A Review of Regulatory Theory and the U.S. Casino Industry

Abstract

The casino industry is one of the most stringently regulated industries in the United States. State governments and their regulatory agencies control almost every aspect of the industry. However, U.S. casino regulation has not received much research attention. We examine the five most applicable economic theories of regulation. Since relevant empirical data of regulatory changes for casinos are sparse, we examine trends of the key variables to evaluate these theories. We categorize and examine trends in state and industry characteristics to determine if any one of these theories best explains the regulation of casinos. Based on our review of the state-level data, we conclude that the legalization and regulation of casinos best conform to a Leviathan theory of government in which the primary policy goal is to maximize government revenues.