Question of the Day - 23 May 2021

Isn’t this a chicken and egg situation? 

If a casino owner (for the purposes of this argument let’s say he owns 100% of the casino) plays a negative EV game in his own casino does he lose money? 

There’s obviously the marginal cost of paying a dealer to run the game and the cost of tipping so he loses those but it’s then a case of left pocket, right pocket (I believe those are the correct accountancy terms but feel free to correct me). 

What he makes as a gambler he loses as a casino and vice versa so the better question would be why a casino owner would bother to gamble in his own casino other than just for fun. 

simple answer.
to cheat the lawmakers out of tax profits

I hadn’t thought of that but given that Uncle Sam taxes gambling winnings at a lower marginal rate than personal taxation on anything over $500k(ish) I’d think it unlikely 

I’m obviously ignoring the fact that he could just not declare his winnings though! 

The pari-mutual exception makes sense since the bets are going into a commingled pool rather than being booked by the casino.

When Pennsylvania first opened casinos, licensed casino employees weren't allowed to gamble anywhere in Pennsylvania including playing the PA Lottery.  Those rules have since been loosened and now they are only prohibited from playing in their own casino.

The concern is cheating.  Employees could get with their working coworkers and cheat the casino while playing.

There could be a large “must hit” progressive jackpot that they would rather pay to themselves than a customer.

I hadn't thought of the progressive that Bob mentioned, but the only ones that are large enough are usually wide-area, like Megabucks, which isn't a substantial loss to the individual casino. I took the other stance, that it seems that it would be silly to lose money (which he won't be able to deduct) yet have to pay taxes on because his casino won. It doesn't make sense to do that.

Surely progressive jackpots don’t cost the casino a penny?

My understanding (and I’m more than open to correction here) is that as players play a game, and usually lose, some of their stake goes into the jackpot pool and when the prize is eventually hit the player is winning other players’ money, not the casino’s. 

So a casino owner playing and winning wouldn’t prevent his own casino from having to a different winning player (albeit he would have won some money himself, leading to a tax liability - we seem to be driving this into some sort of infinite circle now!) 


Oh - and in my second comment I should have typed “corporate profits being taxed at a lower marginal rate than personal taxation” 

It’s Sunday and I’ve had a couple of beers!! 

The tax angle makes no sense as a reason to keep casino owners from playing at their own shop...unless the owner is cheating to consistently win more than they lose.

So taxes might be a factor, but only because of the possibility of cheating.

A better reason, in my opinion, is that casinos (the non-corporate ones) are often owned by more than one person. If a casino had three owners, for example, the law keeps one owner from influencing employees to cheat for them and thus allow that owner to cheat their partners.

This is also why key employees can't gamble in their own shop---the possibility of influencing employees to cheat for them.

Would a casino owner be at any advantage playing a slot machine in his own house so to speak? I'd think they wouldn't want to be caught at a machine playing those odds.

I probably used the wrong word.  Was thinking more of a promotion jackpot, not progressive.