Hawaii Sen. Stanley Chang, D-Honolulu, introduced SB935 on Jan. 20, which would ban all advertising of Nevada casinos.
Yesterday, the Senate Committee on Commerce and Consumer Protection recommended the measure be passed.
Chang points out that all forms of gambling are illegal in the state, and:
Residents generate hundreds of millions of dollars, perhaps billions, in economic activity in other jurisdictions related to gambling. And, in return, Hawaii receives no benefit.
The bill also names a Las Vegas operator that’s popular with Hawaiian visitors. Boyd Gaming Corporation has successfully attracted Hawaiians to its downtown Las Vegas properties. An estimated 300,000 visitors from the Aloha State visit Las Vegas each year, giving it the nickname “the ninth island.”
According to Chang, in 2011 alone, Boyd Gaming made $600 million from Hawaiian visitors.
That number is grossly inaccurate, according to Boyd’s spokesperson. According to David Strow, Boyd Gaming made $215 million in 2022 from all sources, not just Hawaiian visitors. He also points out that the legislation may violate the First Amendment.
Obviously, we oppose the bill, and we think there are a couple of serious constitutional issues with it. First and foremost is the First Amendment. Commercial speech is clearly protected by the First Amendment. We believe that couldn’t be clearer. Also, federal law prohibits states from passing laws that discriminate against interstate commerce.
Hawaii is only one of two states with no legal gambling, including a lottery. Lawmakers have long been against gambling expansion. Utah is the second teetotaling state.
The Bill Could Violate the First Amendment
SB935 sparks the question of whether it violates the First Amendment, which grants freedom and protection of commercial speech. In structuring the bill, Chang might be referring to a 1986 US Supreme Court (SCOTUS) decision that upheld a Puerto Rican law limiting gambling advertisements.
In Posadas de Puerto Rico Associates vs. Tourism Co. of Puerto Rico, SCOTUS held that Puerto Rico had a legitimate concern in limiting gambling among its residents, and that concern did not violate the First Amendment.
However, SCOTUS has decided differently in multiple cases since then.
In 44 Liquormart, Inc. vs. Rhode Island in 1996, SCOTUS ruled that a ban on alcohol price advertising is unconstitutional. The plaintiff, 44 Liquormart, did not advertise a price on the alcohol it sold (following Rhode Island law) but suggested low prices, which the state found illegal. SCOTUS ruled that Rhode Island violated freedom of commercial speech in the case.
Additionally, in 1999, SCOTUS again went against the 1986 ruling. In the Greater New Orleans Broadcasting Association vs. United States, the court struck down a law prohibiting the broadcast advertisement of Louisiana casinos. The broadcast would go into neighboring states, including Texas and Mississippi, and was deemed illegal by the FCC.
After each case in 1996 and 1999, there were calls to overrule the 1986 Puerto Rico case. However, SCOTUS hasn’t done so. That gives Chang hope that his bill can withstand potential challenges; and, if it goes to court, the 1986 case could be used.
Hawaii Faces a Gambling Dilemma
One of Chang’s arguments is that Hawaiians going to Nevada are taking money out of the state. His proposal is meant to reduce the number of people leaving Hawaii to gamble. However, he does not acknowledge that many Hawaiians like to gamble responsibly or offer an alternative to keep money in the Aloha State.
Hawaiian lawmakers have long been against gambling, with only a small part of them seeing the national shift of acceptance towards it — state Reps. John Mizuno and Daniel Holt are among those select few.
Mizuno and Holt, both representing the neighborhood of Kalihi on the O’ahu island, introduced a gambling bill in January. Last week it got shut down by the Hawaii House Committee on Economic Development, meaning Hawaii stays gambling-free for another year.
The bill introduced by Mizuno and Holt would have focused on the local economy and not allowed big sports betting operators to enter the market. Instead, it would’ve established small, locally owned gaming parlors where patrons could bet on sports and poker.
Additionally, they believe establishing legal parlors would reduce crime and illegal parlors, something Kalihi struggles with. Illegal parlors promote crime, prostitution, and drug dealing. Furthermore, estimates indicate that gambling revenue can reach $400 million to $800 million in the future.
The Hawaii House Committee on Economic Development didn’t see it that way. Concerns of lawmakers and police departments are that gambling will increase crime and addiction. Also, they estimated that the bill would generate only $7 million in tax revenue, which would not be enough to “put the communities at risk.”
Chang’s legislation and the rejection of the bill by Reps. Mizuno and Holt leave Hawaii at a crossroads. On one side, the state doesn’t want people to gamble, even outside the state. However, Hawaii is not providing an alternative.