Advantage players

One of the issues New York will have to address as it moves into a new age of comprehensive regulation of gambling is what respective rights it will recognize on the parts of casinos and so-called advantage players.  Casinos are businesses designed to make money for their owners and, through taxation, for various government entities in which they are located.  The fact that government both regulates casinos and derives income from them arguably creates a conflict of interest, but that’s a topic for another post.  While most casino patrons are casual visitors there to take a chance against odds they know favor the house, there are casino patrons who take gambling  seriously and who strive to extract long-term profits from casinos.  They are known as “advantage players,” or “APs,” and casinos do not like them even if, as is the case with the vast majority of APs, they do not cheat or employ any illegal methods.

That casinos go to great expense to detect and neutralize advantage players gives lie to the cliche that “you can’t beat the house.”  I know several people who are lifetime winners at gambling, and a few who make a pretty good living at it (it’s not as glamorous as you might think, and they work a lot harder than you do).

How can one make money gambling?

First, one can get lucky.  All gambling is based on the principle of variance — or luck — that allows some players to win in the short run, while usually preserving a long-term house advantage.  For example, a typical slot machine may be designed to retain an average of 10% of all monies deposited in it, but it will occasionally spit out a jackpot to keep the player interested.  Some of those jackpots are large, and casinos love to publicize them, because in the long run the aggregate of all play by all players will yield a profit to the casino equal to the house edge.  People who get lucky by bucking long-term odds against them are not advantage players, and will, in time, give their winnings back to the house.

Second, one can beat other players in certain games of skill, such as betting on horses or playing live poker.  In those games, the house takes a cut off the top of all monies bet, and the remainder of the pool or pot is distributed to the winners.  Since the winner is taking money from the other players, not from the house, casinos do not fear this type of player, even if he or she is able to establish a long-term advantage over other players and therefore consistently generate a profit.

The third type of player is one who can achieve a long-term advantage against the house.  There are many ways to do this, none of them easy.  Typical is a card counter in blackjack who may establish a small long-term edge over the house if he or she is skillful, nervy and well-financed.  Most card counters cannot achieve a long term profit, because they lack one or more of these attributes.  However, some well-financed card counting teams have taken millions from casinos over the years, and casinos often ban players they detect counting cards from playing blackjack.  Even if the player is working alone, playing the game honestly and by the rules established by the house, it can back him off almost anywhere in the US except Atlantic City.  While I can understand that a casino needs protection against something like the MIT team depicted in the movie “21,” I fail to see how someone  skillfully playing $25 a hand can put that big a dent in a casino’s bottom line.  It also seems unsportsmanlike and hypocritical for a casino to be able to offer a “beatable” game (which is very profitable because it attracts legions of customers who think they can beat it but can’t) and then tell anyone who essentially takes up that offer that he or she can’t play.  But it happens all the time.  Should it be allowed to happen in New York?

I imagine the casinos will argue that they need protection from advantage players so that they can remain profitable and continue to provide employment, stimulus to the local economy through the purchasing of goods and services and, of course, tax revenues to government.  Players could respond that the attraction of gambling — what, in essence, the casinos are selling — is a chance to win money, and that a casino that chooses (probably for competitive reasons) to offer a beatable game should have to live with that choice, at least within reasonable limits.  Were the choice this simple, I would vote that casinos should have to live with their choice.  Implicit in the term “gambling” is a recognition that sometimes the house does have to lose.

However, as Atlantic City has shown, if casinos can’t back off advantage players, they are likely to make their games worse for everyone. How much they can get away with in this regard depends on the competition (Atlantic City was getting away with a lot more before neighboring Pennsylvania licensed casinos and mandated them to offer games with more player-favoring rules, while also allowing them to back off advantage players).  Making the games worse for everyone is bad for business (even suckers eventually find out they can do better — or less badly — elsewhere), as Atlantic City casinos have found out.

In sum, how to allow casinos to deal with advantage players is an important decision New York’s casino regulators will have make, and some outside-the-box thinking on this issue would be welcome.  Given the availability of gambling in most of the states that border New York (not to mention Canada), an outright bar on backoffs could result in games that leave New York casinos at a competitive disadvantage, detrimentally affecting profits and tax revenues.  Allowing backoffs might not prevent short-sighted management from offering poor games anyway, in the hope of maximizing profits, but such a decision might prove costly and therefore short-lived.  Maybe the best course would be to remove some of the discretion casinos have in dealing with suspected advantage players.  For example, maybe the discretion to permanently back off suspected card counters or other APs should be vested in the regulatory agency rather than the casinos.  Involvement of the agency would bring a more neutral perspective to the evaluation of the suspect play, and would certainly reduce the amount of abuse to which suspected APs sometimes have been subject.  Provisional back offs by casino management probably should be allowed, but the suspect should be guaranteed prompt review of that decision by the agency.

Others, I’m sure, could come up with better solutions.  The point is, though, that creative thinking, and a recognition that winning players are not automatically the threat casinos seem to think they are, could help New York survive and prosper in a very competitive gambling environment.  Good luck to those charged with writing the rules.

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