Ray, do you think your theory about how legal gambling would damage legal businesses only applies specifically to Americans or to every first world country? If it's solely for America, then ok. I haven't lived there in a few years so maybe things have changed quite a bit.
But that's simply not the case here. Australia has 23% of the world's slot machines and the latest figures released said each Australian on average turns over $8k per year gambling, whether they win or not. This amount is a combination of sports/race betting and slot machines. This is a massive gambling country but it is also a very financially sound one - in fact one of the only to escape the GFC relatively unscathed.
People still shop whether they gamble or not. Some may even shop more if they win a decent amount. The thing is though that not everyone here gambles even though their winnings wouldn't be taxed and most people are able to place bets within 10 minutes of their house, if not less. Other than online of course. I have quite a few friends who place a $5-$50 bet once per year on the Melbourne Cup and that's it. They are more than financially able to bet, and lose, every day if they wanted to, but they just don't. Even though it's splashed in our faces constantly to the point that Aussie sporting events constantly post live odds during the game.
The people it does hurt are locals as there really isn't any need for them. Most people aren't willing to take the chance to do something illegal when the lines locals offer just simply aren't worth it. Plus they can't compete with bonuses, free plays, etc...
But as far as legal gambling harming our shopping efforts, that's just incorrect. The only thing harming local businesses right now is the strength of the Aussie dollar compared to the US as more and more people are buying stuff online from US shops and having it shipped here as it's much cheaper to do so.