As legalized online gambling continues to gain momentum in states around the country, opposition of this national trend have begun to gain footing. When it comes to the opposition of online gambling, there is no singular voice as determined and well-funded than that of Sheldon Adelson.
As of June 16, 2019, the man is worth almost $35 billion dollars and maintains strong, public disdain for online gambling. Seeing as Adelson turned his millions into billions from profits off of the Las Vegas Strip, some question whether Adelson’s moral qualms about online gambling amount to nothing more than a business strategy.
The business strategy has apparently paid off as Adelson has the ear of many policymakers surrounding online gambling, including the President’s. Not only has Adelson come out against online gambling but he has publicly commented that he is “willing to spend whatever it takes” to stop it.
So, what explains such an about-face from the man who has enjoyed a lifetime of abundance off gambling profits? To better understand this apparent dichotomy, we begin with a bit on the life and times of Sheldon Adelson before we attempt to dig into what could possibly motivate his strong stance against online gambling.
A Brief Biography of Sheldon Adelson
Born in 1933 to a low-income Jewish family in Boston, Adelson quickly found his knack for entrepreneurship. At age 10, Adelson was selling newspapers. At 12, he took out a sizeable loan from his uncle, a treasurer at a credit union, to buy the newspaper corner he was already operating. He leveraged that corner into two more and paid back his uncle the $200 (roughly $2,500 in 2019 value) loan plus interest.
Adelson made enough money with his newspaper business to enroll at City College of New York in 1951. He did not pursue his degree in finance for long as Adelson left his sophomore year to join the Army in 1952.
After service in the U.S. Army, which Adelson now says he regrets (5:05) and would have rather served with Israeli forces, Adelson started working on Wall Street. As a mortgage broker and investment advisor, Adelson made his first million.
The gamble that would ultimately thrust Adelson into the upper echelon of wealth in America was, like many billionaires of our day, technology. In 1978, Adelson began developing the COMDEX trade show which showcased computer technology throughout the eighties and nineties. When he sold the division that included the trade shows to a Japanese company, Adelson personally made a cool half a billion dollars.
During the heightened success of COMDEX, Adelson began to invest in Las Vegas Real Estate. Specifically, the infamous hang-out of the rat pack themselves, the Sands Hotel and Casino. There can be no doubt Adelson was eying the lucrative returns of the aging establishment and the industry at large.
But, longtime friend and Sands board member Irwin Chafetz said that “the Sands had enough land to build a convention center, that’s why we got into the casino business.” Adelson’s dream was realized in 1990 when he opened the Sands Expo and Convention Center.
The Sands Hotel and Casino was eventually demolished and is now grounds for Adelson’s wildly successful Venetian Hotel. Much of Adelson’s current wealth stems from the success he has found on the strip, but as a consummate entrepreneur, Adelson has opened successful brick and mortar casinos across the world.
If Adelson had any qualms over gambling throughout his career, you would not have guessed it based on the profits he has derived from it.
Coalition to Stop Internet Gambling
Adelson advocacy group, the Coalition to Stop Internet Gambling, was formed in 2014 to help persuade Congress to restore the federal prohibition on internet gambling. The organization website reads as follows:
“Targeting the young, the poor and the elderly where they live, Internet gambling takes gambling too far. Internet Gambling crosses the line of responsible gaming by bringing gambling into our living rooms and onto our smartphones, tablets and home computers 24 hours a day without necessary protections.”
Since its formation, the advocacy group has fought against the DOJ’s 2011 interpretation of the Wire Act that essentially opened the doors for state regulation of internet gambling.
The DOJ’s New Groove
When the DOJ released a memo earlier this year that detailed an expanded interpretation of the Wire Act, many felt Adelson and the Coalition to Stop Internet Gambling were behind the power play.
A Wall Street Journal report alleged a direct line of influence between Adelson and the DOJ’s sudden policy reversal. Keep in mind that during the 2016 presidential cycle, Adelson was Trump and the GOP’s biggest campaign supporter. That was to the tune of $35 million to outside spending for electing Trump, $20 million to the Congressional Leadership Fund, and $35 million to the Senate Leadership Fund.
An official inquiry was started by Gurbir S. Grewal, who filed a Freedom of Information Act (FOIA) request to force the government to disclose any such connection. The FOIA request specifically sought any and all documents regarding press reports that the DOJ’s decision came about due to extensive lobbying efforts by Adelson.
To date, the DOJ has left the FOIA request unanswered and has given no legal grounds for their withholding. Grewal announced in May that he would be suing the DOJ in New Jersey’s District Court to seek a response to his FOIA request. Whether this challenge survives judicial scrutiny is anybody’s guess.
Business Philosophy Ideology
The question remains, why, according to Adelson, are brick and mortar gambling fine for the nation but internet gambling will surely be the death of us? It is easy to say that Adelson’s stance against internet gambling is just a billionaire staving off competition.
But with such a hefty bankroll, Adelson could probably dominate the nascent internet gambling space if he so chose. Perhaps he views the risks involved with such an investment as not worth the net gain to an already-flourishing casino empire?
According to a Forbes article, Adelson thinks internet gambling would only be a short-term play for operators and that, “non-branded web sites would quickly saturate the market with financial incentives that casino-branded offerings would inevitably need to match to stay competitive, eating away at their profit margins.” Adelson points to the fate of land-based casinos in European jurisdictions that have permitted online gambling.
Given the financial stake Adelson maintains in the issue, some say that his moral qualms over the one venue of gambling is a façade. This may be true, but Adelson does raise some good points about the challenges facing internet gambling. These are points that market participants and government entities will eventually have to deal with in one way or another.
First, he claims traditional institutions provide a safeguard against toxic gambling, under-age gambling and alcohol/substance abuse problems that stem from gambling that the internet cannot provide.
Second, Adelson believes increased accessibility to gambling will wreak societal havoc. The Coalition to Stop Internet Gambling website warns, “Internet gambling is on track to be available in every college dorm room, every family’s house, every poverty-stricken neighborhood 24 hours a day, seven days a week.”
Lastly, Adelson echoes concerns by the FBI about increased identity theft and money laundering as a result of internet gambling.
In relation to pending litigation, it was revealed that Adelson was being treated for cancer. A spokesperson for Las Vegas Sands reported in February, “Mr. Adelson is still dealing with certain side effects from medication he is taking for the treatment of non-Hodgkin lymphoma. These side effects have restricted his availability to travel or keep regular office hours.
They have not, however, prevented him from fulfilling his duties as chairman and CEO.” Considering the personal influence Adelson has over his company and in certain political arenas, his presence would certainly be missed if his health were to take a turn.
At this point in his career, Adelson has to be thinking about his legacy. Perhaps another reason for his unlikely outlook on internet gaming.
It should not be under-stated that Adelson’s analog gambling institutions have allowed him to do a lot of social good. He is one of the world’s most generous philanthropists and continues to donate millions of dollars to a range of causes and organizations.
Further, he has personally shaped Vegas into a more business friendly city and promoted the services and markets ancillary to his gambling operations. No matter how you view Adelson and his agenda, his impact on our industry cannot be debated.