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Rod Smith

Legalized Gambling in Nevada Turns 75

20 March 2006

LAS VEGAS –- On March 19, 1931, seventy-five years ago today, the state of Nevada legalized wide-open casino gambling, ushering in a new world of entertainment that had never before existed.

The first gaming license was issued to Mayme Stocker, a dour-looking woman who opened the Northern Club on Fremont Street in what is today downtown Las Vegas.

The motives of the legislators were complex, but American Gaming Association President Frank Fahrenkopf said their action has turned out to be "brilliant."

In 1903, the Comstock Lode's silver had run dry. Faced with a huge territory but small population, Nevada exempted most companies from taxes and regulation to boost business.

In 1931, Nevada passed a six-week divorce statute and prepared for an influx of visitors as a result of the new law and the completion of Hoover Dam.

Nevada legalized casino gambling for two reasons: The state wanted to replace the reliable tax base lost when the silver business went south, and legislators wanted to benefit from the anticipated tourism boom.

Legalized gambling also made Las Vegas the gambling capital of the United States, a status the city has retained.

Fahrenkopf said the 75th anniversary shows how young the community is, despite the seismic effect legalized gambling has had in Nevada, across the country and around the world.

Pat Robbins, a visitor from Boston, said the idea of Las Vegas being that old, let alone celebrating the anniversary, seemed weird.

"I know old. Where I come from, the buildings are Revolutionary," she said. "Here, the idea of gambling may be old, but there's nothing else old about the place. It feels more like it was all built yesterday."

Nevada Gaming Commission Chairman Pete Bernhard said gaming has driven Nevada's development.

"Our tourism industry and our Nevada way of life would be profoundly different today had gaming not been legalized and regulated effectively throughout this period," he said.

Jim Medick, chief executive officer of MRC Group, a Las Vegas market research firm, said gambling turned Nevada into "the little state that could."

"Without gaming, Nevada would be a wonderful truck stop on the way to California," he said.

Las Vegas Convention and Visitors Authority President Rossi Ralenkotter said legalized gambling and the casinos that followed were the foundation of Las Vegas' development as a visitor destination.

"Las Vegas is now the No. 1 brand throughout the country," he said. "And what has been done here should make this an example for (other communities in) the country and the world."

Jan Jones, senior vice president of Harrah's Entertainment, the world's biggest gaming company, said sustainability has been legalized gambling's most surprising facet.

"Everybody thought, stuck here in the middle of the desert, it would die. But it became the center of tourism and entertainment in the world today, something that was unpredictable and unanticipated," she said.

Keith Schwer, director of the Center for Business and Economic Research at the University of Nevada, Las Vegas, said gaming has made Nevada a significant player in the global economy.

"Travel and tourism is an area in which the United States runs a balance of payments surplus," he said. "It is the engine of growth for urban Nevada."

Even something as world-transforming as legalizing gambling, however, started small. Initially, gambling was limited to small taverns and saloons and was regulated by individual counties.

Boyd Gaming Corp. Chairman Bill Boyd, who moved here 65 years ago, said in those days, downtown was a mix of casinos and commercial outlets.

Then, in 1941, the Strip launched its career as the world's primary gambling venue.

The El Rancho Vegas was the first casino on the Strip, although it was soon joined by the Last Frontier and the Desert Inn.

These so-called new-style casinos offered hotel accommodations and recreational amenities such as swimming pools for visitors.

All that changed the city forever, Boyd said, as casinos took over downtown and the Strip burgeoned into an entertainment complex all its own.

Gaming in Nevada, however, struggled from its inception until after World War II, when the prosperity of postwar America started a boom in the industry.

In 1946, Bugsy Siegel, financed by organized-crime kingpin Meyer Lansky, opened the Flamingo Casino on the Strip. The property featured a showroom with Hollywood entertainment. The opening came after Siegel's gambling ships off California were shut down by then-Gov. Earl Warren over fears that the Chinese would attack the United States.

It became clear over gaming's first 25 years that the state needed to establish a regulation system to keep the games clean. Nevada created the Gaming Control Board in 1955 and the Gaming Commission in 1963 to professionalize the regulation of gambling and convince federal authorities the state could host crime-free casinos.

Gaming Control Board Chairman Dennis Neilander said the creation of his agency was a benchmark in the development of the industry that players enjoy today.

"Prior to that time, the Tax Commission had authority over licensing matters, but no investigations were done with regard to applicants. Licensees just paid a fee," he said.

In 1959, regulations were adopted that for the first time set standards based on business probity, finances and suitability, Neilander said.

Then, when Grant Sawyer was elected governor and created the Gaming Commission, Nevada adopted statutes and a regulatory scheme that gave the board greater autonomy in controlling licenses and cleaning up the industry, he said.

In 1966, billionaire Howard Hughes moved to Las Vegas and started a casino buying spree that went a long way toward buying out the mob.

And in 1969, Nevada legalized ownership of casinos by public corporations, prompted by the need for larger and upgraded hotel-casinos.

After that, growth came in waves, but was rapid, especially following the opening of The Mirage in 1989.

Schwer said Las Vegas has prospered beyond anyone's imagination in a relatively short period. And, he said Nevada's growth came without the usual comparative advantages of labor or capital, he said.

Instead, Nevada built a world-class city, the fastest growing in the country, by creating its own comparative advantage in the goods and services it offered, Schwer said.

For 47 years Nevada was the only state with casino gambling. The state used that advantage to build a reputation that today is making it the so-called entertainment capital of the world, he said.

Schwer said the next 75 years of growth aren't likely to look like the past 75 years because of new competition.

"Perhaps as other industries go, Las Vegas could become a faded rose, but it probably will not be in our lifetimes," Schwer said.

Tom Grey, executive director of the National Coalition Against Legalized Gambling, said the future is undecided.

"It seems to me if the (gaming) industry is smart, it will continue its diversifying away from its product," he said. "If they won't give up sports books to bring in a major-league team, the reluctance to diversify will hold them back."

Others observers are more optimistic.

Medick said the first 75 years were the hardest for gambling, but the second 75 years will be easier.

"No longer does the majority of the national population look at gaming as an evil business and therefore gaming operators can easily move not only in the tourism industry, but in the local community.

Investors now line up for the opportunity as do gamers who now see themselves as entertainment seekers," he said.

University of Nevada, Las Vegas Professor Bill Thompson, who specializes in gaming studies, said legalized gambling helped gave Nevada a national gaming monopoly for 47 years, a status it kept until New Jersey legalized gambling in 1978.

More importantly, he added, Nevada established a wide-open market system. By wide open, he meant anyone meeting licensing requirements could open a casino, and any adult citizen could wager there.

"These factors have given the state a fantastic advantage for establishing a critical mass of casino facilities that cannot be matched elsewhere at least for a foreseeable future -- and probably not for the next 75 years," he said.

Bernhard said his vision of the next 75 years is probably no clearer than that of Nevada's legislators and regulators back in 1931.

None of them could foresee what the state's gaming industry would look like in 2006, and his guess is that gaming regulators in 2081 will be looking at issues that we cannot even conceive, let alone comprehend, today.