In this article we’ll look at how casinos make their money, the history behind them, what the popular games are and how they are played, what you could expect when you visit one, how casino’s stay safe and the dark side of the business.
A casino is simply a public place where a variety of games of chance can be played, and where gambling is the primary activity engaged in by patrons. The typical casino adds a host of luxuries to help attract players, including restaurants, free drinks, stage shows and dramatic scenery, but there have certainly been less lavish places that house gambling activities. These would still technically be called casinos.
A truly enormous amount of money changes hands at casinos every year. While there are certainly big winners at the gaming tables every now and then, the only sure winner in a casino is the owner. In 2005, commercial casinos in the United States had gross revenues of $31.85 billion. Add to that the revenue of Native American casinos, which brought in $22.62 billion in 2005, and it’s safe to say that casino industry profits have been steadily increasing for more than a decade [Source: American Gaming].
Casinos make money because every game they offer has a built in statistical advantage for the casino. That edge can be very small (lower than two percent), but over time and the millions of bets placed by casino patrons, that edge earns the casino enough money to build elaborate hotels, fountains, giant pyramids, towers and replicas of famous landmarks. The casino advantage is known as the “vig” (short for vigorish) or the rake, depending on the game. The exact number can vary based on how the player plays the game and whether the casino has set different payouts for video poker or slot machines.
As of 2007, only two U.S. states do not have legal gambling: Utah and Hawaii [Source: Hawaii News]. Every other state either has state-sanctioned casinos or Native American gaming.
Gambling almost certainly predates recorded history, with primitive protodice known as astragali (cut knuckle bones), and even carved six-sided dice found in the most ancient archaeological sites [Source: Schwartz]. However, the casino as a place for people to find a variety of ways to gamble under one roof did not develop until the 16th century. A gambling craze swept Europe at the time, and Italian aristocrats often held private parties in places known as ridotti [Source: Schwartz]. These were basically private clubs for rich people, but the popularity of gambling meant that was the primary pastime. Technically, gambling was illegal, but rarely was a ridotto bothered by legal authorities – apparently the nobles knew just when to expect the Italian Inquisition. The lower classes were also gambling, but they didn’t have a fancy place to do it in.
In 1638, the government of Venice decided that if they ran a gambling house themselves they could better control it and, while they were at it, make a lot of money. Thus, they authorized the opening of not just any ridotto, but the Ridotto, a four-story gambling house with various rooms for primitive card games and a selection of food and beverages to keep the gamblers happy [Source: Schwartz]. The Ridotto was important for two reasons — it was the world’s first government-sanctioned gambling house, and the first that was open to the general public. High stakes games meant that the clientele were still generally rich people, but in principle, the Ridotto makes Venice the birthplace of the casino. The idea spread throughout Europe as people either thought of it themselves or copied it from the Italians. Indeed, most popular modern casino games were invented in France. As for the word itself, a casino was originally a small clubhouse for Italians to meet in for social occasions. The closure of large public gambling houses like the Ridotto pushed gambling into these smaller venues, which flourished [Source: Schwartz].
In the United States, gambling went through waves of popularity and decline, with a strong wave in the 1800s. Gambling on Mississippi riverboats and in frontier towns were an integral part of the ‘Wild West’ culture, but when moral conservativism took hold of the country in the early 20th century, gambling was on the way out. It wasn’t until 1931 that the desolate state of Nevada decided to legalize gambling. Like the Venetians before them, Nevada politicians figured they might as well gain something from all the illegal gambling that was going on anyway. Plus, the brand new Hoover Dam (then called the Boulder Dam) was sure to bring tourists running — why not give them another way to spend their money within Nevada’s borders? [Source: California State Library]. Soon, casinos drew gamblers to Reno, then Las Vegas, where the downtown gambler’s casinos gave way to the Strip, a neon oasis of themed resort casinos and glamorous stage shows. Atlantic City, New Jersey tried to bring legal gambling to the east coast in the 1970s, with limited success. But the biggest change in the U.S. casino business since 1931 happened in the late 1980s, when Native American tribes decided to get a piece of the action. We’ll discuss Native American casinos a little bit later.
A wide variety of games can be found at casinos, and some casinos seem to specialize in inventing new games to draw more players. In some places, the games that are allowed are regulated by state laws. This section will cover the most common casino games.
Blackjack is one of the easiest table games. The object is to get a hand of cards whose values are as close to 21 as possible without going over (busting). Only the values of the cards are considered, not the suit — picture cards are worth ten, and an Ace can be worth 11 or one, whichever is more advantageous to the player. The house advantage can be minimized by using a strategy or even counting cards, but if a casino suspects card counting, they can throw you out. The house edge without counting is about two percent. For more details, see How Blackjack Works.
Slot machines are the most popular casino games, and casinos earn a larger proportion of their money from them than any other game [Source: PBS]. Part of the slot machine’s appeal is the simplicity — the player puts in some money, pulls a handle or pushes a button and waits to see the outcome. No amount of player skill or strategy can affect the outcome in any way. Varying bands of colored shapes roll on reels (actual physical reels or a video representation of them). If the right pattern comes up, the player wins a predetermined amount of money. Slot machines used to be mechanical devices with reels of the shapes spinning past, but today all slot machines are controlled by on-board computer chips. There are still slots with actual reels, but they are computer-controlled as well. Modern slot machines come in a dizzying array of colors and themes.
Most states have laws regulating the minimum payout frequency of a slot machine, usually about 75 percent. In other words, the house edge is a whopping 25 percent. However, to entice players or compete with other casinos, most slot machines have payout rates in the ’80s or ’90s. State law governs whether the payout rates are published or posted near the machines themselves.
Roulette is a classic casino game was invented by the French (the name means ‘little wheel’). A spinning wheel is divided into 38 spaces, each space containing a number from one to 36. The other two spaces have the numbers 0 and 00. The spaces are also divided between the colors red and black (the 0 and 00 spaces are green). A metal ball is dropped onto the wheel as it spins, rolls and bounces around a bit, and eventually settles into one of the spaces. The players bet on which space the ball will end up in. Bets can be placed in single numbers, various combinations of two or more numbers, even or odd numbers, red or black spaces or sets of a dozen numbers at once. While the house edge varies (different bets have different payouts), it is roughly between five and seven percent.
Craps is a dice game, and is often considered the most complicated casino game. The players bet on the outcome of the roll of two six-sided dice, or on a series of consecutive rolls. The casino edge in craps is about 1.5 percent. Explaining all the details of betting on craps is beyond the scope of this article.
Perhaps even more insidious is the damage done by compulsive gambling. Studies indicate that people who are addicted to gambling generate a disproportionate amount of profits for casinos: five percent of casino patrons are addicted, generating 25 percent of the casino’s profits [Source: PBS]. Economic studies show that the net value of a casino to a community is actually negative [Source: UIUC News Bureau]. Critics contend that casinos primarily draw in local players, not out-of-town tourists, so casino revenue represents a shift in spending from other forms of local entertainment; and that the cost of treating problem gamblers and lost productivity from gambling addicts reverses whatever economic gains the casino may bring. In numerous communities where a casino has opened, calls to gambling addiction hotlines have increased by several percentage points in subsequent months and years.