Uncertainty in the Gaming Industry: Lessons from Missouri

By Fisher, James F.; Arnold, Mark J. | Review of Business, Spring 1997 | Go to article overview

Uncertainty in the Gaming Industry: Lessons from Missouri


Fisher, James F., Arnold, Mark J., Review of Business


Introduction: Gambling Considered

In 1992 Missouri residents voted in a statewide ballot referendum to bring riverboat gambling to their state.(1) A chronology of Missouri riverboat gaming is provided in Exhibit 1. Two neighboring states, Iowa and Illinois, had previously legalized riverboat gambling and subsequently, casino gambling was offered on the Mississippi River at various ports, including two in the St. Louis metropolitan area, East St. Louis and Alton, both located on the eastern Illinois side of the Mississippi. Indeed, the availability of Illinois-based gambling was believed by many to hasten the legalization of gambling in the state of Missouri. "Why should Illinois go unchallenged in its collection of gaming dollars spent by Missouri citizens?" was the question posed frequently by those who thought it in the state's interest to make similar allowances for riverboat gambling.

Soon after the referendum was passed, the movement to legalize gaming in Missouri met with a constitutional challenge. Illinois gambling interests first challenged the constitutionality of the gambling statute that the Missouri legislature had enacted. A partner in the Casino Queen, an East St. Louis gambling boat, argued in a lawsuit that the Missouri state constitution allowed the state to offer only games of chance, typically in the form of state-sponsored lotteries. This case was dismissed - the judge ruled that an Illinois business concern had no standing in a lawsuit concerning the Missouri constitution - but a second suit was filed by a Missouri resident under somewhat suspicious circumstances. The individual who brought the suit steadfastly refused to discuss the case or respond to press inquiries. He was represented by the Casino Queen's lawyers and used the same constitutional arguments advanced in the original suit brought by the Casino Queen representative. In the opinion of many, the Missouri citizen who brought the suit was merely a front, acting on behalf of Illinois interests.

The suit received a sympathetic hearing by the Missouri Supreme Court and in January 1994, the Court ruled the law unconstitutional. Interpretations of the opinion quickly focused on the distinction between games of chance and games of skill within the larger gaming industry. Games of chance were disallowed on constitutional grounds, while games of skill were given approval. However, the distinction between games of chance and skill was hardly clear. Poker and blackjack were presumably games of skill, while other games such as slot machines, roulette and craps were more problematic, likely falling into the category of games of chance.

Exhibit 1. Chronology of Missouri Riverboat Gaming

July 1991          Missouri legislature passes House Bill 149
                   approving riverboat gambling and placing a
                   referendum on the state general ballot on
                   November 1992.

August 1992        Article III, Section 39(d) states that any future
                   gaming revenues must be appropriated solely for
                   education. Revenues are not included within the
                   definition of "total state revenue."

November 1992      Riverboat gambling referendum is approved by
                   voters statewide.

December 1992      A lawsuit is filed challenging the
                   constitutionality of the riverboat gaming law.

April 1993         The Missouri General Assembly amends House Bill
                   149 with Senate Bills 10 and 11, which Governor
                   Mel Carnahan signs into law. The Missouri Gaming
                   Commission is created to oversee riverboat
                   gambling in the state.

November 1993      The Missouri Gaming Commission announces four
                   companies will be processed for gaming licenses.

January 1994       The Missouri Supreme Court invalidates key
                   sections of Senate Bills 10 and 11 and raises
                   legal questions concerning other sections. … 

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