Israel Bets on Gambling’s Riches but Also Fears Its Ills

Gaming is big business around the world, a source of jobs and tax revenue. But it brings a host of social ills with it.

The opening ceremony of the Venetian Macao Resort Hotel, Aug. 28, 2007.
AP

When Israelis think of gambling, they think of Las Vegas, of the casinos in Bulgaria and the Czech Republic that are popular with tourists and of Sheldon Adelson, the billionaire controlling shareholder of Sands Las Vegas Corporation and long-time ally of Prime Minister Benjamin Netanyahu.

But the global gambling — or gaming, as it prefers to call itself — industry is much bigger than these, and its impact extends far beyond the slot machines and poker tables that most people associate with it. Legal gambling is a big source of tax revenue — and of social maladies.

Israelis will have to take a close look at both sides of the chip as they weigh a preliminary proposal issued by the Tourism Ministry Wednesday to permit the operation of between two and four casinos in the southern resort town of Eilat. The plan has the backing of Netanyahu, who has been a supporter of casinos since his first term as prime minster in the 1990s, but it has already stirred protest from rabbis and religious parties.

“Do we want to create a society of illusions? A society of easy money?" asks Rabbi David Stav, chairman of the Tzohar organization of moderate Zionist rabbis. Stav isn’t absolutely opposed to gambling but wants it to be limited to the government’s Mifal Hapayis and Toto games.

“It’s inconceivable that a person can spend tens of thousands of shekels gambling. People spend their entire salaries on illusions that cause many of them to lose everything,” Stav said Wednesday in response to the government’s proposal.

Not everyone loses money, of course. The big gambling companies — and Adelson’s Sands is the biggest of all — are highly profitable. Even in a tough year like 2015, his company had net revenues of $11.7 billion and adjusted net income of $2.03 billion.

Likewise, gambling brings in tourists, who not only lose money at roulette wheels but spend money on hotels, food and drink and entertainment. With 40 million visitors annually, Las Vegas is the most visited place on the planet — and most of the money they spend is not for gambling.

In a 2014 report, the American Gaming Association noted that state and federal governments in the United States took in a combined $38 billion in taxes from the industry in a single year. The report by the industry organization, “When Gaming Grows, America Gains,” valued the industry at $240 billion a year and credited it with supporting 1.7 million jobs.

They may be exaggerated, but figures like these encourage gambling’s boosters in Israel.

The world gambling industry is enormous. Investment bank Morgan Stanley valued it at $423 billion in 2014. Casinos were the biggest segment, taking in $146.5 billion, mostly in the United States and Asia. Lotteries were next with $121 billion followed closely by sports betting with $118 billion.

Online gambling, the industry’s up and coming segment and one where Israel has staked out a major role, was worth $37 billion in 2014.

Gaming “is a unique segment of the U.S. entertainment industry that depends on a large workforce and the support of thousands of outside vendors and suppliers, which makes it dynamic in creating jobs and fueling economic growth,” the AGA report boasts.

Las Vegas is the world’s gambling capital, at least by name and by virtue of its storied history, and it once had a near-monopoly in the United States. Today only three states allow unrestricted gambling, but only two ban it altogether. Nearly all developed countries permit gambling of one sort or another. Japan, one of the few that doesn’t, has in the past two years been debating making it legal.

Brazil, which banned gambling 70 years ago, is considering a repeal of the prohibition as a way to inject some life into a moribund economy.

But as Macau has learned — the quasi-independent Chinese region is the world’s biggest gambling center — gambling may benefit from existing economic growth rather than spurring it. With the Chinese economy sputtering, gamblers — especially the high rollers — are betting less: Revenue from that elite group, which accounts for half the total, plunged 41% in the first nine months of last year.

Sands Las Vegas, which is a big player on the Macau scene, saw its pretax profit drop 19% in 2015.

“We are at the beginning of the shift in the cycle from a recession-type economy to a bottoming out, and I think the economy and Macau’s fortunes will turn around,” said Adelson optimistically last month.

As Stav said, gambling comes at a social cost. In Macau, the number of criminal investigations jumped 52.2% in the six years that after 2002, when the single-casino monopoly was opened up to competition. The number of compulsive gamblers — who bring social ills in the form of higher rates of divorce, suicide, child abandonment and alcoholism — also rose.

With an eye to the social ills gambling creates, some would prefer that Israelis be barred from local casinos. The Tourism Ministry proposal argues that would not be a clear solutions, since there are advantages to deterring Israelis from gambling abroad or illegally online by keeping them wagering at home. One way to deter compulsive gamblers could be to charge at entry fee or to restrict hours or the number who can enter at all.