How Casinos Work

Legal Status of Casinos

The Las Vegas Strip
The Las Vegas Strip
Photo courtesy of Brendel Signature

Initially, Nevada was the only state to allow legal gambling. Casino owners realized they could capitalize on the "destination" tourists who came to visit casinos by placing a large number of them in one place. Despite the added competition, this would help draw in huge numbers of casino visitors from across the United States and the rest of the world. Later, Atlantic City, New Jersey also legalized gambling. In the early 1990s, Iowa legalized "riverboat" gambling. Other states realized their citizens were traveling to Iowa to gamble, and opened their own casinos. At the same time, Native American casinos were proliferating at a rapid pace.

Riverboat casinos represent an attempt to allow gambling but limit its geographic and economic scope. The casino can only be located on a riverboat that floats in a body of water, and gamblers can only stay for the duration of a "cruise" that usually lasts two hours. In reality, the riverboat casinos never move -- the "cruise" is really just a shift of two hours, at the end of which the gamblers must leave. Many riverboat casinos are also required to use a loss limit. This is a predetermined dollar amount, somewhere between $200 and $500, which is the maximum a patron can lose during one "cruise." As competition from other states increases, many states are easing or abandoning both the riverboat and loss limit requirements of their casinos.

Luxury tourist riverboat on the Yangtze River (Chang Jiang). Luxury tourist riverboat on the Yangtze River (Chang Jiang).
Luxury tourist riverboat on the Yangtze River (Chang Jiang).
Photo courtesy of Leonard G.

The legality of Native American casinos is based on the fact that Native American territory is considered sovereign, not entirely subject to U.S. laws. Just how sovereign a tribe is a bit fuzzy -- think of a tribe as a 51st state. It can govern itself and make its own laws, but if it does something that overtly disturbs the public good of the rest of the country, federal authorities will step in. U.S. criminal laws are enforced within Native American territory, while civil law is largely powerless. This is an important fact, because it means that if you are hurt at a Native American casino you have no right to sue the casino even if the owners were negligent.

Depending on your feelings about the issue, you can either thank or blame one man for the explosion of Indian casinos: Arthur James Welmas, leader of the Cabazon tribe in California in the 1980s [Source: NPR]. The landmark Cabazon vs. California Supreme Court decision said that if a state allowed any kind of gambling (including lotteries), the state could not ban gaming within Indian territory because it then became a civil rather than a criminal matter. In response, Congress passed the Indian Gaming Regulatory Act (IGRA) in 1988. This law established federal oversight of Native American gaming and sought to keep organized crime from infiltrating Indian casinos like it had in Las Vegas in earlier decades.

We'll look at the dark side of casinos in the next section.