In a few years, four of America’s six largest cities will have full-fledged casinos just a few miles from downtown.* Phoenix has a couple of tribal casinos within the metro area; Philadelphia has two inside city limits and one just beyond. Now New York City and Chicago are getting dealt in, as leaders look for new sources of jobs, revenue, and excitement to bolster city centers that are still struggling to recover from the pandemic.
New York state plans to approve as many as three casino licenses for the city, and operators and politicians have IDed Times Square as a potential location. That’s a fitting choice for Mayor Eric Adams, who has called himself the mayor of swagger and touted the city’s nightlife as an engine of revitalization.
In Chicago, the City Council voted on Wednesday to approve a deal selected by Mayor Lori Lightfoot—the operator Bally’s at the old Chicago Tribune printing plant. (It is, if nothing else, a perfect metaphor for the city’s once-proud paper, which is being picked to the bone by the vultures at Alden Global Capital.)
In a way, the entry of bona fide casinos to Chicago and New York represents the triumphant return of urban gambling. Up until the early 20th century, gambling was an illegal but highly visible vice in many cities, flourishing under the wing of machine politics. New York, for example, had 6,000 gambling houses in the 1850s, where visitors could try their luck at games such as faro, chuck-a-luck, loo, all fours, hearts, euchre, Boston, and whist. After reformers cracked down in the Progressive Era, games of chance became the domain of corner gangsters, backroom operators, and the Mafia. Now casinos will be open to all at the heart of the country’s largest cities.
But these groundbreakings will also represent the end of an era in which the urban casino became a popular and controversial tool of economic development. Las Vegas emerged as the nation’s marquee gambling destination in the 1950s and ’60s; Atlantic City, New Jersey, followed in 1977. Beginning in 1988, casinos opened with staggering speed on Native American reservations, bringing jobs and money to tribal communities—but also increased rates of violence, crime, and bankruptcy. Then, starting in the 1990s, states like Missouri, Indiana, Ohio, Michigan, and Pennsylvania embraced casinos as a tool of urban revitalization.
We are now in the era of diminishing returns. “New casinos not only pull gamblers from other casinos, they pull non-casino revenues from other outlets,” Ernie Goss, an economist at Creighton University in Omaha, Nebraska, and the co-author of the American casino history Governing Fortune, told me. “As a result, most casinos today do not represent economic development engines.”
Consider a recent example of what casino-watchers call “cannibalization”: It took less than a decade for casinos in Pennsylvania to cut Atlantic City’s revenues in half and eliminate 10,000 jobs. Then Maryland opened casinos, Pennsylvania experienced its first revenue drop, and Delaware—New Jersey’s first regional competitor—saw slot income hit a 15-year low. This is also happening within states; in upstate New York, casinos are underperforming and closing as credit agencies warn of a saturated market. And all this is before New York City takes its seat at the table.
The result of this competition is not more and more gambling revenue, but better deals for casinos as competition pushes cities to lower tax rates, undercutting the very purpose of permitting the casinos in the first place. And while cities and states are the financial beneficiaries when casinos open—Chicago will get $40 million from Bally’s right off the bat—they often find themselves under pressure to preserve jobs and revenue when they struggle.
Whether the strategy was even a good one to begin with is a matter of some debate. Consider Bethlehem, Pennsylvania, one postindustrial city that courted and won a massive casino that opened on the site of the old Bethlehem Steel plant in 2009.
Three things entice leaders in cities like this one, a former industrial powerhouse 80 miles west of Manhattan. First is the money from tax revenues or dedicated payments. Second is the jobs. Third is the promise of a private partner to help catalyze a site, a neighborhood, or a downtown where other new businesses and housing might sprout.
“They needed someone with really deep pockets to develop that former steel site, and it wasn’t until casinos were an option that there was a viable way to do it economically,” explained Chloe Taft Kang, who adapted her doctoral thesis into a book about the Bethlehem project, From Steel to Slots. “The ancillary development has never quite lived up to what the casino corporation says it’s going to be. Casinos are designed to bring people in and keep them there. Traditionally, they don’t have windows and they don’t have clocks and there’s no incentive for a casino to push gamblers out into the community.”
In other words, casinos tend to be large and opaque—the opposite of what you’d want in a catalyst for a disinvested neighborhood. Complicating matters in Bethlehem is the fact that the casino corporation—like many casinos—owns much of the land around the facility. The new owner’s plans to transform an old machine shop into a water park have been put on hold.
To be clear, the only people losing money on these deals are the gamblers. After Nevada, no state makes more money than Pennsylvania from gambling and sports betting—more than $1.25 billion in the first quarter of this year, according to the American Gaming Association. (Gaming is what the casino industry calls gambling.) That’s in part because Pennsylvania helped devour the country’s most famous example of casino-led urban renewal: Atlantic City, New Jersey.
Today, the boardwalk city’s fate is a cautionary tale. Atlantic City failed to harness its casino head start, in 1978, to diversify its economy and ignite adjacent small-scale development. When barriers fell in neighboring states, its destination status was quickly diminished.
But the experiment shouldn’t be read as a total failure. As Jake Blumgart writes, “Atlantic City essentially postponed its region’s reckoning with the postindustrial economy for 30 years.” Atlantic City was a union town, and the casino jobs were good ones that supported tens of thousands of families for decades. The casinos in Philadelphia, by contrast, are not unionized.
For New York and Chicago, the goal is not so ambitious: It’s simply to keep a hold of tax revenue from gamblers that’s currently winding up in neighboring jurisdictions like Connecticut and Indiana. Politicians rarely frame casino legalization in such stark terms, but the policy is basically, if money’s being gambled away, it might as well be gambled away right here.
Not everyone is a fan of casinos as revenue generators. Warren Buffett famously called casino revenue a “tax on ignorance,” and gambling opponents say locals’ gambling losses far exceed municipal revenues. Whether a casino is or isn’t a regional attraction, each one brings significant social downsides, including bankruptcies, increased crime, problem gamblers, and a decline in other local entertainment.
With each new casino, though, the impact gets smaller and smaller. That’s not only because they are competing for a (thankfully) limited pie of people who want to play slot machines all afternoon. It’s also because gambling has transcended the casino. In New Jersey, for example, taxable corporate revenue from sports betting ($157 million, mostly on the internet) was equal to taxable casino profits ($156 million) in the first quarter of 2022. And that’s to say nothing of the speculation opportunities available on Robinhood or in cryptocurrency.
What it means, ultimately, is a return to the time when urban gambling and all that it brings—jobs, revenues, crime, financial ruin—was a more regular feature of the landscape, rather than the king-size regional attraction it has been since the 1970s. For American cities, it’s back to the everyday click-clack of tumbling dice that characterized the 19th century city before being pushed underground by Protestant moralists and good-government crusaders. In its place, we have made do with lotteries and horse racing and the occasional trip to Las Vegas.
Even Las Vegas knows there is a ceiling to Americans’ appetite for table games. In 1984, casinos accounted for 59 percent of revenue on the Strip. By 2013, that was down to 36 percent. Instead, visitors were coming for concerts, pool parties, even the food!
Today, that diversification looks prescient. New York and Chicago will have their casinos, but they are just playing catch-up. It’s already game over for casino-driven development in cities.
Correction, May 26, 2022: This article originally misstated that Los Angeles has a full-fledged casino in Commerce, California. The Commerce casino is only a card room.