liability centered on the claim that cigarette executives "knew, but long hid, their knowledge that nicotine is pharmacologically active and highly addictive" and "manipulated nicotine levels in their products to hook unsuspected smokers."

According to Kindt, the gambling industry profiles customers through credit cards and uses other marketing knowledge to target people who are liable to wager a high percentage of their income. Overall, Kindt estimated that problem gambling, including personal bankruptcies and increased crime, costs the U.S. economy about $80 billion a year.

Having studied the tobacco litigation, the gambling industry has attempted to insulate itself from legal liability, according to the UI expert. "Trying not to repeat the mistakes of the tobacco industry in denying for decades the problems associated with their product, the lobbying group representing the gambling industry mobilized the gambling industry in the mid-1990s to admit finally some problems, including the problem that a certain percentage of gamblers would develop gambling problems."

In defense of a potential lawsuit by Illinois or another state with legalized casinos, the gambling industry could well argue that a state should not benefit financially from an activity that it has promoted. A counter argument, according to Kindt, is that the gambling industry sponsored incomplete or misleading studies before state legislatures that played up the economic advantages of gambling while minimizing the negative side effects.

Ultimately, governments with legalized gambling will have to decide "whether the goal is to reduce the public’s utilization of an alleged potentially hazardous product or to impose increased costs on the industry, which are then passed on to the consumer in the form of increased prices."

Kindt’s paper is titled, "The Costs of Addicted Gamblers: Should the States Initiate Mega-Lawsuits Similar to the Tobacco Cases?"