Profile and purpose of gambling in Montana

Pub Date: 1/1/2003
Profile and purpose of gambling in Montana

Montana has, over the years, developed a system of legalized gambling that has been carefully, deliberately and incrementally evolved to fit this state's unique economic and social requirements.

First, a little background.

During the 1970s, then with increasing momentum in the 1980s, drinking practices, especially as they pertained to driving afterward, were falling under increasing social scrutiny. Drunk driving was recognized to be the serious and dangerous crime that it is.

Penalties associated with offenses have been and continue to be stiffened dramatically. They now call for mandatory jail time, heavy fines, lost driving privileges, subsequent violations treated as felonies, confiscation of vehicles and long-term imprisonment.

The exponentially increased awareness of the problem and punishment for transgressions has had a profound effect on the adult beverage business. People are simply drinking a lot less in our state's 2,000 bars.

Montana is still a rural society dotted with dozens and dozens of small but essential towns, villages and hamlets. In many cases, the only local business is a tavern that sells adult beverages but may also sell prepared meals, groceries, fuel, entertainment and other essentials.

These business may be the only ones open in the evenings or on weekends and may offer the only entertainment options or social opportunities for miles around. They are culturally, socially and economically indispensable.

As the tavern business declined in the late 1970s and early 1980s, something had to change or the demise of hundreds of these small enterprises was imminent.

In another related twist, local governments had been severely limited by citizen initiative in their ability to raise tax revenue, and many essential local services were being pinched off.

Finally, gambling had been a part of the Montana social landscape forever, and the games existed in grey areas between and sometimes outside of the law. It was good policy to centrally, closely regulate and tax the activity.

An astute Legislature recognized the problems struggling taverns, strained tax streams and fickle gaming regulation and devised a way to resolve them.

A little more background:

In Montana, liquor license ownership is reserved for state residents and only one all-beverage license is allowed to be owned by any individual. Any number of conventional beer and wine licenses may be owned, as they are more commonly used in restaurant settings.

The residency requirement also assures that the income from gaming operations largely is earned by residents, so is fed back into the local economy, stimulating economic activity across the board.

State law calls for possession of an alcohol license as a prerequisite to application for a gaming license. It further stipulates that only 20 video gaming machines may be operated in conjunction with a single license.

So, because of our residency requirements, limitations on license ownership and limiting licensees to 20 machines, we have created a system of locally owned traditional taverns, restaurants and mini-casinos that offer low-stakes, small scale gaming entertainment with financial benefits for operators, taxpayers and government.

In turn, the games are restricted to an environment where the age of participants is regularly as a matter of course verified, and where the state traditionally has, for almost seven decades, wielded a heavy regulatory hand.

There are about 1,675 establishments licensed for gaming in Montana and 17,300 machines in operation. Thus the average licensee operates about 10 machines. These numbers have remained relatively static for many years.

The revenue these machines produce is taxed at a 15 percent rate on the gross proceeds before any expenses other than paid-out prizes are deducted. Yet the tax yielded $50 million this year, approximately two-thirds of which is reimbursed to local government by the state, one third of which the state retains. Gaming taxes fund approximately 14 percent of city budgets.

Other license and permit fees paid by machine owners completely fund the operation of the regulatory apparatus, the Gambling Control Division of the Montana Department of Justice.

The result:

So, the state has effectively achieved its goals: produce supplemental and essential income for our locally owned taverns and their 22,500 employees, according to a 2002 study and produce "voluntary" tax revenues to support government services, all via small stakes, small-time, well regulated gambling.

Finally, our state's policy has allowed a relatively benign entertainment option for hundreds of thousands of residents and our million-plus annual visitors.

People will gamble: there is no question about that always have, always will. Some form of gambling, including wide-open casino gambling, is available to the west, north, east and south. With our own home-grown, small-time gaming industry, at least some of those gaming expenditures stay right here in Montana.


Player participation by game type graph from the Montana Business Quarterly, Autumn 2002, Gambling Economic Impact Study, "Montana's Gambling Industry: An Update," Bureau of Business and Economic Research, University of Montana, .


Characteristics of business type licensed for gaming from the Montana Business Quarterly, Autumn 2002, Gambling Economic Impact Study, "Montana's Gambling Industry: An Update," Bureau of Business and Economic Research, University of Montana, .

Sources: Montana Department of Justice Gambling Control Division '; Montana Tavern Times, published monthly by Continental Communications, 125 W. Granite St., Suite 102, Butte, MT 59701'; Autumn 2002 Gambling Economic Impact Study, "Montana's Gambling Industry: An Update," Bureau of Business and Economic Research, University of Montana.