KEY TAKEAWAYS
Nevada’s sportsbooks did not start in casinos. For roughly the first quarter-century after the federal government taxed sports wagers in 1951, a legal bet on a single game was placed in small stand-alone betting parlors, not in the big resorts of the Strip. The move indoors happened in 1975, when the Union Plaza downtown opened what sources describe as the first sportsbook inside a casino, and in 1976 the Stardust gave Las Vegas the theater-style room that other casinos copied. This article follows that path from the early rules of the 1940s to the tax law of 1951, the turf clubs that survived it, and the 1974 change that let casinos return, flagging every point where sources disagree.
Legal, But Not Yet Casino Business
In 1931 the Nevada Legislature passed Assembly Bill 98, signed by Governor Balzar on March 19, 1931, which ended an eighteen-year ban on gambling in the state. The Nevada Legislature’s own research history notes that gaming had been illegal from 1913 to 1931, although the ban was unevenly enforced. Betting on horse races and sports was part of the broader picture, but the sources do not agree on when it became a clearly licensed business.
A Tax Policy Center paper says Nevada specifically approved sports betting in 1949. A commentary in CDC Gaming says bookmaking was decriminalized in 1941 with a law allowing pool rooms in casinos, which mostly took horse racing bets. The Nevada Supreme Court, in a 1950 opinion, noted that a state act had added any race horse book or sports pool to the games licensed under the gambling act of 1931, without giving the year in the passage consulted here. What is documented is that Nevada’s 1949 Legislature passed chapter 152, approved March 26, 1949, to license the supply of horse racing information, the so-called race wire.
The race wire matters because bookmakers depended on it. At the Kefauver Committee’s Las Vegas session on November 15, 1950, Nevada Tax Commission member William J. Moore testified that the race-wire law took effect July 1, 1949, and said that operators had told him that Bugsy Siegel had decided who received race-book service. Moore said he knew little of this himself. The Las Vegas session, held in the federal courthouse, was one of hearings the committee held in 14 cities, according to the Nevada Gaming Lawyer.
The Federal Tax of 1951
Congress answered the Kefauver hearings with the Revenue Act of 1951, Public Law 183, dated October 20, 1951. Part VII added wagering taxes: an excise tax of 10 percent of the amount of a wager, and a special tax of $50 a year, with registration, on each person in the business of taking wagers. Taxable wagers included those on a sports event placed with a person in the business of accepting them. Licensed pari-mutuel wagering was left out.
Historian David G. Schwartz writes that the law was never designed as a revenue measure but as one more tool against organized crime, relying on the fact that illegal bookmakers feared the Internal Revenue Service more than the FBI. Under it, bookmakers had to give their names, residences and customers’ names. Nevada’s Senator Pat McCarran, according to two Nevada legal histories, could not stop the bill but got card games, roulette, slot machines and dice games exempted under certain conditions, so most casino gambling escaped the tax. Sports wagers did not.
The arithmetic explains the result. Authors Brenda Roubidoux Taylor and Gregory Gemignani, writing for the Nevada Gaming Lawyer in 2019, give an example of a book in 1959 taking $220,000 in perfectly balanced bets on a championship game at standard odds of $110 to win $100. The book would hold $10,000 from the losing side, but the 10 percent tax on all $220,000 would be $22,000, a loss of $12,000. Schwartz notes that a well-run sportsbook averages a profit margin of about 5 percent of handle, so a 10 percent levy meant net losses.
Casinos with other games to run saw no reason to carry such a business. The Las Vegas Advisor adds that in the 1950s and 1960s the resorts were largely run by recently legitimized operators, who had little appetite for new reporting requirements to the federal government.
Two Decades of Turf Clubs
The sources agree that the tax drove sports betting out of the large casinos and left it to smaller operations. Two sources count how many Nevada race and sports books shut: the Nevada Gaming Lawyer says 21 of 24 closed, while a UNLV Center for Gaming Research paper by Robert Faiss and Gregory Gemignani says 21 of 25 went out of business, claiming they could not make a profit.
Schwartz says independent turf clubs sprang up, under a gentleman’s agreement in which club owners promised not to offer other gambling and casinos promised to stay out of bookmaking. The Las Vegas Advisor names the Derby and Saratoga clubs, owned by Jackie Gaughan, and the Hollywood Horse and Sports Club, owned by Jimmy “the Greek” Snyder. A Chicago Sun-Times history lists the Rose Bowl, Santa Anita and others, and says that at times only three stand-alones operated in Las Vegas.
The other side of the story was an enormous illegal market. Schwartz estimates that perhaps 300,000 illegal bookmakers existed by 1960. The tax also drew a constitutional challenge: in 1968, in Grosso v. United States, the Supreme Court reversed a conviction for failing to pay the wagering tax, in a case where the defendant argued the tax violated his Fifth Amendment rights, as the Nevada Gaming Lawyer summarizes. Nevada’s 1974 sports handle, reported in the Sun-Times, was just $8 million.
The Casinos Come Back, 1974 to 1976
A federal law dated October 29, 1974, Public Law 93-499, cut the wagering tax on sports bets from 10 percent to 2 percent, effective December 1, 1974, according to the U.S. Code’s amendment notes. Several sources credit Nevada Senator Howard Cannon with pushing the change through. Nevada casinos could now consider a business that had been closed to them for two decades.
In 1975, according to the Las Vegas Advisor and a Casino City Times history, Jackie Gaughan opened a sportsbook at the Union Plaza, the first inside a casino, overseen by oddsmaker Bob Martin. The following year Frank “Lefty” Rosenthal opened a plush room at the Stardust. The Las Vegas Advisor describes six giant television screens and seating for 300, and the Sun-Times says Rosenthal developed the theater-style setting that became standard.
Rosenthal’s story needs care. The Las Vegas Sun reported that he had a criminal history from illegal gambling in Chicago and that he reportedly oversaw gambling at several casinos without holding a title that would force a license application. In 1978 the Nevada Gaming Commission held a hearing on why he was running the Stardust unlicensed and refused him a license. The Sun also reported that he was never charged with a crime in connection with skimming in Las Vegas, and in 1988 he was placed in Nevada’s Black Book, which barred him from the state’s casinos.
What Changed After 1975
The immediate effect was a change of venue. Schwartz writes that within about a decade of 1974 the turf clubs were out and sports betting was a casino fixture. The Sun-Times quotes oddsmaker Michael Roxborough saying that the casinos had little tolerance for the rowdier customers of the old joints, and that the era of standing on chairs and throwing beer bottles at the television was over.
A second federal change followed. Public Law 97-362, dated October 25, 1982, set the tax at 0.25 percent of the amount of a wager authorized under the law of the state where it was accepted, and 2 percent for other wagers, according to the U.S. Code. Schwartz reasons that a 2 percent tax on a business with a 5 percent margin was still onerous, which is why Congress acted again in 1982.
The Nevada regulatory background also mattered. The Gaming Control Board, created in 1955 and made independent of the Tax Commission under Governor Grant Sawyer’s reforms, supplied the oversight that, in the words of the UNLV paper, launched the modern era of gaming control in Nevada. This article does not draw lessons from this history for any later period; it records what the sources say happened.
Disputes, Numbers and the Other Side
Several points remain disputed. First, the legal date: 1931, 1941 or 1949 for legal race and sports books, depending on the source. Second, the tax year: the statute is dated October 20, 1951, but a CDC Gaming commentary dates the tax to 1952. Third, the casualty count: 21 of 24, or 21 of 25, books closed.
Fourth, the date of the first cut: the U.S. Code gives October 29, 1974 as the law’s date and December 1, 1974 as its effective date, while the Las Vegas Advisor says the tax was reduced on October 15, 1974. Fifth, the date of the second cut: the law is dated 1982, but sources place the lower rate in 1982, on January 1, 1983, in 1983, or in 1984.
Sixth, the firsts: the Union Plaza’s 1975 book is called the first in a casino, while Rosenthal’s Stardust room is called the prototype of the modern sportsbook. The sources describe business history and say little about ordinary bettors, though Schwartz’s estimate of 300,000 illegal bookmakers suggests how large the unlicensed market was.
Nevada Sportsbook Timeline
| Date | Event |
|---|---|
| March 19, 1931 | Governor signs Assembly Bill 98, ending Nevada’s gambling ban |
| March 26, 1949 | Race-wire law (chapter 152) approved |
| November 15, 1950 | Kefauver Committee holds its Las Vegas session |
| October 20, 1951 | Revenue Act of 1951 imposes a 10 percent wagering tax |
| 1955 | Nevada creates the Gaming Control Board |
| October 29, 1974 | Law cuts sports wagering tax to 2 percent, effective December 1, 1974 |
| 1975 | Union Plaza opens first sportsbook inside a casino |
| 1976 | Stardust opens a theater-style sportsbook |
| October 25, 1982 | Law sets 0.25 percent rate for state-authorized wagers |
Related Stories
To see how Nevada handled other bets, read the history of pari-mutuel betting, which the 1951 tax excluded. For the odds that bookmakers posted, see the history of the point spread. Nevada’s other mid-century gaming story is told in the opening of the Flamingo in 1946, whose builder appears in the Kefauver testimony.
Frequently Asked Questions
Sources & References
- Nevada Legislative Counsel Bureau, Research Division — History of Gaming in Nevada
- Robert D. Faiss and Gregory R. Gemignani, UNLV Center for Gaming Research — Nevada Gaming Statutes: Their Evolution and History (2011)
- Brenda L. Roubidoux Taylor and Gregory R. Gemignani, Nevada Gaming Lawyer — The Remaining Wagering Excise Tax (September 2019)
- Revenue Act of 1951, Part VII, sec. 471 (Public Law 183), 65 Stat. 529
- U.S. Code — 26 U.S.C. § 4401 and amendment notes (Pub. L. 93-499; Pub. L. 97-362)
- David G. Schwartz, Vegas Seven — Why Congress Should Repeal a Federal Tax on Sports Betting (2015)
- Las Vegas Advisor — When Did Sports Books Become Part of Casinos? (2025)
- Rob Miech, Chicago Sun-Times — The opening of the book (2021)
- Ed Koch and Mary Manning, Las Vegas Sun — Mob-era gambling boss was ‘Old Vegas’ (2008)
- Dunn v. Nevada Tax Commission, 216 P.2d 985 (Nev. 1950)
- Kefauver Committee, Part 10 — testimony of William J. Moore, November 15, 1950
- Richard Auxier, Tax Policy Center — The Prospects and Limitations of Taxing Sports Betting
- CDC Gaming — A Winning Parlay (2016)
- Casino City Times — Vegas race books buck trend (2008)
