Gambling industry Summary

  • Last updated on November 10, 2022

Gambling has become one of the most profitable American enterprises. For a time, it was legal only in the state of Nevada, but gambling has become legal in forty-eight states (although not Hawaii and Utah). Shares in some gambling corporations are traded on the New York Stock Exchange.

In the United States, Nevada became the first state to permit gambling in 1931. In large measure, the move was made to create revenue for a jurisdiction faced with the prospect of being unable to support itself. After gambling became legal, Organized crime;gambling industryorganized crime syndicates came into Nevada and took control of the gambling industry, using the experience they had gained by running illegal gambling operations elsewhere. Vast sums of money were regularly skimmed from casinos in Las Vegas and Reno and hidden from tax authorities. However, in time, it became obvious that casinos could be run profitably and legitimately, merely by predetermining the odds on any game and making certain that the house reaped the desired profit. By the twenty-first century, most of the gambling casinos in Nevada were owned by giant public corporations.Gambling industry

In 1978, Atlantic City, New Jersey, joined Las Vegas as a major site for casinos, and since then, many states have licensed various forms of gambling. The Casinoscasinos draw people with slot machines and games such as baccarat, craps, keno, roulette, and blackjack. They also make use of clever tactics to enhance sales. For example, casinos do not have clocks on the wall that might remind gamblers how long they have been gambling. They sometimes provide free alcoholic beverages, served by attractive young women. The casinos also attempt to soften any moral concerns by saying that their patrons are engaged in “gaming” rather than “gambling.”

This sign welcomes visitors to Las Vegas, a major center of gambling in the United States.

(© Davinci/Dreamstime.com)

Two firms–Harrah’s Entertainment and MGM Mirage–dominate the gambling business, both in Nevada and in the rest of the United States. In 2007, Harrah’s EntertainmentHarrah’s Entertainment, the largest gambling company in the world, had an estimated annual income of almost $9 billion; it employed 95,000 people and owned fifty-four casinos across the United States. It controlled more than half of the hotel rooms on the Las Vegas Strip. The transformation of the gambling industry from a shady business to a modern, corporate endeavor is demonstrated by the leadership (as of 2008) of Harrah’s Entertainment and MGM MirageMGM Mirage. Gary Loveman, the chief executive officer of Harrah’s Entertainment, was formerly a professor at the Harvard Business School, and J. Terrence Lanni, chief executive officer of MGM Mirage, holds a master’s degree in business from the University of Southern California. Also, MGM Mirage describes itself on its Web site as a “respected hotel and gaming company,” thereby distancing itself from the image of a gambling casino run by gangsters.

Las Vegas has also successfully marketed itself as something more than just a gambling mecca–as a fun family destination and a great place to hold conventions. The city has highlighted the celebrity performances, shops and restaurants, swimming pools, and family amenities (such as playgrounds for children) featured at its many casinos as well as the relatively low prices of its hotel rooms. Each day, Las Vegas’s population of 793,000 is increased by 250,000 visitors.

Slot Machines

About 70 percent of gambling casino income is derived from Slot machinesslot machines. The customer, who on average makes six plays a minute, presses a button that results in a winning or losing display. Slot machines have distinct advantages for the businesses that use them: They can generate revenue any time that the business is open, and they do not require the hiring of an employee (such as a dealer) to interact with the customers.

Manufacturing of slot machines largely is the province of International Game Technology, a Reno-based business. One of its best sellers is The Price Is Right, a slot machine designed to dispense a large number of small payouts to provide a great deal of positive reinforcement while nibbling away at the bettor’s money. On the average, slots pay back about 90 percent of what is bet.

Slots are designed to appeal primarily to women over the age of fifty-five, who are believed to have considerable leisure time and disposable income. In cities such as San Diego and Phoenix, some casinos operate a fleet of vehicles that shuttle people between the casinos and retirement communities. For older people, casinos provide a safe environment, with numerous security guards and attractive shops and restaurants.

Riverboat Gambling

The popularity of Riverboat gamblingriverboat gambling in the United States can be traced in part to nostalgia for earlier times when boats traversed the major inner waterways. One gambling riverboat on Lake Charles in Louisiana has been designed to look as if it was created in the Victorian era. It features a huge paddle wheel, as required by state law, even though it is propelled by diesel engines and underwater propellers.

Most riverboat gambling came into being through voter referendums. For example, in 1962, 62 percent of the voters in Missouri endorsed a referendum favoring dockside and excursion gambling within the state on boats on the Mississippi and Missouri Rivers. At first, there were limited boarding times and a $500 ceiling on the amount of money any one person could lose, but the time restrictions were later abandoned. Only games of pure chance are permitted. The courts have upheld a ban against any games in which a player’s expected return is increased by reasoning, foresight, dexterity, or any strategy.

Off-Track Betting

Although bets were allowed to be made at racetracks, bets on the same horse races were forbidden if placed elsewhere. This discrepancy seemed odd to many people. In 1971, legal Off-track betting[Off track betting]off-track betting made its debut in New York. The state-operated Off-Track Betting Corporation (OTB) sought to popularize its business with catchy slogans. One OTB advertisement proclaimed, “Start a new morning routine–coffee and doughnuts and the daily double.” Another advertisement read, “If you’re in the stock market, you might find this a better bet.”

The effects of legalized off-track betting are difficult to determine. However, organized crime’s strength in the realm of illegal bookmaking has been greatly reduced. The impact on racetracks is harder to determine; however, tracks are experiencing lower attendance figures, an increase in the age of clientele, and a decrease in the number of foals registered each year. The drop in revenue at racetracks in Bangor, Maine, and in Pennsylvania has been offset somewhat by the installation of slot machines at the tracks.

Native American Casinos

Casinos run by Casinos;Native AmericansNative Americans on tribal land first appeared after Congress enacted the Indian Gaming Regulatory Act of 1981Indian Gaming Regulatory Act of 1981, which legalized gambling on Native American reservations. The law sought to promote tribal economic development, self-sufficiency, and strong tribal government. By 2008, there were 310 such casinos, run by 200 of the nation’s 556 federally recognized tribes. States cannot tax Native American reservations, but many arrange to share in the revenue from these operations. During the early twenty-first century, some states were receiving more than $800 million a year from Native American gambling operations.

The most lucrative of the Native American gambling operations is Foxwoods Resort Casino, located in Ledyard, Connecticut, 110 miles south of Boston and 130 miles north of New York. Foxwoods is operated by the Mashantucket Pequot tribe. It hosts about 40,000 persons daily and has 6,000 slot machines as well as 350 table games located throughout its nineteen-story casino. From the profits, each of the three hundred members of the tribe receives at least $50,000 a year and some receive free homes, education subsidies, medical care, and retirement benefits.

One study found that, on average, in the first four years after a Native American casino was opened, employment in the county where the reservation was located grew by 24 percent, the population increased by 12 percent, and the mortality rate dropped by 2 percent. On the downside, bankruptcies, automobile theft, violent crime, and larceny increased 10 percent in the same time period.

Internet Gambling

The most controversial form of gambling in the twenty-first century is Internet gambling. Most Internet;gambling industryInternet gambling takes the form of electronically placing wagers on sporting events or playing games of chance on personal computers. Fifty-four countries allow Internet gambling, but in the United States, federal and state laws forbid such activities. Some argue that these laws are constitutionally suspect as they violate the First Amendment guarantee of freedom of speech. Law-enforcement agencies object to Internet gambling because it is too accessible to minors. Although some legislators have proposed bills that would legalize and monitor online gambling, as of 2008, none had become law.

Despite the legal questions, Americans are believed to be some of the best customers of overseas Internet gambling operations. The small island of Antigua and Barbuda in the Caribbean has asked the World Trade Organization;gambling industryWorld Trade Organization to issue a ruling that the American ban on Internet gambling is an unfair trade practice and contrary to the agreement by the United States to adhere to regulations that allow traffic in most goods between signatory countries. Although the World Trade Organization ruled in favor of Antigua and Barbuda’s claim, it has no real power to enforce its decision.

It is estimated that illegal sports betting by Americans in the twenty-first century ranges somewhere between $80 billion and $300 billion annually. Some experts argue that if Internet gambling were permitted in the United States, many of those bets would be placed with Nevada casinos because of their name recognition, and the U.S. government would gain considerable revenue from the business.

Further Reading
  • Adler, Peter J. Gambling, Freedom and Democracy. New York: Routledge, 2008. Adler argues that governments have a duty to protect their residents from the subtle degradation of legal gambling and advocates international conventions to monitor gambling activities.
  • Chafetz, Henry. A History of Gambling in the United States from 1492 to 1955. New York: Clarkson N. Potter, 1960. Chafetz offers anecdotes that bear on the historical development of gambling, noting Thomas Jefferson’s backgammon losses while he was writing the Declaration of Independence and the start of the infamous Chicago fire, when a companion of Mrs. O’Leary’s son (and not her cow) knocked over a lantern while rolling dice in the barn.
  • Darian-Smith, Eve. New Capitalists: Law, Politics, and Identity Surrounding Casino Gambling on Native-American Land. Belmont, Calif.: Wadsworth, 2004. An anthropologist looks at the implications for tribal life of casinos on Native American reservations, stressing the dramatic changes that have been introduced into a historically marginalized culture.
  • Grinols, Earl L. Gambling in America: Costs and Benefits. New York: Cambridge University Press, 2004. Grinols argues that others have used conceptually flawed concepts to measure the impact of gambling and that his approach indicates that its social harms outweigh its benefits.
  • McGowan, Richard A. The Gambling Debate. Westport, Conn.: Greenwood Press, 2008. Focuses on the ethical and rhetorical elements in debates regarding gambling and offers case studies from Missouri, Massachusetts, and Macao.
  • Morse, Edward A., and Ernest P. Goss. Governing Fortune: Casino Gambling in America. Ann Arbor: University of Michigan Press, 2007. A comprehensive examination of all facets of gambling practices, including practices in Nevada, other states, and on tribal lands, with emphasis on the role of casinos in economic development.
  • Walker, Douglas M. The Economics of Casino Gambling. New York: Springer, 2007. Argues that legal gambling “cannibalizes” other industries and therefore makes no net economic addition to economic well-being. Includes a comprehensive review of the costs and benefits of gambling.

Indian removal

State-run lotteries

Organized crime

Taxation

Tourism industry

Vending machines

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