I had a friend ask me the other day, “Can just anyone own a casino? Can you just open one up if you have the money, interest, etc.? Or are there restrictions?”
This is an interesting question and is certainly worth looking into a little more deeply. I’m going to limit the questions raised in this article to the United States, but many of the same principles will apply generally.
In terms of the actual question, “Can anyone own a casino?” the answer is complicated and depends mostly on the state you live in.
I think the origin of this question is probably from the fact that many casinos in the United States are owned by Native American tribes. Some might even think that only Native Americans can own casinos in the United States.
The answer is a little more complicated. To understand why, you have to back up a bit and look at the history of casinos in the United States.
To simplify things, I’ll just say that casinos as we know them today didn’t really exist until the early 1900s. For a long period within the country’s history, they were pretty much illegal. But all of that began to change after World War I and World War II, when casinos began to appear.
Up until the ‘60s and ‘70s, casinos were really only legal in Nevada. But over time, state laws began to change, and riverboat gambling (which had been part of a loophole) came back in style. When you get into the modern era, the essential rule is that gambling is a state-level decision. It’s not illegal federally, so the states get to decide if they want casinos or not (or gambling of any sort).
However, in the middle of this long push toward legalization, Native Americans realized around the ‘70s and ‘80s that they could probably legally open casinos. After some landmark lawsuits, they won the right to do so. This is because gambling was legal at the federal level and tribal lands were sovereign.
If Native American tribes wanted to open a casino in their state that outlawed gambling, it may be permitted on a federal level if the casino were to operate solely on tribal lands.
So, this is exactly took place in the ‘80s. Still, the country didn’t see much gambling outside of Nevada for another decade or two. Because it was a slow process, many Native American tribes had the ability to get a jump on the competition and open casinos that were open to everyone.
Now, for many Native American tribes, this turned out to be great. They had a source of income that included the entire population of their own state and often other states. While casinos generally don’t increase the income of an actual state, they are known to essentially transfer wealth from one section of a state to another.
They’re not great for growing an economy, but they can be great for growing a local economy at the expense of neighboring economies. Whether you think that’s a good or bad thing is irrelevant, it has worked well. Native American tribes use a large portion of the funds generated to pay for schooling, housing, and other social services for their local reservations.
To get back to the original question, for a time, only Native American tribes could own a casino outside of Nevada.
Did that mean that you had to be Native American to own a casino outside of Nevada? Well, here’s another wrinkle in the story—it really wasn’t individual Native Americans who were opening these casinos, but rather the tribes themselves. So, technically, a single person could only own a casino in Las Vegas, because everywhere else, the casinos were owned by entire tribes.
Now, with gambling legal in a few different states, anyone can open a casino and run it as long as they comply with state laws.
That’s where things get dicey, given that gambling tends to be heavily regulated and that the laws can vary so much from state to state.
This is something most people don’t think about. It’s been my experience that many people who ask this question are really asking if they can just open up a really tiny casino in their town. They’re probably thinking they can take an old warehouse or even a bar and turn it into a little casino of their own.
But whether you can do that or not very much depends on the state you’re hoping to operate in. There are still states where gambling is, for all intents and purposes, completely prohibited. There are others where a certain type of gambling is illegal.
This is why you often find that Native-American-owned casinos will have different slot machines or rules or games than other casinos in the same state. There are specific rules in the state that outlaw particular types of gambling. They’re usually identified by class.
Now, you really have to take the legal side of things into account here because of how specific it can be. For example, many states still basically outlaw casinos on dry land but allow for riverboat casinos. Other states have a limit on how many casinos can exist within the state.
Buying a few slot machines and setting them up in the back room of your gas station may not go over so well with the local authorities, not to mention the fact that many cities have their own set of laws that cover gambling. And this may prevent you from opening a casino within the city limits, even if the state allows for it and even if you’ve chosen an area for it that is properly zoned.
Ironically (or maybe not), investing in a casino is a much larger risk than investing in many other types of businesses, except maybe a restaurant. The reason for this isn’t just related to legal issues, although those definitely play a role. It has more to do with to the economics of gambling itself.
But let’s talk just a little bit more about the legalities of all this. Let’s assume you’re able to open a casino, found a spot you can open in, and have the go-ahead from local and state authorities. Let’s say that you obtain a license to operate, and you actually build the thing, get some employees, and open for business.
Great! Now, you need to make back a lot of money. That investment could take years or decades to turn a profit. Most people understand that, but a casino is a different kind of investment. The cost of operation generally includes paying a larger amount of taxes than most businesses.
For many businesses, they actually get a tax break from the government to encourage them to build and stay in the state. But casinos are different because they tend to attract a negative element to a city. Because of this, you’re going to get taxed heavily, and that taxation can get worse over time if public opinion shifts (which it tends to often).
Now, on top of the tax situation, you also have to think about the cost to stay open legally. You’ll likely have to pay ongoing fees to remain in compliance with state laws and regulations. There’s an extra stack of fees that you have to worry about each month, quarter, or year.
On top of that, there’s the economics of owning a casino itself. The reality of casino ownership is that casinos are entertainment. People come to play with discretionary cash. Even the people who gamble regularly are doing so because they happen to have regular disposable income.
That doesn’t sound like a problem at first, but it’s a huge problem when the economy isn’t doing so hot. When you have a recession, disposable income is the first thing to go, which means many casinos struggle during tough times.
There’s a reason why you see casinos bought up so regularly and why they tend to accumulate under these large umbrella brands. It’s because they’re a pain to operate, and they’re often only really profitable when you own a bunch of them.
Add to this the fact that Las Vegas is really an outlier (Atlantic City isn’t doing well these days), and you’ll soon realize that the idea of building a casino that draws people from all over the country just isn’t sufficient enough. You’ll mostly get locals. Las Vegas as a city is a novelty, and trying to replicate all of that with one casino may not be the most fiscally responsible choice.
All in all, owning a casino is not only a bad idea for the average businessperson, but it’s probably a bad idea for most people. If you’re one of the few people in the world with a few million dollars you’re willing to gamble, then by all means, it’s worth a shot.
But even then, it’s probably not a great bet.
Anything I missed here? Let me know in the comments.
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