Gambling was legalized in Nevada in 1931 but race and sports betting remained largely the province of illegal bookies or small stand-alone legal (or semi-legal) "turf clubs", like the Derby and Saratoga Clubs, owned by Jackie Gaughan, and the Hollywood Horse and Sports book, owned by Jimmy "the Greek" Snyder, some of which were highly lucrative affairs -- Jimmy the Greek was allegedly making $2 million a week in the mid-'50s from his Vegas Turf and Sports Club.
In 1951 however, reacting to a groundswell of popular opposition to sports gambling, which had been illegal outside of Nevada, the government slapped a 10 percent tax on the enterprise, which simultaneously regulated the industry while driving a lot of the legitimate operators out of business, or else back into the illegal underground.
It took two decades of opposition for the federal government to reduce the tax on sports betting to a more palatable 2 percent on October 15, 1974. Prior to that change, the casinos didn't want to touch race and sports betting because their edge was too low to fade that kind of a tax burden. Following the repeal of the onerous tax, Jackie Gaughan opened the first sports book inside a casino at the Union Plaza in 1975, overseen by legendary oddsmaker Bob Martin, but it wasn’t until the following year that the prototype for the modern race and sports book was pioneered by notorious bookmaker Frank "Lefty" Rosenthal, at the Stardust. Lefty's operation was a plush affair, featuring 6 giant TV screens with seating for 300, and it became the prototype for Las Vegas race and sports books ever since.
On January 1, 1983, the tax on sports betting was further cut to 0.25 percent, making it a more attractive proposition to Las Vegas resort-casinos, most of which now carry a race and sports book, whether their own or an outside franchise. Even though the casinos' edge remains low, sports betting is seen as a strong draw that gets people in the door, where they'll hopefully partake in some of a property's more profitable offerings.
As an aside, a 1992 federal law restricted sports betting to the four states that met a deadline to sign up for it, namely Nevada, Delaware, Montana, and Oregon. The latter two currently don't offer any sports betting, although legally they could. New Jersey was offered some latitude with a special exemption that gave it longer to decide if it wanted legal sports betting, but the state never took the necessary steps to legalize, and the exemption window closed. Following action taken by the state Legislature last December, however, New Jersey voters will this November have the opportunity to vote on whether they want sports betting to be legalized. If they vote yes, the current federal ban will have to be repealed or overturned before the casinos of Atlantic City could introduce race and sports books.
