VEGAS MYTHS BUSTED: Casinos Have Closed When They Can’t Pay Winners

Posted on: March 4, 2024, 08:05h. 

Last updated on: February 4, 2024, 09:14h.

Corey Levitan Read More

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

What was the name of that casino that shut its doors because it couldn’t pay off a huge jackpot? You know the one I’m talking about, right? It’s on the tip of my tongue!

Oh yeah, it’s … NO CASINO EVER.

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

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

Which made for by far the worst opening night in casino history!

But just because a casino goes bust, doesn’t mean it has to 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.”

Today, there are measures in play to prevent casinos from going bust. (We’ll get to those later.) But even back then, it was always easy to find someone willing to help you save your perfectly good casino operation. That someone was frequently a man wearing an expensive suit and fedora hat, and the help he offered was almost always cash.

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

Casinos can and do close for good, like businesses in every other field, but not because anyone happens to hit a huge jackpot one night.

The Bird Cage

Another Las Vegas casino commonly reported to have gone bust 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 said that a lack of business did not 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 — due to a series of improbable wins.

But, while Jagger indeed broke that casino’s bank, it was not due to 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.

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 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 the 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 sat is still very much in the spotlight. Its current occupant is 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 [email protected].