At the beginning of the 20th century, the anti-alcohol movement was gaining momentum in the United States. By 1918, its representatives had such significant political influence that the government was compelled to amend the constitution and enact the so-called Prohibition Law. This law imposed a total ban on the production, sale, and transportation of all types of alcohol on a national level. Surprisingly, it served as one of the most powerful catalysts for the development of the gambling industry. Casinos went underground, and the criminal syndicates that managed them gained such wealth and power within just 10 years that their influence on the industry still persists to some extent today.

Key Events Dates
Start of Prohibition Era 1920
Formation of the National Crime Syndicate 1929
Onset of the Great Depression 1929
Repeal of Prohibition 1933
End of the Great Depression 1939

Enactment of the Prohibition Law

In the 1910s, two very significant changes took place in the United States, which greatly contributed to the enactment of the Prohibition Law. The first was the implementation of the 16th Amendment to the Constitution in 1913, which introduced a full-fledged income tax on alcohol instead of indirect levies. The second was the 19th Amendment of 1920, granting women the right to vote. Since a significant portion of women openly supported the temperance movement, “dry” political parties gradually gained a majority in Congress. This included both Democrats and Republicans.

One of the main ideas promoted by supporters of the Prohibition Law was the conservation of grain supplies and preventing their use for producing alcoholic beverages.

The national ban on alcohol came into effect on January 17, 1920. The task of enforcing it fell on over 1,500 federal agents from three government organizations, tasked with ensuring compliance.

Loopholes and Workarounds

After the enactment of the Prohibition Law, the gambling industry on water received a powerful boost. Although river and sea casinos had existed in the USA for hundreds of years by that time, they reached unprecedented scales for the first time. Enterprising businessmen quickly realized that opening a gambling establishment did not necessarily involve breaking the law or engaging in open confrontation with the police and authorities. All they needed to do was sail the casino ship 5-7 kilometers away from the shore, and the problems would be solved.

The key lay in the legal status. At such a distance, the waters became neutral, and US laws automatically ceased to apply. Even though reaching the ship could take just an hour, legally it was beyond the country’s jurisdiction. Therefore, near major port cities, especially on the West Coast, dozens of floating casinos began to emerge. Here, guests could freely purchase alcohol and enjoy gambling, while the establishment owners didn’t fear persecution from law enforcement.

To open casinos, ships of various types were purchased, including cargo barges and even oil tankers.
Gambling establishments on water thrived throughout the entire duration of the Prohibition Law and after its repeal. The only challenge they faced was interruptions in operation. Due to storm seasons, casinos were open for only 7-8 months out of the year.

The Mafia Enters the Game

The amendments to the Constitution, contrary to the government’s expectations, had an extremely negative effect on law and order. The alcohol ban led to the active development of bootlegging networks and increased levels of organized crime. The mafia syndicates managing such businesses became extremely wealthy and powerful. They sold their products, including through underground casinos.

The start of the Prohibition Era coincided with the rise of Benito Mussolini’s dictatorship in Italy. This led to the mass emigration of many Italians to the United States. The Sicilian Mafia was no exception. Italian gangsters crossed the ocean in search of a better life and new opportunities. They organized their own criminal clans and joined existing families. It can be said that the Prohibition Law gave rise to influential criminal figures such as Meyer Lansky, Al Capone, Frank Costello, Bugsy Siegel, and more.

However, where there were large sums of money involved, conflicts inevitably arose, often escalating into real wars between Italian mafia families and other ethnic gangs. In New York, a confrontation quickly erupted between Frankie Yale and the Irish-American gang “White Hand.” In Chicago, Al Capone waged war against the North Side Gang. Towards the end of the 1920s, one of the bloodiest conflicts broke out between the families of Joe Masseria and Salvatore Maranzano. This became known as the Castellammarese War, which resulted in the division of New York into five zones of influence.

As a result of these clashes, underground bars and casinos often changed hands but continued to thrive. To ensure security for their establishments, the mafia resorted to three favorite methods of operation:

Threats and intimidation. Both victims and potential informants who could cooperate with law enforcement were subjected to physical violence. This way, the mafia kept people in fear, preventing anyone from cooperating with law enforcement.
Bribery. The Prohibition Law fueled not only organized crime but also corruption. The mafia bribed anyone willing to take money, especially police officers and politicians.
Jury tampering and bribing judges. If a case went to trial, the mafia could influence the composition of the jury.

One of the most successful gangs involved in bootlegging and organizing gambling was led by Arnold Rothstein. This American of Jewish origin managed to establish contacts with Italian mafiosi and often even acted as a mediator in resolving conflicts between families. Arnold organized stable transportation of alcohol from Ireland, Scotland, and Canada, and distributed it through his own network of underground casinos and bars. Rothstein was also known as a loan shark. He provided significant loans to organize gambling and other businesses, in return demanding huge interest payments.

In 1928, an assassination attempt was made on Rothstein, resulting in him being seriously wounded and passing away the next day in the hospital.

The success of gambling establishments and the alcohol sales business were largely due to the fact that the Prohibition Law did not explicitly forbid gambling and the consumption of alcoholic beverages. Responsibility was only targeted at the organizers, while ordinary citizens didn’t need to worry about police oppression. Casino visitors had access to a full range of familiar gambling activities: poker, blackjack, roulette, dice. In some establishments, there were even slot machines, which had a history of around 30 years at that time.

However, honesty was notably worse than the diversity of gaming opportunities. Since the casinos operated illegally and their activities were not regulated, fraud thrived. Moreover, much of the fraud was committed by the casino staff themselves. Dealers often rigged cards, magnets were used in roulette, and slot machines were adjusted to reduce payouts.

Combined with inflated alcohol prices and the influence of alcoholic beverages on players’ decisions, this allowed casinos to generate colossal profits. The only hindrance for the mafia on their path to increasing wealth was internal conflicts. By the end of the 1920s, these conflicts had exhausted Italian and Jewish groups to such an extent that the largest families decided to establish a global peace.

National Crime Syndicate

The bloodshedding wars between the mafia families were not benefiting anyone. They were depleting resources and preventing a full focus on business. To put an end to this, in 1929, at a mafia conference in Atlantic City, a decision was made to create the so-called “National Crime Syndicate.” This was a united group of Italian-American and Jewish families, led by their representatives.

According to one version, the idea of creating the Syndicate belonged to the Italian mafioso Johnny Torrio.

This move temporarily halted the endless conflicts. While conflicts continued to occur between individual families, they became controlled, and the wars were conducted according to a kind of code, following certain rules.

The established peace proved to be beneficial for the gambling business. New casinos started to open in New York, Chicago, Atlantic City, and other major cities. The subsequent severe crisis that shook America, contrary to the overall economic decline, had a positive impact on the gambling industry.

The Great Depression

In 1929, the Great Depression began in the United States, lasting until 1941. This period was one of the most difficult for the country. To raise funds for the budget and give an additional boost to the economy, gambling activities gradually began to regain their legal status. Racetracks for betting on horse races were opened in 21 states. Also, in 1933, a decision was made to repeal the Prohibition Law.

Nevada legislators were particularly active in this direction. In 1931, a law was passed here that legalized most forms of gambling and turned them into one of the main sources of income for the state. Historians note that one of the most important figures of that time was gold prospector Nick Abelman. Gambling saloons were opened on almost all of his claims. However, he paid the most attention to the city of Reno, where he had settled since 1920. Here, he opened his first full-fledged casinos.

In 1931, when gambling was legalized in Reno, Abelman and two partners founded a gambling club called the Ship and Bottle.

Almost every visitor to the hospitable state of Nevada considered it their moral duty to leave some money in one of the legal casinos. However, there were still few of them in the early 1930s. For example, in Las Vegas, only four had opened.

Moves towards legalization were happening in other states as well:

In New York, several new racetracks were built, and national lotteries were revived. In the city of Saratoga Springs, located in the northern part of the state near natural mineral springs, horse races were organized, hotels were built, and various forms of gambling were offered. In Cleveland, Ohio, the so-called “Harvard Club” emerged, operating from 1930 to 1941. It was considered one of the largest gambling establishments in the country and attracted guests from even New York and Chicago. The casino could accommodate up to a thousand visitors at a time. However, the status of the national gambling capital was ultimately acquired by Las Vegas, a status it holds to this day. Although the city’s peak development came after World War II, the 1930s and 1940s saw fundamental changes that laid the foundation for its evolution as a gambling hub in the United States.

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