The Casinos and the Whale

Japanese tycoon Terrance Watanabe gambled away nearly $127 million at the Caesar’s Palace and Rio casinos in 2007, and now is suing the casinos even as he faces criminal charges for refusing to pay them over $15 million in additional debts. He claims that the gambling establishments allowed him to gamble while intoxicated in violation of state casino regulations, and otherwise share blame for his outlandish losses, believed to be the most any gambler has amassed in a single year.

In a comment on the Ethics Alarms thread about card counting, casino ethics are compared to Bizarro World, the richly metaphorically planet in Superman Comics populated by flawed clones of Superman and his friends whose logic and customs are the opposite of what we would call sensible. On Bizarro World, logic is illogical, just as in the world of large scale legalized gambling (itself unethical, in my view) unethical conduct may seem ethical. Watanabe was what casinos call a “whale”— a fanatic gambler with a lot of money to lose. The practice with “whales’ is to make them happy and treat them well, so they will lose as much money as possible. How can it be unethical to trust someone well? Well, this is Bizarro World.

As whales go, Watanabe was Moby Dick. He would stay at the tables for up to 24 hours, sometimes losing as much as $5 million in a single binge. He was allowed to play three blackjack hands simultaneously with a $50,000 limit for each hand. At one point, the casino raised his credit to $17 million, according to court documents. Watanabe was also an incredibly dumb gambler. His favorite games were slots and roulette, two games where the odds against a player are prohibitive, and in which skill is irrelevant. He also liked blackjack, a skill game at which he had no skill.

Caesar’s gave him every incentive imaginable to make sure he kept playing and losing. Mr. Watanabe lived in a complimentary three-bedroom hotel suite, surrounded by attendants who served his every need, like delivering a seven-course meal from the casino’s restaurant to him while he was gambling. The casino gave him tickets to the Rolling Stones, $12,500 a month for air transportation, and a half-million dollar credit line at its gift stores. Watanabe was even offered 15% cash back on table losses greater than $500,000. It makes sense: he would lose up to $5 million dollars a day. These are sound investments in human folly.

The casino also kept him drinking, and, Watanabe says in his lawsuit, drugged. Sources have told reporters that they literally never saw the gambler sober. Caesar’s supplied him with a personal bartender and his own special brand of vodka.

Unless he can show that the casino drugged him, most observers seem to believe that Watanabe’s chances of winning his lawsuit are slim. Though Nevada law prohibits casinos from letting patrons gamble when they are intoxicated, it seems that the enforcement of the law is lax or non-existent. In practice, the casinos  ask drunk gamblers to stop, but so not force them to stop, as the law requires. The gambling industry’s approach to gambling addicts is to prohibit them from playing if the addicts request them to do so in advance. The casinos are not required to diagnose gambling addicts, a reasonable policy except in cases  like Terry Watanabe, who might as well have been walking around with a neon sign reading, “I am a out-of-control gambling addict!” on his head.

Legal matters aside, the ethical issues come down to these questions:

  • Does the casino have an ethical obligation to stop a very rich man, who enjoys gambling even when he loses, from playing as much as he chooses?
  • Is it wrong for the casino to do everything in its power to make him want to continue gambling and losing there?
  • If a gambler is foolish enough to gamble while impaired by alcohol or drugs, does a casino have an ethical duty to protect him from himself?
  • Is there any ethical difference between allowing a billionaire to lose millions, and allowing a man who makes $40,000 a year to lose $20,000?

In a normally ethical culture, I would give the answers as “yes,” “yes,” “Hell, yes!” and “Sure…letting the man lose $20,000 is worse.” In the Bizarro World of legal casino gambling, however, the answers are four times “no.”

This is a business that preys on people’s weakness and irresponsibility. It is, by its very nature, an unethical business, one that a state government sullies itself by permitting and profiting from. To argue that a business has an ethical obligation to stop its best customers from using its product makes no sense, even when the business itself is unethical. Watanabe was a victim of a state sanctioned activity that thrives on victims. He is its biggest loser, but far, far from its greatest victim. He still has assets. He still has a job. He is sick and he is a fool, but the people of Nevada (and, tragically, many other states now) have decided that they want to profit from illness and folly.

In the classic film “Chinatown,” the shady section of Los Angeles that gives the movie its title is described as a place where normal expectations and values don’t apply, and chaos and tragedy reign. “Forget it, Jake,” Jack Nicholson’s soul-weary detective is told as he ponders the story’s horrible climax, “It’s Chinatown.” An adaptation of this is the best I can muster after trying to unravel the ethical issues in Terry Watanabe’s saga.

“Forget it, everybody. It’s Bizarro World.”

10 thoughts on “The Casinos and the Whale

  1. This is a great post, Jack, and I’m glad you note that state government “sullies itself by permitting and profiting from casino gambling.” The relationship between casinos and government is an extraordinary and mutually dependent one everywhere gambling is legal in the US. Casinos benefit from government-enforced licensing restrictions (usually including very low limits on the total number of casinos permitted in a given state), enjoying a government-protected quasi-monopoly status that inflates profits, obliterates competition, and entrenches established gambling concerns. Governments benefit from special taxes, well above ordinary business taxes, applicable to casinos. Wherever gambling is decriminalized, the result is a public-private partnership in which the state (and its citizens) becomes enmeshed in the gambling industry in a way it’s not enmeshed in typical free enterprise.

    This why we can’t forget about it. A business as unethical as this one is not something I as a citizen want any involvement in. With gambling expansion continuing nationwide (Ohio just approved its first four casinos in a November referendum, and Pennsylvania is in the process of adding table games to the casinos legalized a few years ago on the premise that, because they would only offer slot machines, they wouldn’t present the problems of full-blown casinos), citizens have an ethical obligation to learn how casinos really operate and prevent their governments from becoming entwined in this garbage.

    A quick correction on Nevada law: Casinos can’t legally take bets from visibly drunk people. Effectively, they are in fact obligated to force such people to stop gambling in their establishments. The regulations cite, as a cause for disciplinary action, “permitting persons who are visibly intoxicated to participate in gaming activity.” (The relevant section is here, in PDF form: This, I would think, bolsters Watanabe’s case, especially if some of the casino employees who talked to the Wall Street Journal in the article you linked testify in court. They claim they were instructed by Harrah’s/Caesars managers to continue dealing cards to Watanabe no matter how drunk he became. This violates Harrah’s own policies, Nevada law, and any ethical scheme I can imagine.

    • Thanks Josh, especially for the clarification on the law in Nevada. I reflected this in an edit—another source stated that the law is simply not enforced as written.

      I’m likely to write a lot on the issue of legalized gambling, beacus my views on it are essentially identical to yours. But I’ll bet Watanabe loses.

      • You’ll bet Watanabe loses, eh? I’m thinking the pun was intended.

        I’ve never quite known the laws around drinking and gambling and this is eye opening. Casinos serve gamblers in their seats and some gamblers sit in the same seats for hours on end drinking at every pass of a cocktail waitress. So what is the definition of “visibly intoxicated”? If you see someone put a toxin in their mouth…. (See where I’m going with this?)

        I live in Colorado, and we recently voted as a state to let the gambling towns of Blackhawk and Central City decide what games to permit and what limits to allow. Before the vote, there was a $5 limit, and games were limited to cards and slots. No craps or roulette.

        Since the vote, the limit is $100 and there is now craps and roulette. There is also now a beautiful new 34 floor hotel (though they cut into the mountain to find space to build it…I think.)

        In 2000, the population of Blackhawk was 118, and 515 for Central City. I guess we’ll find out next year if they’ve grown any.

    • No. Gambling is a legitimate form of recreation, just like drinking alcohol is a form of sensory relaxations and pleasure for the palate. Gambling or drinking in moderation poses no ethical issues at all, but doing either so that one cannot fulfill one’s obligations and threaten the welfare of others is unethical, and the state’s facilitating/promoting/ profiting from that kind of gambling is also unethical. The BUSINESS of providing drink or gambling opportunities easily becomes unethical when the profit motive inspires conduct aimed at encouraging unethical levels of drinking or gambling.

  2. Thank you for this insightful commentary. My one concern about all the attention Watanabe is receiving from the press is that he is (was) so fabulously wealthy that readers and the public will dismiss him and his troubles, which is why I felt it was so important to tell my own story of slot machine addiction. I’m no “whale,” just a hard working university professor who had no idea how addictive slot machine gambling can be. I spent over two years trying to break the habit and not completely lose control. I hope that as more of us speak out about the negative effects of casino gambling, people will think twice and twice again before they let their local and state politicians sneak a casino into their neighborhoods.

    • Slot machines are essentially mechanical devices created to cause addiction; they perfectly embody B.F. Skinner’s research on how intermittent reinforcement locks in conduct. The entire casino environment, as you know, is created to encourage self-destructive behavior profitable to others. Thanks for the comment—I see this as a major cultural ethics issue that needs exposure.

  3. Gambling addiction is as much a neurochemical phenomenon as alcoholism and ingested drug addiction. In addition, some people are born with a genetic predisposition (an inability to effectively metabolize dopamine) to gambling addiction. When you add in the brilliant programming within slot machines – variable interval reinforcement, you have the perfect template for addiction. The gambling industry, in its own terms, programs machines to take players down to extinction.
    I just finished a year’s researching and writing a book on women’s gambling addiction. The information is chilling.
    Thanks for addressing this.

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