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Atlantic City Legalizes Casino Gambling, 1976 Table of Contents:Further Readings By permitting legalized casino gambling, Atlantic City became a competitor to Las Vegas in the organized gambling industry Principal personages DONALD TRUMP (1946), a New York developer who created Trump Castle STEVE WYNN (1941-), a casino promoter in Las Vegas who successfully opened new operations in Atlantic City BILL HARRAH (1911-1978), an early Las Vegas casino builder who created Harrah's in Nevada and New Jersey MERV GRIFFIN (1925-), an entertainment figure who bid against Trump for Atlantic City casinos Summary of Event Since the 1930's, legal casino gambling within the United States had been confined to Nevada and (with minor exceptions) Indian reservations. Casino gambling took a giant step toward penetrating more deeply into American society in 1976, when New Jersey voters legalized the practice. Atlantic City residents hoped that taxes on gambling revenues as well as tourist dollars would restore the luster to what once was the jewel of East Coast resorts. Opened in 1854 to beach visitors, Atlantic City started to attract vacationers as early as 1870, when the boardwalk was finished. After World War II, however, it fell in popularity as a vacation destination. It had no superhighway to connect it to New York or other urban areas, and, except for the boardwalk, it had no attraction to compete with California or Florida beaches. A vote in 1974 had failed to legalize casinos statewide. Supporters of gambling in New Jersey sculpted a different measure in 1976 that restricted gambling to Atlantic City. Various states already had permitted lotteries for more than a decade (New Jersey itself had a lottery), and casinos had gone up along the California-Nevada border in Lake Tahoe. Casino gambling offered dice and card games, roulette wheels, on-the-spot sports betting, and slot machines, all with the odds stacked clearly in favor of the casino, or "the house." The advantage to the house varied, depending on the game. A rule of thumb was that the smaller the bet (as in nickel slot machines), the higher the chance of a payoff but the lower the percentage of money bet that was returned to the bettor, since the highest payoffs were relatively low amounts. Gambling in America represented essentially a "frontier" activity, one that embodied such western traits as individuality, risk, and opportunism. The "gambling bug" had tended to move westward, until it alighted in Nevada, close enough to incubate in the warmth of California's economy but far enough removed that it did not directly influence the Golden State. According to this interpretation, the spread of gambling back to the East represented a natural phenomenon of eastern areas trying to regain their frontier spirit. Ultimately, however, the dynamics of voter mentality demanded that gambling show material rewards rather than merely an individualistic, opportunistic spirit, before it would be approved at the polls. Las Vegas and Nevada gaming in general had long been associated with organized crime figures such as Benjamin "Bugsy" Siegel, who claimed credit for creating Las Vegas, and frequent mobster visitors. Gaming came under

Atlantic City Legalizes Casino Gambling, 1976 - …City...Atlantic City Legalizes Casino Gambling, ... influence the Golden State. ... visitors ratio suggested that Atlantic City was

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Atlantic City Legalizes Casino Gambling, 1976

Table of Contents:Further Readings

By permitting legalized casino gambling, Atlantic City became a competitor to Las Vegas in the organized gambling industry

Principal personages

DONALD TRUMP (1946), a New York developer who created Trump Castle

STEVE WYNN (1941-), a casino promoter in Las Vegas who successfully opened new operations in Atlantic City

BILL HARRAH (1911-1978), an early Las Vegas casino builder who created Harrah's in Nevada and New Jersey

MERV GRIFFIN (1925-), an entertainment figure who bid against Trump for Atlantic City casinos

Summary of Event

Since the 1930's, legal casino gambling within the United States had been confined to Nevada and (with minor exceptions) Indian reservations. Casino gambling took a giant step toward penetrating more deeply into American society in 1976, when New Jersey voters legalized the practice. Atlantic City residents hoped that taxes on gambling revenues as well as tourist dollars would restore the luster to what once was the jewel of East Coast

resorts. Opened in 1854 to beach visitors, Atlantic City started to attract vacationers as early as 1870, when the boardwalk was finished. After World War II, however, it fell in popularity as a vacation destination. It had no superhighway to connect it to New York or other urban areas, and, except for the boardwalk, it had no attraction to compete with California or Florida beaches.

A vote in 1974 had failed to legalize casinos statewide. Supporters of gambling in New Jersey sculpted a different measure in 1976 that restricted gambling to Atlantic City. Various states already had permitted lotteries for more

than a decade (New Jersey itself had a lottery), and casinos had gone up along the California-Nevada border in Lake Tahoe. Casino gambling offered dice and card games, roulette wheels, on-the-spot sports betting, and slot

machines, all with the odds stacked clearly in favor of the casino, or "the house." The advantage to the house varied, depending on the game. A rule of thumb was that the smaller the bet (as in nickel slot machines), the higher the chance of a payoff but the lower the percentage of money bet that was returned to the bettor, since the highest payoffs were relatively low amounts.

Gambling in America represented essentially a "frontier" activity, one that embodied such western traits as individuality, risk, and opportunism. The "gambling bug" had tended to move westward, until it alighted in Nevada,

close enough to incubate in the warmth of California's economy but far enough removed that it did not directly influence the Golden State. According to this interpretation, the spread of gambling back to the East represented a

natural phenomenon of eastern areas trying to regain their frontier spirit. Ultimately, however, the dynamics of voter mentality demanded that gambling show material rewards rather than merely an individualistic, opportunistic spirit,

before it would be approved at the polls.

Las Vegas and Nevada gaming in general had long been associated with organized crime figures such as Benjamin "Bugsy" Siegel, who claimed credit for creating Las Vegas, and frequent mobster visitors. Gaming came under

intense investigation by federal and state officials. New Jersey's voters wanted to make sure that any Atlantic City gambling remained free of organized crime's influence.

The traditional philosophy of casino management was epitomized by Bill Harrah, whose Harrah's catered to professional gamblers. Harrah and others had directed the older generation of casinos in Nevada, giving complimentary rooms, meals, and show tickets to, or "comping," the gamblers that they identified as potential "high rollers." With returns to the casinos vastly exceeding the cost to the casinos of the complimentary free rooms and meals handed out to the high rollers, casinos in the relatively noncompetitive environment that existed prior to 1976 made hefty profits. Although organized crime originally had a foothold in many of the casinos, by the 1970's Nevada's gaming commission had weeded out most of that influence.

Even before the competition from Atlantic City, a new generation of casino owners in Las Vegas sought to keep gamblers in the hotels for longer periods of time by offering attractions and shows aimed at family members. That trend accelerated once the threat from Atlantic City was realized. Las Vegas tried to be seen as a center for entertainment, while Atlantic City focused on gambling as its primary attraction.

Impact of Event

The opening of Atlantic City as a "second Las Vegas" let the gambling genie out of its bottle. Although far superior in attractions and casino management, Las Vegas lost its mystique of being the only gambling resort in America.

Estimating exactly how much Atlantic City cost Las Vegas in lost revenue is difficult, but some statistics are illustrative. In 1982, Atlantic City attracted twenty-three million visitors, twice the number that visited Las Vegas. Its gross revenues from gaming were $1.5 billion, or roughly equal to those of Las Vegas. The gaming revenues-to-visitors ratio suggested that Atlantic City was far less effective in getting visitors to gamble. Atlantic City's visitors left quickly, while Las Vegas visitors increasingly lengthened their stays.

Part of the reason for Las Vegas' effectiveness in convincing visitors to stay longer and to part with their dollars came from a fundamental reassessment made by Las Vegas hotels and casinos when Atlantic City opened to gambling.

Realizing that they could no longer rely only on gamblers, since that market would suffer from inroads made by Atlantic City, they entered into a frenzy of new casino building aimed at family entertainment. Many of the new hotels copied the successful family-oriented Mirage Hotel created by Steve Wynn and, to a lesser extent, the theme-oriented Caesar's Palace. The Mirage featured dolphin pools, white tiger enclaves, game arcades for children, a volcano that erupted every hour, the hugely popular Siegfried and Roy magic and illusion show, and many other nongambling attractions. Caesar's, renovated in 1992 and 1993, had Disney-type robot attractions, costumed employees who wore Roman togas and battle gear, an enclosed shopping mall, and an IMAX theater.

No casino better captured the new philosophy than the Excalibur, opened in 1990 by the owners of Circus Circus, who had considerable experience in family entertainment. The Excalibur was built to resemble King Arthur's magical castle and featured a jousting tournament, a "virtual reality" ride, and an extensive game area for children. Other hotels quickly imitated the Excalibur, with the Luxor and the MGM Hotel/Casinos opening in 1993. Those hotels contained such nongambling entertainment as IMAX theaters, virtual reality rides, and even self-contained amusement parks, patterned after the amusement park at the Mall of America.

By the late 1980's, most of the organized crime influence had been driven out by large, publicly held corporations such as Holiday Inn, Harrah's, and Ramada Inns. The new owners of the casinos were less interested in using the legal gambling operations as a cover for illegal income than in maximizing their profits in the gaming establishments

themselves. New computer technology produced video poker machines as well as traditional slot machines that featured randomly spinning objects, such as fruit, numbers, or characters. Regardless of the format, a typical slot machine or video poker machine could take in a profit of $100,000 in a year. Many casinos even introduced "frequent gambler" cards, which carried computer-coded information that allowed selected customers to receive complimentary drinks, meals, or even hotel rooms. The cards and associated discounts were intended to lure patrons into gambling

more than they otherwise would have. In 1991, Atlantic City casinos gave out nearly $500 million in complimentary goods and services.

The new corporate owners of Atlantic City and Nevada casinos advertised heavily. To entice New Yorkers and visitors to the East Coast to make the trip, Atlantic City casinos gave away more than $247 million in coins and bus coupons in 1991 alone. Room prices rarely covered the cost to the hotel; the hope was that guests would gamble in

the hotel's casino rather than venturing out. "Comps" and advertising were easily paid for out of gambling revenues,

but financing the construction of expensive hotel-casinos required considerable capital investment.

Among the early sources for Atlantic City casino financing was Michael Milken, famous for his convictions on violations of securities laws in the 1980's. Veteran corporate hotel and casino operators such as Holiday Inn, Hyatt, and Ramada Inns had no difficulty raising cash. New entrants and those inexperienced in American casino gaming, such as the Playboy organization and Donald Trump, found the going more difficult. As a result, several paid far more for their facilities than was proved to be justified. Trump paid more than $1 billion for the Taj Mahal, and Merv Griffin's takeover of Trump's Resorts International exceeded $1 billion in borrowed capital. Some of the ventures represented a misunderstanding of the market. Playboy, for example, tried to create a fancy, European-style casino, not realizing that most Atlantic City bettors were more of the nickel slot machine variety, unwilling to spend a lot of money on luxurious accommodations and elaborate shows. Trump ran so low on funds that he could not afford a swimming pool for the Taj Mahal. Trump even competed against himself for a short time. In 1985, he bought the Trump Castle from Barron Hilton, and in 1986, he bought Holiday Inn's Boardwalk property, which he called the Trump Plaza Hotel and Casino.

Inexperience was exhibited in operating the casinos as well as in capitalizing them. Trump, for example, allowed his wife Ivana, who had no casino managerial experience, to run Trump Castle. Whereas veteran casino managers such as Steve Wynn made certain that the "high rollers" got the most prestigious suites, Ivana took the Castle's fanciest suite for herself. Trump's ego and inexperience also led him to acquire controlling interest in Resorts International and its Taj Mahal, the world's largest casino, which was unfinished at the time and was estimated to need more than $500 million to complete. Meanwhile, Resorts International had attracted the interest of show business producer Merv Griffin, who put out a bid to acquire the stock in Resorts International from Trump in a deal that allowed Trump to keep the Taj Mahal. Griffin used junk bond financing provided by Michael Milken (in his last major deal) to purchase Resorts International from Trump in November, 1988. More than $1 billion in borrowed funds went into the deal. Within a short time, both Griffin and Trump were in bankruptcy court.

Legalized gambling spread to other states that were enticed by the promise of huge revenues. In April of 1989, Iowa passed a casino bill allowing gambling on casino boats traveling on the Mississipi and Missouri rivers. Davenport set its sights on becoming the center of the river gambling activity, which proponents claimed would attract nearly

800,000 gamblers each year, generating more than $90 million. Boom towns of the Old West sought to return to their former glory by legalizing casino gambling.

Analysts of commercial gambling predicted that by the end of the twentieth century, many other cities and states would join the trend. Chicago had plans as of 1993 for a $2 billion gambling zone, with Caesar's World, Hilton, and

Circus Circus all planning development. In 1992, the Mashantucket Pequot Indians opened a casino in Foxwoods, Connecticut. Legalization of casino games in Indiana, Missouri, New York, Pennsylvania, and Washington was pending. By 1992, every state except Utah and Hawaii had laws that permitted at least one form of commercial gambling, including lotteries, casinos, dog and horse racing, jai alai, bingo, sports betting, or charity "Las Vegas

nights."

In 1987, the U.S. Supreme Court allowed Indian tribes to offer on their reservations any types of gambling that were

allowed in the state where the reservation was located. Indian tribes in other states immediately started to lobby for gambling of other types on their reservations. In several states, reservation gambling touched off sharp debate

among those who contended that the Indians had unfair advantages, such as freedom from federal taxation, or that gambling was not permitted in other forms in the state. Indian groups maintained that such charges represented

revived forms of racism and oppression of Native Americans, but several states rejected Indian attempts to expand gambling activities into other areas.

The quiet proliferation of legalized gambling included legalization of video slot machines in Maryland, Montana,

Oregon, South Dakota, and West Virginia. Minnesota, by 1993, had more casinos than did New Jersey. The advent of casinos owned and operated by individual states appeared likely. Many states already had targeted lottery money for specific state expenditures. In the case of Ohio, for example, all lottery profits went for education; in other states, lottery money funded highway construction. The visible returns were offset by unseen and subtle harms from creation of a public mentality that wealth came from chance or luck rather than from skill and effort, and the notion that public goods could be obtained and financed without sacrifice. With this tradeoff, it was hardly surprising that both the public and corporate America supported the spread of organized gambling.

One final aspect of legalized gambling involved the increasing sophistication of video and computer technology.

"Virtual reality" games had reached the market by the early 1990's, offering consumers the chance to "live" in

imaginary situations. It was only a matter of time before gambling and virtual reality joined forces. One could imagine

bets on virtual reality games in which people would "walk" over computerized virtual reality suspension bridges, with odds set on survival after a bridge collapse, or, for the true risk-takers, virtual reality games of Russian roulette. Bettors had long displayed their willingness to gamble on anything. New technologies were sure to be employed to offer fresh approaches and new attractions.

FURTHER READINGS

Abt, Vicki. The Business of Risk: Commercial Gambling in Mainstream America. University of Kansas Press, 1985.

A scholarly approach to the sociological impact of legalized gambling on American values

Findlay, John. People of Chance: Gambling in America from Jamestown to Las Vegas. Oxford University Press, 1986.

A broad investigation of gambling. Findlay argues that gambling had distinctly "frontier" or western roots and that it reflected American values of opportunism, risk taking, and individualism. Well documented and stronger in analysis than many other books on American gambling

Johnston, David. Temples of Chance: How America Inc. Bought Out Murder Inc. to Win Control- of the Casino Business. Doubleday, 1992.

A journalist's entertaining and timely discussion of the new generation of corporate-owned casinos. A pioneering history of the rise of Atlantic City and subsequent legalization of gambling in other states

Sasuly, Richard. Bookies and Bettors: Two Hundred Years of Gambling. Holt, Rinehart & Winston, 1982.

Examines in depth the history of gambling in the United States. Particularly helpful in understanding the laws involved in gambling

Stuart, Winston. Nation of Gamblers: America's Billion-Dollar-a-Day Habit. Prentice-Hall, 1984.

An international approach that emphasizes British horse racing as much as Las Vegas craps tables. Makes only weak attempts to discuss the impact of casino gambling in the United States

Source Citation:

"Atlantic City Legalizes Casino Gambling, 1976." DISCovering U.S. History. Online ed. Detroit: Gale, 2003. Student Resource Center - Bronze. Gale. Central Bucks East High School. 30 Apr. 2009 <http://find.galegroup.com/srcx/infomark.do?&contentSet=GSRC&type=retrieve&tabID=T001&prodId=SRC-3&docId=EJ2104241451&source=gale&srcprod=SRCS&userGroupName=centralbucks&version=1.0>.

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