Atlantic City Legalizes Casino Gambling

Atlantic City’s legalization of casino gambling changed the gambling industry, as Nevada’s legal gambling destinations, particularly Las Vegas, found they needed to compete for business, and other locales began to consider legalized gambling as a way to raise revenues.

Summary of Event

From the 1930’s to the late 1970’s, legal casino gambling within the United States was confined to Nevada and (with minor exceptions) Indian reservations. Casino gambling took a giant step toward penetrating more deeply into American society on November 2, 1976, when New Jersey voters legalized the practice in their state. Atlantic City residents hoped that taxes on gambling revenues as well as tourist dollars would restore the luster to what had once been the jewel of East Coast resort destinations. Founded in 1854, the beach town of Atlantic City started to attract vacationers as early as 1870, when its famous boardwalk was completed. After World War II, however, it declined in popularity. No superhighway connected it to New York or other urban areas, and, except for the boardwalk, it had no attraction to compete with California or Florida beaches. Gambling;Atlantic City
Casinos;Atlantic City
Atlantic City casinos
[kw]Atlantic City Legalizes Casino Gambling (Nov. 2, 1976)
[kw]Casino Gambling, Atlantic City Legalizes (Nov. 2, 1976)
[kw]Gambling, Atlantic City Legalizes Casino (Nov. 2, 1976)
Gambling;Atlantic City
Casinos;Atlantic City
Atlantic City casinos
[g]North America;Nov. 2, 1976: Atlantic City Legalizes Casino Gambling[02610]
[g]United States;Nov. 2, 1976: Atlantic City Legalizes Casino Gambling[02610]
[c]Government and politics;Nov. 2, 1976: Atlantic City Legalizes Casino Gambling[02610]
[c]Trade and commerce;Nov. 2, 1976: Atlantic City Legalizes Casino Gambling[02610]
[c]Travel and recreation;Nov. 2, 1976: Atlantic City Legalizes Casino Gambling[02610]
Trump, Donald
Wynn, Steve
Harrah, Bill
Griffin, Merv

A vote in 1974 had failed to legalize casinos statewide in New Jersey. Supporters of gambling in the state sculpted a different measure in 1976 that restricted gambling to Atlantic City. Various U.S. states already had permitted lotteries for more than a decade (New Jersey itself had a lottery), and casinos had been built along the California-Nevada border in Lake Tahoe. Casino gambling offered dice and card games, roulette, on-the-spot sports betting, and slot machines, all with the odds stacked clearly in favor of the casino.

Gambling in the United States represented essentially a “frontier” activity, one that embodied such “western” traits as individuality, risk taking, and opportunism. The “gambling bug” had tended to move westward, until it alighted in Nevada, close enough to incubate in the warmth of California’s economy but far enough removed from the Golden State that it did not have too much direct influence there. Some commentators asserted that the spread of gambling back to the East represented a natural phenomenon of eastern areas trying to regain their frontier spirit. Ultimately, however, the dynamics of voter mentality demanded that gambling show material rewards rather than merely an individualistic, opportunistic spirit before it would be approved at the polls.

Las Vegas, and Nevada gaming in general, had long been associated with organized crime figures such as Benjamin “Bugsy” Siegel, Siegel, Bugsy who claimed credit for creating Las Vegas, and frequent mobster visitors. Eventually, gaming came under intense investigation by federal and state officials. New Jersey’s voters wanted to make sure that any casinos allowed to operate in Atlantic City would remain free of the influence of organized crime.

The traditional philosophy of casino management was epitomized by Bill Harrah, whose Harrah’s casino catered to professional gamblers. Harrah and others had directed the older generation of casinos in Nevada, giving complimentary rooms, meals, and show tickets to, or “comping,” the gamblers they identified as potential “high rollers.” With returns to the casinos vastly exceeding the cost to the casinos of the free rooms and meals handed out to the high rollers, casinos in the relatively noncompetitive environment that existed prior to 1976 made hefty profits. Although organized crime originally had a foothold in many of the casinos, by the 1970’s the Nevada Gaming Commission Nevada Gaming Commission had weeded out most of that influence.

Even before Atlantic City opened casinos and began competing for gamblers’ attention, a new generation of casino owners in Las Vegas sought to keep visitors in their hotels for longer periods of time by offering “family” attractions, such as amusement parks. That trend accelerated once the threat from Atlantic City was realized. Las Vegas promoters advertised their city as a center for entertainment of all kinds, whereas Atlantic City focused on gambling as its primary attraction.


The opening of Atlantic City as a “second Las Vegas” let the gambling genie out of its bottle. Although it far outpaced Atlantic City in attractions and casino management, Las Vegas lost the mystique of being the only gambling resort in the United States. It is difficult to estimate exactly how much Atlantic City cost Las Vegas in lost revenue, but some statistics are illustrative. In 1982, Atlantic City attracted twenty-three million visitors, twice the number that visited Las Vegas that year. Gross revenues from gaming in Atlantic City in 1982 were $1.5 billion, roughly equal to those of Las Vegas. This ratio of visitors to gaming revenues suggests that Atlantic City was far less effective in getting visitors to gamble. In addition, Atlantic City visitors had shorter stays than did Las Vegas visitors.

Part of the reason Las Vegas was effective in convincing visitors to stay longer and to part with their dollars in the casinos was that the Las Vegas hotel and casino owners made a fundamental reassessment when Atlantic City opened to gambling. Realizing that they could no longer rely only on gamblers, as that market would suffer from inroads made by Atlantic City, they entered into a frenzy of new casino building aimed at family entertainment. Many of the new hotels copied the style of the successful family-oriented Mirage Hotel created by Steve Wynn and, to a lesser extent, the theme-oriented Caesar’s Palace. The Mirage featured dolphin pools, an enclave housing white tigers, game arcades for children, a volcano that erupted spectacularly every hour, a hugely popular magic show featuring Siegfried and Roy, and many other nongambling attractions. Caesar’s had Disney-type robot attractions, costumed employees who wore Roman togas and battle gear, an enclosed shopping mall, and an IMAX theater.

By the late 1980’s, most of the influence of organized crime had been driven out of the casino business by large, publicly held corporations such as Holiday Inn, Harrah’s, and Ramada Inns. The new owners of the casinos were less interested in using the legal gambling operations as a cover for illegal income than in maximizing their profits in the gaming establishments themselves. New computer technology produced video poker machines as well as traditional slot machines that featured randomly spinning objects, such as fruit, numbers, or characters. Regardless of the format, a typical slot machine or video poker machine could take in a profit of $100,000 in a year. Many casinos even introduced “frequent gambler” cards, which carry computer-coded information that allows selected customers to receive complimentary drinks, meals, and even hotel rooms. The cards and associated discounts are intended to lure patrons into gambling more than they otherwise would. In 1991, Atlantic City casinos gave out nearly $500 million in complimentary goods and services.

The new corporate owners of Atlantic City and Nevada casinos advertised heavily. To entice New Yorkers and visitors to the East Coast to make the trip to Atlantic City, casinos gave away more than $247 million in cash and bus coupons in 1991 alone. Hotel room prices rarely covered the hotel’s costs; the hope was that guests would gamble in the hotel’s casino rather than venturing out.

“Comps” and advertising were easily paid for out of gambling revenues, but financing the construction of expensive hotel-casinos required considerable capital investment. Among the early sources for Atlantic City casino financing was Michael Milken, famous for his convictions on violations of securities laws in the 1980’s. Veteran corporate hotel and casino operators such as Holiday Inn, Hyatt, and Ramada Inns had no difficulty raising cash. New entrants and those inexperienced in American casino gaming, such as the Playboy organization and real estate developer and entrepreneur Donald Trump, found the going more difficult. As a result, several paid far more for their facilities than proved to be justified. Trump paid more than $1 billion for the Taj Mahal hotel and casino, and Merv Griffin’s takeover of Trump’s Resorts International exceeded $1 billion in borrowed capital.

Some of the ventures represented a misunderstanding of the market. Playboy, for example, tried to create a fancy, European-style casino, not realizing that most Atlantic City gamblers were more of the nickel slot machine variety, unwilling to spend a lot of money on luxurious accommodations and elaborate shows. Trump ran so low on funds that he could not afford to build a swimming pool at the Taj Mahal. Trump even competed against himself for a short time: In 1985 he bought the Trump Castle from Barron Hilton, and in 1986 he bought Holiday Inn’s Boardwalk property, which he called the Trump Plaza Hotel and Casino.

Inexperience was exhibited in operating the casinos as well as in capitalizing them. Trump, for example, allowed his wife Ivana, who had no casino managerial experience, to run Trump Castle. Whereas veteran casino managers such as Steve Wynn made certain that the “high rollers” got the most prestigious suites, Ivana took the Castle’s fanciest suite for herself. Trump’s ego and inexperience also led him to acquire controlling interest in Resorts International and its Taj Mahal, the world’s largest casino, which was unfinished at the time and was estimated to need more than $500 million to complete. Meanwhile, Resorts International had attracted the interest of show business producer Merv Griffin, who put out a bid to acquire the stock in Resorts International from Trump in a deal that allowed Trump to keep the Taj Mahal. Griffin used junk-bond financing provided by Michael Milken (in his last major deal) to purchase Resorts International from Trump in November, 1988. More than $1 billion in borrowed funds went into the deal. Within a short time, both Griffin and Trump were in bankruptcy court.

Legalized casino gambling soon spread to other states, which were enticed by the promise of huge revenues. In April of 1989, Iowa passed a casino bill allowing gambling on casino boats traveling on the Mississipi and Missouri rivers. The city of Davenport set its sights on becoming the center of the river gambling activity, which proponents claimed would attract nearly 800,000 gamblers each year, generating more than $90 million. Some of the boomtowns of the Old West also sought to return to their former glory by legalizing casino gambling.

In 1987, the U.S. Supreme Court allowed Indian tribes to offer on their reservations any types of gambling that were allowed in the states where the reservations were located. Some Indian tribes immediately started to lobby to be allowed to offer gambling of other types on their reservations as well. In several states, reservation gambling touched off sharp debate among those who contended that the Indians had unfair advantages, such as freedom from federal taxation. Indian groups maintained that such charges represented revived forms of racism and oppression of Native Americans.

The quiet proliferation of legalized gambling included legalization of video slot machines in Maryland, Montana, Oregon, South Dakota, and West Virginia. By 1993, Minnesota had more casinos than did New Jersey. Some critics of legalized gambling pointed out the unseen and subtle harms caused by the creation of a public mentality that wealth comes from chance or luck rather than from skill and effort, and by the notion that public goods can be obtained and financed without sacrifice. Despite such arguments, however, both the public and corporate America continued to support the spread of legal casino gaming. Gambling;Atlantic City
Casinos;Atlantic City
Atlantic City casinos

Further Reading

  • Abt, Vicki. The Business of Risk: Commercial Gambling in Mainstream America. Lawrence: University of Kansas Press, 1985. A scholarly approach to the sociological impact of legalized gambling on American values.
  • Barker, Thomas, and Marjie Britz. Jokers Wild: Legalized Gambling in the Twenty-First Century. Westport, Conn.: Praeger, 2004. Provides analysis of gambling as a legitimate industry and discusses the involvement of organized crime in gambling, gambling’s effect on communities, and state-run lotteries.
  • Findlay, John M. People of Chance: Gambling in America from Jamestown to Las Vegas. New York: Oxford University Press, 1986. A broad investigation of gambling. Findlay argues that gambling had distinctly “frontier” or western roots and that it reflected American values of opportunism, risk taking, and individualism. Well documented and stronger in analysis than many other books on American gambling.
  • Johnston, David. Temples of Chance: How America Inc. Bought Out Murder Inc. to Win Control of the Casino Business. New York: Doubleday, 1992. A journalist’s entertaining and timely discussion of the new generation of corporate-owned casinos. A pioneering history of the rise of Atlantic City and subsequent legalization of gambling in other states.
  • Sasuly, Richard. Bookies and Bettors: Two Hundred Years of Gambling. New York: Henry Holt, 1982. Examines in depth the history of gambling in the United States. Particularly helpful in understanding the laws involved in gambling.
  • Van Meter, Jonathan. The Last Good Time: Skinny D’Amato, the Notorious Five Hundred Club, and the Rise and Fall of Atlantic City. New York: Crown, 2003. Describes the history of Atlantic City from its founding in the 1850’s to its evolution into a gambling mecca. Focuses on the life and career of nightclub owner Paul “Skinny” D’Amato. Includes index.

New York State Allows Offtrack Betting

U.S. Law Supports Indian Gaming

Pequots Open Gaming Facility