Yep. You can either be a bank backed by the full faith and credit of the United States, or you can be a casino. You can't be both. Or at least that's how it would work in a world where the banks don't own Congress.
And even the casino analogy is largely unfair to casinos.
They don't get to bet against their clients, lie about returns, or collude with other casinos.
And that's even if we grant the rumors and whispers as true; that the casinos might have the gaming commission in their pocket the way Wall Street owns the ratings agencies, and that they may well get the same sweetheart penalty deals when busted, as Wall Street does with the SEC.
But even there, what casinos may be doing can't compare to what Wall Street does -- not even as open secrets, but on the public record.
The market maker knows the odds and is incentivized to be honest with the customer, to keep their trust and get as many people to play as possible as it 'wins' only in the aggregate as more and more people play. [1]
But the point is that there isn't another, let's call it 'evil', branch of the casino, separate from the market maker. Where this 'evil' branch can bet against each gambler.
So now, instead of making 2% off a gambler, you can now make massive sums betting against any gambler you lure into horrible odds.
So the incentives have been thrown out of balance. Pulling in astute gamblers and making 2% becomes an inefficient strategy. Reeling in unsophisticated gamblers, luring them into games with terrible odds and then betting against them, becomes an optimal strategy.
And down that road, almost inevitably, comes distortion and outright fraud.
[1] Slot machines only earn something like 2% for the casino. It's more in their interest to be very transparent about those odds and get more people to play, than to be shady and try to squeeze out 3%. Because you'll lose more gamblers than you can get with a 'tighter' slot.
EDIT: to be clear, I only used 'evil' because the 'gambling against' branch was housed with and colluding with the market maker in this example. I have no problem with the analogous financial services. The argument is simply that you can't do both. It's bad for the market as a whole.
I don't see how trying to slot casinos into the market model would help understand them any better than simply understanding them as casinos. There isn't much of a liquid market of betting in a casino. Compare with Wall Street and its endless array of derivatives and hedges and mutual funds and all that stuff to... $25 on red. Wall Street may have elements of betting, but it's also a lot more. Casinos are much simpler.
There actually is. If you read the sites for serious gamblers, they pay lots of attention to the exact rules in place, especially for blackjack. It's defiantly not a commoditized industry.
The gamblers visit the places with the best rules. If you're playing blackjack at $500 a hand, playing against a 1.1% house edge instead of a 1.2% house edge matters.
Not really. A casino could hire a bunch of professional/expert poker players, put them in the poker room, and have them literally play against the novice/intermediate guys. They would make a lot of money. But that's illegal.
On same games the casino just rake a bit off the top - basically a cover charge. Others the casino profits off you - but the odds are known.
A casino could hire a bunch of professional/expert poker players, put them in the poker room, and have them literally play against the novice/intermediate guys
This is actually done, and fairly common. Usually, casnios pay small-time pros a flat rate to seed poker tables, and don't take a stake in their wins or losses, but the point is casinos do hire pros to play against customers.
