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Colorado Pledges To Do Problem Gaming Right, But How?

Richard Nathan, chairman of the Colorado Limited Gaming Control Commission (LGCC), has a deliberate, dispassionate way of speaking. For someone in the business of government regulation, it suits his role.

But when he began to talk about the future of gaming in Colorado, near the end of the LGCC’s Dec. 16 meeting, the gravity of what he said may have been lost on a casual observer, because it was delivered in his no-frills style. Nathan was summarizing what was discussed at a recent meeting of the National Council of Legislators from Gaming States in Austin, Texas, and touched on comments made there by Colorado Speaker of the House Alec Garnett.

“[Garnett’s] remarks were insightful, well received, and indicated how we can look forward to the legislature dealing with our own sunset process in this upcoming session, with an emphasis on the speaker’s part — as well, as we know, on the division’s and commission’s — to look more seriously, more in depth … more concretely on our responsibilities for responsible gaming,” Nathan said.

But the weight of that statement was not lost on Peggy Brown. Moments later, she spoke to the LGCC during the time it allots for public comment, and she broke down.

“Chair Nathan, you choke me up,” Brown said, as she struggled to get the words out. “That’s the best news I’ve heard in 20 years. To say the state is going to take a more active role in responsible gaming is beyond comprehension.”

After a short break to compose herself, Brown, the president of the Problem Gambling Coalition of Colorado (PGCC), continued.

“Most people know me as a tough, old broad, but you got to me. You know, I don’t think that people have a concept of how many lives that statement is going to affect in Colorado,” she said.

The emotion was palpable. Brown, a recovering gambling addict herself, has been part of the responsible gambling movement for decades. She has the experience of what she describes as problem gaming issues being “swept under the carpet,” so the mere mention from a public institution that it would take those matters seriously was monumental.

“We’ve swept this under the carpet since we legalized gambling in 1992, and we have not dealt with the social consequences,” Brown said days after the LGCC meeting. “It’s time to do it right.”

What is the current problem gaming situation in Colorado?

The scope of problem gaming concerns exploded in 2019, when Colorado voters legalized sports betting. Legal gambling of some form has existed in Colorado since voters approved wagering on horse and dog racing in 1948, but online sports betting, specifically, has brought a barrage of advertisements and the temptation of wagering constantly at customers’ fingertips.

When it legalized sports betting, the legislature earmarked $130,000 per year for problem gaming programs (the help line, treatment, education, and workforce development), and advocates find that woefully inadequate.

“That’s a salary, $130,000, not a program,” said Brianne Doura-Schawohl, a problem gaming consultant who just started her own firm, Doura-Schawohl Consulting, after time with the National Council on Problem Gambling (NCPG) and EPIC Risk Management.

Doura-Schawohl described the current situation in Colorado as a hole the state has to dig out of, and she cited a 2016 study that ranked Colorado 37th among U.S. states in “per capita public funds dedicated to problem gambling services.”

“Colorado is already working from a deficit,” Doura-Schawohl said. “They’re starting six feet under, at 37th of 50 states in 2016, then they legalized a form of risky gambling, sports betting, which has twice the rate of gambling problems, with no safeguards and no funding. They have a long way to go, and $130,000 isn’t going to get it done — $500,000 isn’t going to get it done.”

But looking back at the legalization efforts for sports betting, and how the $130,000 figure came about, things get a bit murky.

When asked about the $130,000, and whether it was sufficient, Garnett said it is “not enough” but also said “they came to me with $130,000.” And the “they” in this case, according to Garnett, is the PGCC.

Asking around the problem gaming advocate community about how the $130,000 figure happened results in some squirming. Most blame an unnamed lobbyist who is no longer working with the problem gaming organizations.

“Something got lost in translation via a lobbyist,” Brown said. “We have found, since replacing our original lobbyist, that our communications have improved. We feel we are currently supplying [Garnett] with accurate figures, with regard to the cost of awareness, education, and treatment in Colorado.”

But on the level of the NCPG, the recommendation has long been to apportion 1% of gross gaming revenue to problem gaming efforts, so even if $130,000 is was what PGCC ultimately asked for, through a lobbyist or not, it’s clear, with the benefit of hindsight, that was misguided.

“The art of the legislative process is building structures that work, and based off what we knew and what people were asking for, we delivered,” Garnett said. “The problem here is lines get crossed between problem gaming and sports betting. Was problem gaming being fully funded before? The answer is probably no. In a leadership role, I’m trying to meet the moment … to catch the entire state up with all of problem gaming, which includes more than just sports betting. It’s an opportunity to build off a national conversation and to get it right.”

How much money is enough?

Ask that question, and you receive varying degrees of frustration.

“It’s astounding that Colorado got into this space without answering that question [about how much money is enough for problem gaming programs], but it’s good we’re asking it now,” said Keith Whyte, executive director of the NCPG.

“How much is it going to cost? I get asked that all the time. I don’t know. But how much is a human life worth?” Brown added.

If the NCPG’s recommendation of 1% of gross gaming revenue was in place for 2021, that would have resulted in more than $2.25 million for problem gaming through November (December revenue numbers are not available for Colorado yet), and that’s just from sports betting revenue. But that kind of allocation can’t come at the snap of a finger, and would likely require a reconfiguration of the state’s tax structure on gaming. That seems like a longshot for the upcoming legislative session, which runs Jan. 13-June 8.

For the sake of comparison, albeit for states with significantly more population, New York will apportion $6 million per year in sports betting tax revenue for problem gaming programs, while Pennsylvania sent more than $4.43 million to its Compulsive and Problem Gaming Treatment fund for its 2019-2020 fiscal year. But those states have significantly higher taxes for sports betting than Colorado’s 10%. New York’s mobile sports betting tax rate is 51%, and Pennsylvania’s is 36%.

So what would be workable in Colorado? No one involved wants to give a number, or even a ballpark figure, with negotiations likely ahead. It’s also possible there isn’t a great answer readily available.

“It’s probably too early to get into anything specific,” Garnett said. “But I’m committed for this session.”

Advocates implore that every $1 spent on problem gaming treatment saves $2 in social costs (which can include, but are not limited to, debt, substance abuse, crime, and job loss), but that doesn’t appear to be an effective, tactile concept to grasp. And the cost for an adequate, comprehensive program, to address need in a specific state, requires study. That also hasn’t been done extensively in Colorado, according to problem gaming advocates.

In a statement to the Colorado legislature in 2019, Doura-Schawohl, then with the NCPG, estimated the “annual social cost to Colorado families and communities from gambling-related bankruptcy, divorce, crime, and job loss is $55 million within Colorado, mainly in criminal justice and healthcare costs.”

“There are a lot of misgivings and misconceptions around this issue of gambling addiction,” Doura-Schawohl said Jan. 6. “Many don’t appreciate or understand how much they are paying for the burden of this.”

But the final number — exactly how much is enough to adequately fund problem gaming programs in the state — while integral to problem gaming efforts, means little without a comprehensive strategy.

“No one seems to know what they’re using [the $130,000]  on. There’s no data. No statistics,” Whyte said. “The fact that we don’t even know, and the people in Colorado don’t seem to know — that’s not good. If a state was doing problem gaming well, there would be a statewide plan that would include metrics, outcomes, how we’re building out a workforce — some sort of strategic plan, with reports.

“Without a strategy, almost by definition, the money will not be spent well.”

What strategy could be deployed in Colorado?

If the total spend is yet to be determined, mapping out infrastructure and strategy for problem gaming in Colorado is impossible, but one regulator has indicated at least an aspect of a definitive plan.

Dan Hartman, the director of the Colorado Division of Gaming, wants his agency to take over self-exclusion efforts in the state, and he wants the program to apply to all gambling entities. If a customer at an online sportsbook decides they want to exclude themselves from wagering, the concept would be for that customer to be excluded from all gambling entities — casinos, racetracks, sportbooks, the lottery, etc.

Hartman said he doesn’t feel that would be a “heavy lift” for the Division of Gaming and could be handled within some of the gaming infrastructure in place, as operators already supply streams of information to the regulator on revenue and integrity issues.

Hartman and Nathan also talk about marketing factors of self-exclusion and potential “bad behavior” the regulatory side can handle.

“If you have someone with a problem, and you know they have a problem, and they exclude, to have the person next door grab that mailing list and market to them — we have a responsibility to have a say about that,” Nathan said. “I wouldn’t shy away for a minute from trying to link our operators together, and we can be empowered to do just that. We may ask them to voluntarily do it, which is trickier, but there is also the involuntary avenue. We can have an expectation that this is what is required to operate. You can poach customers, you can compete, but don’t get someone’s damaged customer.”

Security is also a consideration for any database with personal information, which would be the case for an exclusion list that is piped to all operators in the state. But, again, all these things have a cost and can’t be set up instantaneously.

“We’re talking about data,” Hartman said. “It’s not going to be an overnight thing, because every piece of it needs to be secured and as protected as it can be. It’s a program that needs to be done, but it also needs to be done safely.”

Exclusion is just a piece of the problem gaming puzzle, though, which is emphasized by advocates.

“Self-exclusion without treatment and enforcement is useless, because it does nothing to address the underlying problem,” Whyte said. “You need a comprehensive treatment system. If self-exclusion is the primary tool — it’s good, but it’s very limited.”

Whyte also pointed to the presence of the “black market” for these cases, as one of the successes of sports betting trumpeted by Hartman and Garnett has been the migration of customers from the illegal to the legal market. But Whyte contends, without programs in place after exclusion, those customers could simply go back to a local bookie or offshore sportsbook, neither of which have protections around them.

“Now you’re back to a situation, illegally, where there are no limits, betting on credit,” Whyte said. “And people who migrate from the black market have a lot of bad habits.”

An ‘opportunity’

While not everyone involved will say it explicitly, the problem gaming provisions for the introduction of sports betting in Colorado were not adequate, but the buzzword going around now is “opportunity” — every person interviewed for this piece said it several times.

This is the opportunity to get problem gaming programs right in Colorado.

“We finally have legislators and professionals who recognize this is an important topic that must be addressed, so while we didn’t get it right from the start, we have an opportunity here,” Doura-Schawohl said.

There are often social causes and infrastructure plans that benefit from expanded gaming and the taxes they generate. In Colorado, it’s water. In California, it will likely be homelessness. In Louisiana, sports betting tax dollars are earmarked for educational initiatives, and likely will be in Georgia, should the state legalize. Many states funnel tax revenue to roads or state pension funds or simply into the general fund.

The money is there. Problem gambling advocates just wish more of it was sent in the direction of those who are most impacted by expanded gaming.

“Homelessness, schools — those are all worthy causes,” Doura-Schawohl said. “I don’t think asking for 1% is unreasonable, given what can happen if you don’t address that issue.

“This is my word of caution to the five states that have prefiled [bills ahead of 2022 sessions], look at what happens if you don’t deal with this at the onset. If you don’t get serious about problem gambling and responsible gambling programs when you legalize, it can have serious consequences.”

But what Brown found most encouraging at that LGCC meeting wasn’t just that problem gaming would have an emphasis in Colorado. It was that those involved now feel they have a responsibility to protect a community she cares so much about.

“For me, hearing Peggy in the December meeting, and her emotion, it reminded me that I was part of something bigger — where there is a responsibility to what she has been hammering on for three decades,” Nathan said. “The problems are real, and we could whistle by them, but that isn’t dispatching our obligation.”

Author: Neil Garza