Casino Accounting and Financial Management: Second Edition

Chapter 1: Casino History and Operating Environment

c h a p t e r 1 Casino History and Operating Environment In the last dozen years a limited and localized industry has exploded into the newest and most exciting national industry. The gaming business has experienced unprecedented growth—both in existing as well as new jurisdictions. Gaming also has become the economic salvation of many Native American Indian tribes. The last twelve years have seen quantum leaps in gaming technology , innovative games, and significant new casino accounting and finance issues. To understand the details of casino accounting, it is necessary to understand the overall operating environment in which the accounting and finance takes place. It is also necessary to understand the historical development and structure of the casino industry, as well as the typical organization and operation of an individual casino. the history of gambling In examining the history of casino gaming, one must first secure an understanding of gambling of all types. Gambling is as old as man himself.1 Ancient Egyptian artifacts have indicated gambling as a sport or pastime as early as 2000 bc. Gambling was practiced in India and Greece long before the birth of Christ. American Indians were enthusiastic gamblers for centuries before the discovery of the New World.2 Gambling of various forms was popular in western European civilizations, and card games were extremely popular in Europe during the thirteenth century . Around 1360, the French contributed the style of cards which has become the world standard.3 The modern word gambling has its roots in the Anglo-Saxon word gam- 4 Background and Environment nian, which means to sport or play. The term gaming is both a corruption of the word gambling and a deliberate attempt to differentiate legalized casino gambling from its illegal predecessor activities. The word gaming also focuses on the air of sport and minimizes the negative emotional aspects of excessive risk taking sometimes associated with gambling.4 attitudes toward gambling The history of gambling is also the history of public acceptance of the various games of chance that form the basis of gambling. Gambling has been accepted , encouraged, and banned. The first recorded banning of card games was in 1387, when John I, the king of Castile, prohibited card playing because of heavy financial losses by members of his court.5 Europe and America have had alternative periods of encouragement and repression of various forms of gambling. In the United States there were frequent lotteries as the new country was struggling for survival, and economic needs for government funds were acute. It has been a rule that economic pressure for government revenues has often brought increased tolerance toward gambling, as illustrated in the practices in many states, both in the past and at present.6 the gaming industry in the united states Today only two states, Hawaii and Utah, do not have any form of legalized gambling. Even the state of Hawaii periodically considers adding gaming casinos as a solution to limited state funding sources.7 Other states are contemplating additional forms of gaming, or increasing the taxes on gaming to help fund a variety of state projects. Out of fifty-three domestic jurisdictions (District of Columbia, Puerto Rico, and the Virgin Islands are added to the states), some form of legal gaming activity exists or is approved in the states indicated in table 1-1. Appendix 1 lists the types of gaming activities on a state-by-state basis in detail. Figure 1-1 graphically indicates the status of gaming in the United States. Future growth of approved gaming is expected to continue. The only thing constant in the gaming industry seems to be change. Legalization of new types of gaming is continuing and undoubtedly the next decade will bring a number of new jurisdictions and new types of gaming activity. table 1-1 States with Gaming Form or Type of Gaming States Bingo 48 Casinos Commercial casinos 11 Indian casinos 28 Lotteries 41 Pari-mutuels & off-track betting 43 History and Operating Environment 5 Gambling today is a business, a very big business. In 1976, the report entitled “Gambling in America” estimated that $17.7 billion was wagered legally every year and that some 14 million people gambled annually in casinos.8 Less than twenty years later, in 1996, the total amount wagered in the gaming industry was $34 billion. By 1997, an industry trade group studying the impact of gaming as an entertainment...