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Gambling and Bankruptcy

 

Revised by Chad Hills (Originally by Ron Reno)

Bankruptcies in the United States have reached record levels. Many observers see a substantial association between the spread of legalized gambling and the continuous rise in bankruptcy filings.

S M R Research Corporation surveyed 298 Counties (with and without Gambling) and found shocking results. According to a 1997 bankruptcy research report, gambling is "the single fastest-growing driver of bankruptcy."1 The following findings from SMR Research further support this fact: 2

  • Counties with gambling had a bankruptcy filing rate 18% higher than those without.
  • Counties with one to four gambling facilities had a bankruptcy filing rate 14% higher than in counties without casinos.
  • The rate for counties with five or more gambling outlets was 35% higher than counties without gambling.

Professors from Georgetown University and Purdue University performed research on 1,000 U.S. counties over five years with the impact of casino gambling on personal bankruptcies, specifically in collar counties with or near casinos. Concluding remarks in the report said,"we found statistically significant increases at the county level in the number of personal bankruptcy filings due to the introduction of casino gambling."3

Another study of casinos and bankrupcty concluded that bankruptcy filings did increase, relative to the control group, following the introduction of casinos, in seven of the eight towns. The eighth town was a "destination" casino, or a casino that drew primarily tourists, who took their debt back home. The research also noted that the largest increase occurred in the town that had casinos for the longest period of time, and the effect was more pronounced for Chapter 13 bankruptcies than for Chapter 7 bankruptcies.4

In 2003, the Insolvency and Trustee Service of Australia (where video poker is the predominant form of gambling) reported 2,900 Australians declare bankruptct each year as a result of their gambling activities. In New South Wales, gambling is now the fifth most common cause for consumer bankruptcy and fourth most common cause of business failure.5

More instances of gambling-related bankruptcies:

  • A 1997 nationwide study found that the bankruptcy rate in counties with at least one gambling establishment (race tracks, casinos, and jai alai frontons) was 18 percent higher than for those counties without gambling. The rate was 35 percent higher for counties with five or more gambling facilities.6
  • Iowa counties with a casino, racetrack or riverboat casino have a bankruptcy rate 21 percent higher than the state average.7
  • Nevada had the fourth-highest bankruptcy rate in the nation in 1996. Mississippi, the state with the second-highest level of gambling per-capita, ranked fifth in the nation in per-capita bankruptcy filings.8
  • Atlantic County, New Jersey, home of Atlantic City, has by far the highest bankruptcy rate in the state.9
  • Six of the 16 counties with the highest bankruptcy rates in the nation in 1996 were located near the 10 riverboat casinos in Tunica, Mississippi. Shelby County, Tennessee (home to Memphis), had the highest bankruptcy rate in the nation - four times the national average.10
  • Memphis, which is within an hour's drive of Tunica, ranks as the number six "casino feeder market" in the country, producing 6 million casino visits in 1996.11
  • Prince George's County, Maryland, the only county in the state where casino gambling was legal in 1996, also had by far the state's highest bankruptcy rate that year.12 The two California counties with that state's highest bankruptcy rates, Riverside and San Bernardino, are both adjacent to Las Vegas.13
  • Gambling-related bankruptcies in metro Detroit increased by as much as 40-fold within a year and a half of the opening of Casino Windsor, just across the Detroit River, according to local bankruptcy attorneys.14
  • Various studies of pathological gamblers show that 20 percent or more eventually file for bankruptcy.15
  • SMR Research Corporation, in its lengthy study, "The Personal Bankruptcy Crisis, 1997," concluded, "It now appears that gambling may be the single fastest-growing driver of bankruptcy." The report also determined that in those areas near major casinos, "Gambling-related bankruptcies account for a good 10% to 20% of the filings."16

Revised on 12/18/2005

1SMR Research Corporation, "The Personal Bankruptcy Crisis, 1997: Demographics, Causes, Implications, & Solutions," Hackettstown, N.J., 1997, pp.116-130.
2SMR Research Corporation, Ibid, p. 117.
3John M. Barron, Michael E. Staten, Stephanie M. Wilshusen, "The Impact of Casino Gambling on Personal Bankruptcy Filing Rates," McDonough School of Business, Georgetown University, 18 August 2000, (5 December 2003).
4M. W. Nichols, G. Stitt and D. Giacopassi, "Casino Gambling and Bankruptcy in New US Casino Jurisdictions" Journal of Socioeconomics, 1999.
5Richard Brading, The Insolvency and Trustee Service Australia (ITSA), New Directions in Bankruptcy, April 2003, Vol. 13, No.2, pp.16-17 (5 December 2003).
6"The Personal Bankruptcy Crisis, 1997: Demographics, Causes, Implications & Solutions," SMR Research Corporation, 1997, p. 117.
7 John McCormick, "Many Iowans Going for Broke," Des Moines Register, June 15, 1997, p. 1. (Note: For the years 1991-1996.)
8 Calculations based on data provided by the American Bankruptcy Institute.
9 "The Personal Bankruptcy Crisis, 1997," op. cit., p. 117.
10 Ibid., p. 121. (Note: Among counties with a minimum population of 25,000.)
11 "Harrah's Survey of Casino Entertainment, 1997," Harrah's Entertainment Incorporated.
12 "The Personal Bankruptcy Crisis, 1997," op. cit., p. 123. 13 Ibid.., p. 117.
14 Ron French, "Gambling Bankruptcies Soar," Detroit News, December 3, 1995, p. A1.
15 William N. Thompson, Ricardo Gazel and Dan Rickman, "The Social Costs of Gambling in Wisconsin," Wisconsin Policy Research Institute Report, July 1996, p. 15; Henry R. Lesieur and Christopher W. Anderson, "Results of a 1995 Survey of Gamblers Anonymous Members in Illinois," June 14, 1995; "The Personal Bankruptcy Crisis, 1997," op. cit., p. 124.
16 "The Personal Bankruptcy Crisis, 1997," op. cit., pp. 116, 124.


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