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How do casinos work?

Most of the entertainment (and profits for the owner) in a modern casino comes from gambling. Casinos wouldn’t exist without games of chance, despite musical shows, lighted fountains, shopping centers, lavish hotels, and elaborate themes. U.S. casinos make billions of dollars annually from slot machines, blackjack, roulette, craps, keno, baccarat, and more.

Gallery of Casino Images

Here, we’ll look at how casinos make their money, their history, the most popular games, what to expect when visiting a casino, casino security, and some of the less savory aspects of the industry.

The Casino Industry

A casino is a public place where gamblers play chance games. The typical casino has restaurants, free drinks, stage shows, and dramatic scenery to attract players, but there have been fewer lavish casinos as well. Still, casinos

Every year, casinos make a fortune. The only sure winner in a casino is the owner. U.S. casinos grossed $31.85 billion in 2005. Native American casinos brought in $22.62 billion in 2005, so casino industry profits have been rising for over a decade. (Source: American Gaming).

How do casinos work?

Every casino game has a statistical advantage for the casino. Over time and 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. Depending on the game, the casino’s advantage is called “vig” or “rake.” The exact number depends on how the player plays and if the casino has different payouts for video poker or slots.

Only Utah and Hawaii prohibit gambling [Hawaii News]. Every state has casinos or Native American gaming.

History

Ancient archaeological sites have found produce known as astragali (cut knuckle bones) and carved six-sided dice [Source: Schwartz]. The casino as a place to gamble under one roof didn’t develop until the 16th century. Italian aristocrats held private parties in ridotti during the gambling craze [source: Schwartz]. Gambling was the main pastime at these private clubs for the rich. Technically, gambling was illegal, but nobles knew when to expect the Italian Inquisition. Lower-class gamblers didn’t have a fancy spot.

In 1638, Venice’s government decided to run a gambling house to better control it and make money. Thus, they authorized the Ridotto, a four-story gambling house with rooms for primitive card games and food and beverages to keep gamblers happy [Source: Schwartz]. The Ridotto was the first government-sanctioned and public gambling house. High-stakes games meant the clientele were rich, but the Ridotto made Venice the birthplace of the casino. Europeans either thought of or copied the Italians’ ideas. France invented most modern casino games. “Casino was originally an Italian social club. The Ridotto’s closure pushed gambling to smaller venues, which thrived [Source: Schwartz].

Gambling’s popularity peaked in the 1800s. Gambling on Mississippi riverboats and in frontier towns was part of the “Wild West” culture, but moral conservatism ended it in the early 20th century. Nevada legalized gambling in 1931. Like the Venetians, Nevada politicians figured they might as well profit from illegal gambling. The brand-new Hoover Dam (then called the Boulder Dam) was sure to attract tourists; why not give them another way to spend their money in Nevada? California State University Library Soon, casinos drew gamblers to Reno, then Las Vegas, where downtown casinos gave way to the Strip, a neon oasis of resort casinos and stage shows. In the 1970s, Atlantic City tried to bring legal gambling to the east coast. In the late 1980s, Native American tribes entered the U.S. casino business for the first time since 1931. Native American casinos are next.

Playing at a Casino

Some casinos invent new games to attract more customers. Some states regulate allowed games. This section covers casino staples.

Blackjack

Blackjack is easy. The goal is to get a hand as close to 21 without going over (busting). Picture cards are worth ten, and an Ace can be worth 11 or one, whichever is more advantageous. Using a strategy or counting cards can minimize the house advantage, but a casino can throw you out for card counting. Uncounted, the house edge is 2%. How Blackjack Works has details.

Slot Machines

Slot machines are the most popular casino game, and they earn the most money [source: PBS]. The slot machine’s simplicity is part of its appeal—the player puts in money, pulls a handle or pushes a button, and waits. Skill or strategy can’t change the outcome. colored bands on reels (actual physical reels or a video representation of them). The player wins money if the right pattern appears. Slot machines used to be mechanical with spinning reels, but today they’re all controlled by computer chips. There are still reel slots, but they’re computerized. Modern slot machines are colorful and themed.

How do casinos work?

Most states regulate slot machine payout frequency, usually at 75%. The house edge is 25%. Most slot machines had payout rates in the ’80s or ’90s to attract players and compete with other casinos. State law determines whether payout rates are posted near machines.

Roulette

Frenchmen invented roulette, which means the little wheel’. A spinning wheel has 38 spaces, one to 36 in each. Other spaces have a 0 and a 00. Red and black fill in the spaces (the 0 and 00 spaces are green). A metal ball is dropped onto the wheel, where it spins, rolls, and bounces before landing. Players bet on the ball’s destination. Single numbers, combinations of two or more numbers, even or odd numbers, red or black spaces, or 12-number sets can be bet. Depending on the bet, the house edge is between 5% and 7%.

Games Like Keno and Others

Keno

Keno is a casino-based lottery. Players buy a card and pick numbers. Casino schedules numbered ball draws. Players win if their numbers match those drawn. Every casino expert advises avoiding keno because the odds are stacked against players.

Baccarat

Baccarat is played in a separate casino room. It has higher betting limits than other table games. The house edge can be as low as 0.6% but averages 1.5%. Casinos “tax” certain winnings at 5% to make money on the game.

One hand represents the banker, the other the player. The highest hand is determined by a single digit.

Poker on a computer

Video poker machines are similar to slot machines in that the player can play alone without other players or a dealer. After the player inserts money, the computer controls the action. Video poker gives players some skill-based control over the outcome. In Draw poker, players see five cards. He chooses which cards to keep, and the computer “draws” new ones from the virtual deck. The payout depends on the player’s poker hand. Many machines pay for a pair of Jacks or better. The full house and flush pay even more, and the royal flush pays the jackpot. This may be a progressive jackpot that grows between royal flushes.

Experimentation at a Casino

Casino interior design aims to please customers and give them a unique experience. minimize their awareness of time passing. Casinos try to have expensive-looking decor. Lush carpets or tiled hallways complement carefully designed lighting, which is often dimmed to add mystery. A sports car on a rotating pedestal is a common large prize. Vegas casinos take this to another level. A single casino resort can cost $1 billion or more and include multiple luxury hotels, restaurants, shopping centers, giant fountains, pyramids, or volcanoes.

Casinos take steps to please gamblers. Free food and drink keep them in the casino and may intoxicate them, which doesn’t reduce the house edge. Casinos use chips because they abstract money (chips also help the casino track how much money is going in and out of the casino). Since it’s not real money, players are less concerned about losing it. Some states regulate the number and placement of ATMs in casinos.

How do casinos work?

Casinos lack windows and clocks. Without natural light and chiming clocks, players can gamble for hours without realizing how much they’ve spent. A simple wristwatch would render this strategy useless, but casino designers still use it.

Comps keep gamblers playing longer. Making high rollers feel special encourages others to be big spenders. We’ve discussed comps’ dangers. One casino myth is that pure oxygen is piped onto the floor to lower gamblers’ inhibitions. If this happened, the casino owners would face criminal charges.

Casino security is next.

Casino safety is the responsibility of the casino’s security

Something about gambling (probably the large amounts of money) encourages people to cheat, steal, or scam their way to a jackpot, rather than win by chance. Casinos spend a lot on security because of this.

Casino employees watch the games and patrons to ensure security on the floor. Dealers are focused on their own game and can spot palming, marking, or switching cards or dice. Table managers and pit bosses monitor table games for theft and suspicious betting patterns. Each person in the casino has a “higher-up” watching them, noting how much money their tables win or lose.

Security personnel can monitor the entire casino with elaborate surveillance systems. Ceiling-mounted cameras monitor every table, window, and door. Security workers in a room with banks of monitors can focus on suspicious customers. If a crime or cheat is discovered after the fact, the casino can review the tapes to find the perpetrator. Computer chips inside slot machines determine payouts randomly. No one monitors slot machine payouts.

Casino security involves game routines and patterns. How dealers shuffle and deal cards, betting spots on the table, and player reactions and motions follow patterns. Patterns help security personnel spot out-of-the-ordinary behavior.

Here are some casino rules (written and unwritten) to keep casino security happy:

  1. Never use two hands to hold cards or dice. If possible, don’t touch anything. When playing blackjack with face-down cards or craps, only use one hand. Always keep cards or dice in the dealer’s view.
  2. If you’re not playing, you can watch, but don’t disturb others.
  3. Once you’ve bet, don’t touch your chips or collect your winnings until all bets are paid.
  4. Don’t reach across the table to bet if you’ll knock over another player’s chips. Have the dealer place your bet.
  5. Put only chips on the table.

Legitimate Status of Casinos

Nevada initially allowed legal gambling. By clustering casinos, owners realized they could capitalize on “destination” tourists. Despite the added competition, this would attract many casino visitors from the U.S. and abroad. Later, Atlantic City legalized gambling. Iowa legalized riverboat gambling in the 1990s. Other states saw their citizens gambling in Iowa and opened casinos. Native American casinos also grew quickly.

Riverboat casinos limit gambling’s geographic and economic reach. The casino must be on a riverboat, and gamblers can only stay for a two-hour “cruise.” The riverboat casinos never move; the “cruise” is a two-hour shift after which gamblers must leave. Riverboat casinos must also limit losses. A patron can lose between $200 and $500 during one “cruise.” Many states are easing or abandoning riverboats and loss limit requirements as competition from other states increases.

Native American territory is sovereign and not subject to U.S. laws, making casinos legal. Consider a tribe the 51st state in terms of sovereignty. It can govern itself and make its own laws, but if it disturbs the national good, federal authorities will step in. U.S. criminal law is enforced in Native American territory, but civil law is weak. If you’re injured at a Native American casino, you can’t sue the owners, even if they were negligent.

You can either thank or blame one man for the explosion of Indian casinos. Arthur James Welmas, 1980s Cabazon tribe leader [source: NPR]. The landmark Cabazon vs. California Supreme Court decision said a state that allowed gambling (including lotteries) could not ban it in Indian territory because it became a civil matter. Congress passed IGRA in 1988. This law established federal oversight of Native American gaming to prevent organized crime from infiltrating Indian casinos as it had in Las Vegas.

Next, we’ll discuss casinos’ downsides.

The Dark Side of Casinos

Casino opponents and evidence show they harm communities and individuals economically. Casino money attracts corruption, and “casino owner” was once synonymous with “Mafia boss.”

In the 1950s, Nevada casino owners sought funds to expand and renovate in order to attract more Americans. Legitimate businessmen avoided casinos because they were illegal in most states. Organized crime figures had plenty of cash from drug dealing, extortion, and other illegal rackets, so they didn’t mind gambling’s shady reputation. Mafia money poured into Reno and Las Vegas, but it didn’t stop there. They took sole or part ownership of some casinos and influenced game outcomes by threatening casino staff.

Real estate investors and hotel chains had more money than gangsters and saw how lucrative casinos were. Trump and Hilton both own casinos. These companies bought out the mobsters and ran their casinos without mob interference. Federal crackdowns and the risk of losing a gaming license at the slightest hint of Mafia involvement keep the mob away from casinos.

Compulsive gambling may be more insidious. 5 percent of casino patrons are addicted, generating 25% of the casino’s profits [Source: PBS]. Studies show casinos have a negative net value for a community [Source: UIUC News Bureau]. The cost of treating problem gamblers and lost productivity from gambling addicts trumps any economic gains a casino may bring, say, critics. Calls to gambling addiction hotlines have risen in many communities where a casino has opened.