Casinos Stacking the Odds in Their Favor

The Secretary of State recently approved Proposition A for inclusion on the November ballot. While I express no opinion as to whether this measure should pass or fail, I think it is important to point out that one of the effects of this proposition, if passed, would be to impose a cap on the number of casinos in the state, prohibiting the state from issuing permits to any potential competitors in the gaming market.

This is not a new strategy. In many industries, most notably the taxi and limousine industry, entrenched businesses try to block competition by establishing a licensing system that prevents new businesses from cutting in on their action. This sort of anti-competitive action harms consumers by removing all incentives for the companies in the restricted market to keep prices low or focus on providing excellent customer service. It also harms entrepreneurs willing to provide those services in a more affordable, more customer-friendly way because it erects enormous barriers to their entry into the market. The only way these newcomers can pursue their business is to purchase a permit from an existing company, and those permits (which cost their original recipients almost nothing) don’t come cheap. In some cities, the right just to operate a taxi company can cost hundreds of thousands of dollars.

In Missouri, if Proposition A is adopted by voters, it will likely mean that the currently existing casinos are insulated against new competitors, and the existing casinos will gain the right both to choose who will be allowed to replace any failing operations, and to claim millions of dollars in exchange for that right. It is not likely that this will directly affect those who choose not to patronize casinos, but anyone who enjoys gaming needs to be aware of the potential consequences of this proposition.