VEGAS MYTHS BUSTED: Casinos Have Closed Because They Couldn’t Pay Winners

Posted on: March 4, 2024, 08:05h. 

Last updated on: March 4, 2024, 02:47h.

Corey Levitan Read More

Expertise: Commercial Gaming, Entertainment, Expert Insight, Las Vegas, Restaurants, Las Vegas Myths.

What was the name of that casino that shut its doors because it couldn’t pay off a huge jackpot? You know the one we’re talking about, right? It’s, oh yeah…

NO CASINO EVER.

The most commonly cited example of this myth is the Thunderbird Casino, which was located across the Las Vegas Strip from El Rancho Vegas.

It did go bust on Sept. 2, 1948, when its owners (LA building developer Marion Hicks and Nevada Lt. Gov. Clifford Jones) didn’t have sufficient cash on hand to cover a winning streak of $145,000 on the craps tables.

That certainly made for, by far, the worst opening night in casino history.

However, just because a casino goes bust doesn’t mean it must close. And that’s because a casino is still usually a profitable business — especially a brand new one — even if its current owners can’t sufficiently bankroll its losses.

“What many people don’t understand about randomness is that it includes both hot and cold streaks,” Anthony Lucas, a professor of casino management at UNLV, told Casino.org.

“In the short term, players can appear to play both lucky and unlucky. But if they continue to play, the casino’s long-term advantage will eventually be realized.

“There will always be big winners and big losers. But the long-term net effect will favor the house.”

Only Meyer Lansky’s cash wasn’t a loan. The New York crime boss offered an investment in the Thunderbird. And, in exchange, he took majority ownership, leaving Hicks and Jones with just 20% between them.

Casinos can and do close for good, like businesses in every other field, but not just because one or more people happen to win big one night.

The Bird Cage

Another Las Vegas casino commonly reported to have permanently shut its doors due to a run of bad luck was the Bird Cage, which opened at 100 E. Fremont St. downtown on Jan. 1, 1958.

According to the Twitter/X account @HistoryNevada, it was “forced to close” after about a year “when it was unable to pay its jackpot winners.”

Again, not the case.

The Bird Cage closed, on April 30, 1959, because it never found financial success. After failing to convince the Gaming Commission to allow the casino to install more Keno machines to attract new customers, co-owner Maurice Fortney told the Reno Evening Gazette that a lack of business didn’t warrant keeping it open.

Any casino that goes out of business does so due to a series of bad decisions and/or unfavorable market conditions,” Lucas said.

This can be difficult to wrap the brain around. After all, the very phrase “break the bank” was coined to describe what happened in 1881, when English roulette player Joseph Jagger won $350K at the Casino de Monte-Carlo — more than it had on hand — because of a series of improbable wins.

But while Jagger indeed broke that casino’s bank, it was not because of random good luck. He happened to be a genius who discovered that some roulette wheels of the day featured slight imperfections that favored some numbers more than others.

The Casino de Monte-Carlo didn’t close after its bank was broken, either. It’s still open to this day.

Wynn Wins Shuttered Desert Inn

According to Kerry Packer’s Wikipedia page, the late Australian media tycoon closed down the Desert Inn “by winning 52 million dollars in one day and insisting they pay him in cash.” Wikipedia cites as a source an interview with former PGA golf pro John Daly on the Full Send YouTube podcast.

Once again, not true.

In 1998, when Starwood Hotels purchased ITT Sheraton, Desert Inn’s owner since 1993, its first order of business was putting the casino resort up for sale. The Desert Inn had been bleeding money for years due to a series of unfortunate business decisions, not because any one gambler won too much.

Steve Wynn bought the Desert Inn for $270 million in April 2000 just to shutter it four months later, but only because he had already planned to build the $2.7 billion Wynn Las Vegas with a portion of the $4.4 billion he had just made from selling The Mirage and Treasure Island to the company that became MGM Resorts.

Other accounts of Packer’s big Desert Inn win state only that it closed down the casino “that night,” which is entirely possible.

Why Can’t it Happen Today?

Modern measures are in place to isolate casinos from the effects of catastrophic gambling losses, and none of those measures wears a suit and fedora. They include:

• Maximum Bet Limits:
  These make breaking the bank unlikely or impossible.
• Backing Winners Off:
  Though a casino must by law pay winners every single cent they’ve won, they have the right to call it quits on anyone at any particular time. In 1997, Australian media magnate Kerry Packer won somewhere between $20M-$40M at the MGM Grand in Las Vegas, most of it while playing blackjack.Casino executives backed him off the game, fearing he was more capitalized than they were. “You want as many players as possible to bet as much as they can,” Lucas said. “But you don’t want a couple of players to bet way more than everyone else. These outliers can wreck the casino’s revenues and/or earnings, as their outcomes define the casino’s performance.”
• Other Reserves:
  It has often happened that the players win all the money a casino has on hand. In this unlikely scenario, the casino covers its loss with reserve cash stored elsewhere, or outside lenders who would quickly fork up the cash, knowing they’ll be paid back since the casino would quickly return to making money again.
• Insurance:
  Because there is still some astonishingly small chance that a catastrophic gambling loss can occur, almost all casinos carry insurance against it.

By the way, Lansky and his associates skimmed so much of the Thunderbird’s take that it didn’t make a profit or pay a dividend until the mobsters were forced out in 1956. But even then, the Thunderbird continued operating.

It became the Silverbird in the late ’70s, then El Rancho (not the original) in the ’80s before closing in 1992 — due to a lack of business, again, not to a catastrophic gambling loss.

And the plot of land where the Thunderbird once sat now hosts a new casino resort whose financial future is, not too dissimilarly, the subject of rampant speculation.

Its occupant is the Fontainebleau Las Vegas.

Look for “Vegas Myths Busted” every Monday on Casino.org. Click here to read previously busted Vegas myths. Got a suggestion for a Vegas myth that needs busting? Email corey@casino.org.