Casino Gambling in Las Vegas: History, Law & Business

Introduction

"He had an idea — to build a city out of a desert stop-over for GIs on the way to the West Coast. That kid's name was Moe Green — and the city he invented was Las Vegas. This was a great man — a man of vision and guts. And there isn't even a plaque — or a signpost — or a statue of him in that town!..." — Hyman Roth, modelled after crime boss Meyer Lansky, The Godfather (1974)

Perhaps the most famous gaming site in the world is Las Vegas, Nevada, but this bright spot in the desert did not simply appear out of nowhere, as the epigraph above emphasizes. Indeed, the Las Vegas of the 21st century is the result of an enormous amount of investment over the years — first by the underworld, but with an important shift to informed investments by legitimate business concerns during the latter half of the 20th century. Today, Las Vegas represents a vacation destination for millions of people from all over the world, and, not surprisingly, it also has more slot machines than any other city in the United States. The billions of dollars that the city's casinos take in every year have contributed to a superb municipal infrastructure, and Las Vegas has ranked among the fastest-growing communities in the country for a number of years.

In this environment, it is reasonable to suggest that the spectacular growth experienced by Las Vegas in recent years will continue for the foreseeable future, and increasing levels of tourism will also mean that the market for casino gambling will likely continue to grow. To determine what is involved in starting a casino in Nevada in general and Las Vegas in particular, this paper provides a brief history of Las Vegas, an overview of the casino business in terms of the financial aspects of starting one, controlling regulations and statutes, common investment patterns, government regulation, and modern casino management. A summary of the research and important findings is presented in the conclusion.

The Growth of Las Vegas

On the one hand, city leaders of Las Vegas point to the wide range of family-related activities now available in "Sin City," as well as emphasizing the numerous historic sites nearby, the quality of their schools and streets, the convention center facilities, the ultra-modern spas and resorts, and even the low-cost aspects of visiting for families from around the world. On the other hand, many potential visitors and a majority of authorities agree that the business of Las Vegas is mostly just one thing: casino gambling. According to Littlejohn (1999), "The industry in Las Vegas is casino gambling. For most people this denotes a four-mile stretch of Las Vegas Boulevard South called the Strip, which occasionally spills over onto side and parallel streets, from Sahara Avenue at the north end to just past Hacienda Avenue at the south, where it bumps into McCarran Airport" (p. 1). Besides "the Strip," the "industry" in Las Vegas today also includes Downtown Las Vegas, situated just north of the Strip and once the city's actual downtown district, as well as smaller casinos scattered about the city and county (Littlejohn).

For the past two decades, Las Vegas has experienced meteoric growth, transforming itself from its gangster beginnings into a modern metropolitan area with much to offer visitors and residents alike. As Mohl (2004) reports, "With 8,000 residents in 1940, its population multiplied many times over in successive decades, reaching 1.4 million in 2000. Las Vegas exemplifies late twentieth-century Sunbelt city growth — with a difference" (p. 368).

That difference was significant and distinguishes Las Vegas as a truly unique phenomenon in terms of investment patterns and growth. Mohl emphasizes the importance of outside capital in developing the region: "First railroads and mining and later federal funding for 1930s-era dam building, war-time air bases, and postwar atomic testing sites" (p. 368). In fact, the federal government spent about $19 million to build the Hoover Dam as well as Boulder City nearby to house the construction crews. As a result, over 5,000 Boulder Dam construction workers were collectively earning $750,000 a month by 1934, and many of them spent much of their pay in Las Vegas, located just 30 miles away (Gragg, 2007). While these funding sources helped fuel the city's initial growth by bringing people to the otherwise desolate area, it was the visionaries of the underworld who recognized the region's potential for providing these workers with entertainment for their earnings.

Casino gambling initiatives have been part of the city's history from the outset. According to the City of Las Vegas (2008), "The city of Las Vegas celebrated its 100th birthday on May 15, 2005. The event celebrated the May 15, 1905 land auction when 110 acres of land in downtown Las Vegas were auctioned off" (Fun facts, p. 2). Although a hotel and casino were established just a year later, the Golden Gate Hotel and Casino was forced to shut down its gaming operations when a 1910 law made gambling illegal in Las Vegas. The city's future was set back on the casino gambling course in 1931, however, when the State of Nevada legalized gambling (Fun facts). Since that time, the casino gambling industry in Las Vegas has experienced some colorful, sometimes violent, expensive, and fundamental transformations in ownership, financing, and investment methods. As Mohl notes, even more important to the city's destiny than the pre-war and wartime federal investments was "the postwar arrival of mobsters, mostly Jewish, who parlayed Nevada's libertarian politics and legalized gambling into an illicit playground for high-rollers and two-bit hustlers" (p. 369).

From Mob Money to Corporate Investment

Unlike the legitimate investment climate that typifies the Las Vegas gaming industry today, the resources for constructing the original Strip came from sordid sources that exerted control over the industry until the 1970s. As Mohl reports, "Using mob and Teamster pension money, Las Vegas's newly arrived criminal entrepreneurs built hotels and casinos and retained control of the growing city until the 1970s, when outside corporate interests moved in and initiated a new phase in the city's development" (p. 369). Authorities agree that the criminal element has since been replaced by large corporations aiming to bring the gaming industry to new levels. As a result, today most of the casinos in Las Vegas are owned by gaming corporations (Chandler & Jones, 2003).

Cooper (2004) captures this transformation vividly: "Wall Street corporations have replaced mafias and mobs. At a recent gambling industry convention in Las Vegas, the chief financial officers of three major casinos sat on a public panel. When someone from the floor asked if investment in the casino business was a good bet, one of the CFOs answered, essentially: The difference between us and Enron is that at least our money is real" (p. 28).

This "new phase" of development has paid off in major ways over the last four decades. With so much money at stake, both the State of Nevada and the City of Las Vegas have the administration of the gaming industry down to a science — though there are serious legalities involved in establishing a casino operation. Among the considerations is the need for a qualified labor force, which is not an inexpensive undertaking. As Mohl emphasizes, "Las Vegas is now one of the most organized cities in the West. The unionization of hotel and casino workers, whose Culinary Union provides a dependable labor force to the hotels, assures high pay to low-skill workers" (p. 369). In addition, the health care plans and other benefits provided to union employees are ranked among the best in the nation and are therefore costly for their employers (Chandler & Jones, 2003).

Conclusion

Any recent visitor to Las Vegas can readily attest to the vast array of activities available for virtually any individual's tastes, but the overwhelming majority of people flock to Las Vegas to enjoy the gaming opportunities provided on the world-famous Strip. The research showed that competition for the gambling dollar in Las Vegas is fierce, and casinos continue to try to outdo each other in terms of how opulent and flashy their facilities can be. Many sponsor rock concerts, world-class boxing matches, and other spectaculars to entertain their guests.

The research also showed that establishing a casino in Las Vegas is not an inexpensive proposition, but the guidelines for doing so are fairly straightforward. Nevertheless, the Nevada Revised Statutes emphasize that a gaming license is a privilege and not a right, and the city enforces high standards for its casino operations to ensure that investments are legitimate and that criminal elements are unwelcome. The transformation of Las Vegas from mob-financed gambling den to a corporately governed, globally recognized entertainment destination stands as one of the more remarkable urban economic stories of the 20th century.

References

Alexander, R. C., & Paterline, B. A. (2005). Boom or bust? Casino gaming and host municipalities. International Social Science Review, 80(1–2), 20–21.

Chandler, S., & Jones, J. (2003). Because a better world is possible: Women casino workers, union activism and the creation of a just workplace. Journal of Sociology & Social Welfare, 30(4), 57.

Cooper, M. (2004, May 24). America's last honest place: Las Vegas is capitalism stripped bare. The Nation, 278(20), 28.

Fun facts. (2008). City of Las Vegas: LasVegasNevada.gov. Retrieved from

Gragg, L. (2007, February). Las Vegas: Who built America's playground? History Today, 57(2), 51.

Littlejohn, D. (1999). The real Las Vegas: Life beyond the Strip. Oxford University Press.

Mohl, R. A. (2004). Neon metropolis: How Las Vegas started the twenty-first century. The Historian, 66(2), 368–369.

Nevada Revised Statutes. (2008). State of Nevada Legislature. Retrieved from http://www.leg.state.nv.us/NRS/NRS-463.html#NRS463Sec0129

New business checklist. (2008). City of Las Vegas: LasVegasNevada.gov. Retrieved from