The Impact of the Daily Lottery on the Numbers Game: Does Legalization Make a Difference? H. Roy Kaplan, Ph.D. National Conference of Christians and Jews and University of South Florida William R. Blount, Ph.D. Department of Criminology, University of South Florida
T h e r e has been a profusion of state r u n legal lotteries over the last two decades. O n e justification for them has been their supposed diversion of funds from illegal games k n o w n as n u m b e r s , policy and bolita. Records obtained in a police raid in south Florida provided a n opportunity to analyze the impact of Florida' legal lottery on its illegal counterpart. T h e records ranged over a 13 week period encompassing five weeks prior to the inception of Florida's legal daily n u m b e r s and lotto games and seven weeks afterward. While there was a 17 percent decline in monies wagered on the illegal games d u r i n g the first week of the legal games, illegal wagers quickly rebounded to prelegalization levels.
INTRODUCTION
With operations in 30 states and the District of Columbia and revenues approximately $20 billion in 1989, the lottery industry quali-
An earlier version of the paper was presented at the annual meeting of the Academy of Criminal Justice Sciences, Washington, D.C., March 1989. The authors wish to express their deep appreciation to the Metro-Dade Police Department, Miami, Florida, and particularly to Max Schuman and Sgt. James Boyd for their assistance in this research. Reprints may be obtained from H. Roy Kaplan, 6907 Greenhill Place, Temple Terrace, Florida 33617, or from W.R. Blount, Department of Criminology, USF, Tampa, Florida 33620. Journal of Gambling Studies Vol. 6(3), Fall 1990 9 1990 Human Sciences Press
263
264
JOURNAL OF GAMBLING STUDIES
ties as one of the 30 largest industries in the United States. From their inception in the New World, there has been controversy over whether government should promote an activity that might be inimical to the public interest. Even today, despite their much touted capability to generate revenue in a "painless" way, lotteries have been criticized as regressive (Mikesell and Zorn, 1986; Clotfelter and Cook, 1989; Kaplan, 1989) and conducive to the spread of deviant, even pathological behavior by exposing large segments of the population to gambling (Braidfoot, 1985). Yet, one rationale for the re-introduction of state lotteries in this century was their supposed negative impact on illegal gambling, especially numbers, policy, and bolita. Aside from anecdotal information from police, bookies, and lottery officials, that assumption has never been empirically demonstrated (Freid, 1983; Bloomberg, 1988). This paper provides quantitative information from law enforcement in South Florida in an attempt to evaluate the impact of the introduction of Florida's legal lottery on its illegal counterpart.
Background Historian J o h n Samuel Ezell (1960) traced the roots of the lottery in this country to a charter the King of England granted to the Virginia C o m p a n y of London in 1612. This charter provided for the conduct of lotteries to save the struggling settlement in Jamestown, and contained the stipulation that commissioners who supervised them would swear not to defraud or deceive anyone. Later in the seventeenth century, Sir William Petty conceptualized the dilemma: A lottery is properly a tax upon unfortunate self-conceited fools. The world abounds in such fools; it is not that every man that will may cheat every man that would be cheated. Rather it is ordained that the Sovereign should have guard of these fools, even as in the case of lunatics and idiots (Ezell, 1960, p. 1) This ambivalence did not, however, prevent lotteries from becoming successful in the Colonies, or retard their use by government to generate funds for the emerging nation. Lotteries were used to defray expenses during the French and Indian Wars and in 1777, the Continental Congress sponsored a lottery to raise funds for the Revolution. Four states--Massachusetts, Vermont, Rhode Island, and New York--also conducted them to aid the struggle for independence.
H. ROY KAPLAN AND WILLIAM R. BLOUNT
265
M a n y of the founding fathers, despite their reputation for frugality and level-headedness, were avid lottery players. Tickets for these early lotteries were expensive however, running as much as $30 or more, and sometimes the prize would not return as much as the cost of the ticket. Consequently, the practice arose of insuring tickets by taking out a policy. For a premium, usually a percentage of the cost of a ticket, a bettor paid an agent to make up the deficiency between the cost of the ticket and the prize. Benjamin Franklin was known to participate in this practice and once wrote a friend about a lottery in 1748 that "I have not insured for anybody, so I shall neither lose nor gain that way" (Ezell, 1960, p. 95). As such betting became more popular, variations occurred. One variation was betting on the day a number might be drawn, since unlike the modern lotteries, lotteries in the 1700s and 1800s were conducted over many days, even weeks. Further, as some of the final numbers were drawn each day, another popular practice was betting on what numbers might be drawn on any given day. And when the lottery was over, it became natural to seek other sources of "numbers" on which to bet. The void was filled by still other variations and the foundation was laid for what was to become the illegal numbers games currently found in the United States.
Numbers Gambling There are no concrete estimates of the extent of numbers gambling in the United States, although certain facts about it are known. For example, variations of numbers, policy, or bolita (a Hispanic version meaning little ball, from the use of a bag filled with small balls from which numbers are selected) are very popular in inner cities, particularly in the Northeast and Midwest, although the games are also popular in any large city with a sizable ethnic population. Estimates of the amount of money wagered in illegal numbers games vary widely and no reliable figures are available. The number of persons employed in the numbers business is also conjectural. Kaplan and Maher (1970) have placed that figure as high as 100,000 in Harlem alone. Perhaps the most authoritative study of numbers was conducted by Rubenstein and Reuter (1977) which focused on New York City. The authors contended that the scope and volume of illegal numbers in that city was exaggerated. Nevertheless, as Light (1977) has shown,
266
JOURNAL OF GAMBLING STUDIES
numbers gambling has become institutionalized among many ethnic groups in the United States, providing jobs and opportunities for upward mobility to individuals and families that could not survive without them. There are m a n y examples of the pervasiveness of numbers in the lives of inner city blacks in the work of Haley (1964). Illegal numbers games are popular among blacks and Hispanics in South Florida, and as a law enforcement official in Miami once observed, "Lord knows how m a n y kids its put through college" (Rauzin, 1981, p. 73). Through employment, loans to community members, and hope, illegal numbers games continue to flourish in the United States, allegedly providing money to organized crime and reputedly serving as a major source of official corruption (Commission on the Review . . . , 1976). It is the seamier side of the numbers games that has focused official attention on them. Much of the rancor emanates from the transformation the numbers games went through in the 1920s when bootleggers assumed some of the responsibility for numbers operations in major cities and, along with blacks and other ethnic groups, managed to wield considerable economic and political power (Asbury, 1938; Knapp Commission, 1973). Despite the negative connotations, numbers games enjoy considerable, although uneven, popularity. In a survey of gambling behavior conducted for the Commission on the Review for the National Policy Toward Gambling in 1975, only three percent of the adult population in the United States reported playing, with eight percent in the Northeast. In particular states, such as Florida however, there is an active and large cadre of players, especially in the southern part of the state. The Metro-Dade Police Department counted fifty numbers organizations in Dade County in 1988, and estimated that an additional twenty-five were operating. Together these groups employed some 4,500 people and handled approximately $500 million in wagers per year. Ninety-fi~ce percent of these organizations were being run by Cubans and the remaining five percent were controlled by Anglos. Although m a n y blacks were employed in the organizations and are avid players, few reportedly hold key positions. One of the main variations of the numbers games in Dade County involves trying to select one to three numbers that are derived from payoffs at the local dog racing tracks. Nicknamed "the dogs," m a n y organizations have afternoon as well as evening games to coincide with
H. ROY KAPLAN AND WILLIAM R. BLOUNT
267
the matinees and evening racing schedules. The odds are 999 to 1 when betting on three digits, and the payoff is usually $500. On a two digit bet the odds are reduced to 99 to 1 with a payoff of $70. Players can combine their bets into exotic wagers such as parlays and reverse parlays (combinations of numbers) which pay as much as $1,000 or $2,000 for each dollar wagered. Odds on these wagers vary from 1,999 to 1 on a straight or "American" four digit parlay to 999 to 1 on a reverse parlay. A numbers operation is typically composed of writers who take bets, "pick-up men" or runners who deliver the bets and money to a counting house or bank, and a local boss who oversees the operation. Figure 1 depicts an organizational chart of a typical numbers operation in Dade County. This figure was constructed and verified through a series of interviews with law enforcement officers and from a review of seized documents. It can be seen that the organization is structured in a
Figure 1 Organizational Chart of a Typical Illegal Numbers Operation in Dade County, Florida
I
I P,oKoPMAN I , WRITER
BANKER
I
I P,CKOPMAN I I WRITER
P,CKOPMAN 1 WRITER
WRITER
WRITER
WRITER
WRITER
WRITER
WRITER
WRITER
WRITER
WRITER
WRITER
WRITER
WRITER
WRITER
WRITER
WRITER
Source." Generated by the authors through interviews with Metro-Dade Police Vice Squad members and review of documents seized in various police raids,
268
JOURNAL OF GAMBLING STUDIES
classic bureaucratic form (Weber, 1946), complete with technical staff experts who handle intricate financial matters (bankers to oversee the cash flow and lay-off contacts to hedge against large hits), and may involve partners who also share in the proceeds. Writers take customer bets and pick-up men carry either the receipts or the cash to the banker, typically on separate trips. The number of writers varies by the size of the organization, some having as m a n y as thirty. Figure 2 is a reproduction of a tally or ledger sheet seized in a raid conducted by the Metro-Dade Police Department. These sheets are kept by bankers and reflect the record keeping techniques of the illegal organizations. As m a n y of the organizations are Cuban operated, it is equally likely that these sheets will be in Spanish. The usual commission for a writer varies from 20 to 35 percent of the amount wagered. This variation typically depends on the type of wager recorded. Generally, the riskier the wager, the less likely the payoff and the higher the writer's commission.
Figure 2 Reproduction of a banker's tally sheet seized in a police raid which reflects part of a day's operation in an illegal numbers operation
1
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P.~ y
/
"
3.~J"-
i~'..xo)r
~7
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J~CJBz~o
~ ~ /~
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_ _4~__~
~r
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~#.~ _ r
T h e r e has been a profusion of state r u n legal lotteries over the last two decades. O n e justification for them has been their supposed diversion of funds from illegal games k n o w n as n u m b e r s , policy and bolita. Records obtained in a police raid in south Florida provided a n opportunity to analyze the impact of Florida' legal lottery on its illegal counterpart. T h e records ranged over a 13 week period encompassing five weeks prior to the inception of Florida's legal daily n u m b e r s and lotto games and seven weeks afterward. While there was a 17 percent decline in monies wagered on the illegal games d u r i n g the first week of the legal games, illegal wagers quickly rebounded to prelegalization levels.
INTRODUCTION
With operations in 30 states and the District of Columbia and revenues approximately $20 billion in 1989, the lottery industry quali-
An earlier version of the paper was presented at the annual meeting of the Academy of Criminal Justice Sciences, Washington, D.C., March 1989. The authors wish to express their deep appreciation to the Metro-Dade Police Department, Miami, Florida, and particularly to Max Schuman and Sgt. James Boyd for their assistance in this research. Reprints may be obtained from H. Roy Kaplan, 6907 Greenhill Place, Temple Terrace, Florida 33617, or from W.R. Blount, Department of Criminology, USF, Tampa, Florida 33620. Journal of Gambling Studies Vol. 6(3), Fall 1990 9 1990 Human Sciences Press
263
264
JOURNAL OF GAMBLING STUDIES
ties as one of the 30 largest industries in the United States. From their inception in the New World, there has been controversy over whether government should promote an activity that might be inimical to the public interest. Even today, despite their much touted capability to generate revenue in a "painless" way, lotteries have been criticized as regressive (Mikesell and Zorn, 1986; Clotfelter and Cook, 1989; Kaplan, 1989) and conducive to the spread of deviant, even pathological behavior by exposing large segments of the population to gambling (Braidfoot, 1985). Yet, one rationale for the re-introduction of state lotteries in this century was their supposed negative impact on illegal gambling, especially numbers, policy, and bolita. Aside from anecdotal information from police, bookies, and lottery officials, that assumption has never been empirically demonstrated (Freid, 1983; Bloomberg, 1988). This paper provides quantitative information from law enforcement in South Florida in an attempt to evaluate the impact of the introduction of Florida's legal lottery on its illegal counterpart.
Background Historian J o h n Samuel Ezell (1960) traced the roots of the lottery in this country to a charter the King of England granted to the Virginia C o m p a n y of London in 1612. This charter provided for the conduct of lotteries to save the struggling settlement in Jamestown, and contained the stipulation that commissioners who supervised them would swear not to defraud or deceive anyone. Later in the seventeenth century, Sir William Petty conceptualized the dilemma: A lottery is properly a tax upon unfortunate self-conceited fools. The world abounds in such fools; it is not that every man that will may cheat every man that would be cheated. Rather it is ordained that the Sovereign should have guard of these fools, even as in the case of lunatics and idiots (Ezell, 1960, p. 1) This ambivalence did not, however, prevent lotteries from becoming successful in the Colonies, or retard their use by government to generate funds for the emerging nation. Lotteries were used to defray expenses during the French and Indian Wars and in 1777, the Continental Congress sponsored a lottery to raise funds for the Revolution. Four states--Massachusetts, Vermont, Rhode Island, and New York--also conducted them to aid the struggle for independence.
H. ROY KAPLAN AND WILLIAM R. BLOUNT
265
M a n y of the founding fathers, despite their reputation for frugality and level-headedness, were avid lottery players. Tickets for these early lotteries were expensive however, running as much as $30 or more, and sometimes the prize would not return as much as the cost of the ticket. Consequently, the practice arose of insuring tickets by taking out a policy. For a premium, usually a percentage of the cost of a ticket, a bettor paid an agent to make up the deficiency between the cost of the ticket and the prize. Benjamin Franklin was known to participate in this practice and once wrote a friend about a lottery in 1748 that "I have not insured for anybody, so I shall neither lose nor gain that way" (Ezell, 1960, p. 95). As such betting became more popular, variations occurred. One variation was betting on the day a number might be drawn, since unlike the modern lotteries, lotteries in the 1700s and 1800s were conducted over many days, even weeks. Further, as some of the final numbers were drawn each day, another popular practice was betting on what numbers might be drawn on any given day. And when the lottery was over, it became natural to seek other sources of "numbers" on which to bet. The void was filled by still other variations and the foundation was laid for what was to become the illegal numbers games currently found in the United States.
Numbers Gambling There are no concrete estimates of the extent of numbers gambling in the United States, although certain facts about it are known. For example, variations of numbers, policy, or bolita (a Hispanic version meaning little ball, from the use of a bag filled with small balls from which numbers are selected) are very popular in inner cities, particularly in the Northeast and Midwest, although the games are also popular in any large city with a sizable ethnic population. Estimates of the amount of money wagered in illegal numbers games vary widely and no reliable figures are available. The number of persons employed in the numbers business is also conjectural. Kaplan and Maher (1970) have placed that figure as high as 100,000 in Harlem alone. Perhaps the most authoritative study of numbers was conducted by Rubenstein and Reuter (1977) which focused on New York City. The authors contended that the scope and volume of illegal numbers in that city was exaggerated. Nevertheless, as Light (1977) has shown,
266
JOURNAL OF GAMBLING STUDIES
numbers gambling has become institutionalized among many ethnic groups in the United States, providing jobs and opportunities for upward mobility to individuals and families that could not survive without them. There are m a n y examples of the pervasiveness of numbers in the lives of inner city blacks in the work of Haley (1964). Illegal numbers games are popular among blacks and Hispanics in South Florida, and as a law enforcement official in Miami once observed, "Lord knows how m a n y kids its put through college" (Rauzin, 1981, p. 73). Through employment, loans to community members, and hope, illegal numbers games continue to flourish in the United States, allegedly providing money to organized crime and reputedly serving as a major source of official corruption (Commission on the Review . . . , 1976). It is the seamier side of the numbers games that has focused official attention on them. Much of the rancor emanates from the transformation the numbers games went through in the 1920s when bootleggers assumed some of the responsibility for numbers operations in major cities and, along with blacks and other ethnic groups, managed to wield considerable economic and political power (Asbury, 1938; Knapp Commission, 1973). Despite the negative connotations, numbers games enjoy considerable, although uneven, popularity. In a survey of gambling behavior conducted for the Commission on the Review for the National Policy Toward Gambling in 1975, only three percent of the adult population in the United States reported playing, with eight percent in the Northeast. In particular states, such as Florida however, there is an active and large cadre of players, especially in the southern part of the state. The Metro-Dade Police Department counted fifty numbers organizations in Dade County in 1988, and estimated that an additional twenty-five were operating. Together these groups employed some 4,500 people and handled approximately $500 million in wagers per year. Ninety-fi~ce percent of these organizations were being run by Cubans and the remaining five percent were controlled by Anglos. Although m a n y blacks were employed in the organizations and are avid players, few reportedly hold key positions. One of the main variations of the numbers games in Dade County involves trying to select one to three numbers that are derived from payoffs at the local dog racing tracks. Nicknamed "the dogs," m a n y organizations have afternoon as well as evening games to coincide with
H. ROY KAPLAN AND WILLIAM R. BLOUNT
267
the matinees and evening racing schedules. The odds are 999 to 1 when betting on three digits, and the payoff is usually $500. On a two digit bet the odds are reduced to 99 to 1 with a payoff of $70. Players can combine their bets into exotic wagers such as parlays and reverse parlays (combinations of numbers) which pay as much as $1,000 or $2,000 for each dollar wagered. Odds on these wagers vary from 1,999 to 1 on a straight or "American" four digit parlay to 999 to 1 on a reverse parlay. A numbers operation is typically composed of writers who take bets, "pick-up men" or runners who deliver the bets and money to a counting house or bank, and a local boss who oversees the operation. Figure 1 depicts an organizational chart of a typical numbers operation in Dade County. This figure was constructed and verified through a series of interviews with law enforcement officers and from a review of seized documents. It can be seen that the organization is structured in a
Figure 1 Organizational Chart of a Typical Illegal Numbers Operation in Dade County, Florida
I
I P,oKoPMAN I , WRITER
BANKER
I
I P,CKOPMAN I I WRITER
P,CKOPMAN 1 WRITER
WRITER
WRITER
WRITER
WRITER
WRITER
WRITER
WRITER
WRITER
WRITER
WRITER
WRITER
WRITER
WRITER
WRITER
WRITER
Source." Generated by the authors through interviews with Metro-Dade Police Vice Squad members and review of documents seized in various police raids,
268
JOURNAL OF GAMBLING STUDIES
classic bureaucratic form (Weber, 1946), complete with technical staff experts who handle intricate financial matters (bankers to oversee the cash flow and lay-off contacts to hedge against large hits), and may involve partners who also share in the proceeds. Writers take customer bets and pick-up men carry either the receipts or the cash to the banker, typically on separate trips. The number of writers varies by the size of the organization, some having as m a n y as thirty. Figure 2 is a reproduction of a tally or ledger sheet seized in a raid conducted by the Metro-Dade Police Department. These sheets are kept by bankers and reflect the record keeping techniques of the illegal organizations. As m a n y of the organizations are Cuban operated, it is equally likely that these sheets will be in Spanish. The usual commission for a writer varies from 20 to 35 percent of the amount wagered. This variation typically depends on the type of wager recorded. Generally, the riskier the wager, the less likely the payoff and the higher the writer's commission.
Figure 2 Reproduction of a banker's tally sheet seized in a police raid which reflects part of a day's operation in an illegal numbers operation
1
ll/r
P.~ y
/
"
3.~J"-
i~'..xo)r
~7
/fJ s ~
J~CJBz~o
~ ~ /~
/-"
_ _4~__~
~r
/
~#.~ _ r
