Schabacker 1

Casinos and Card Sharps: A Game of Cat and Mouse

Analyzing the incentives, strategies and innovations of casinos and gamblers

DeAnna Schabacker

University of Puget Sound

Professor Matt Warning

Spring 2006
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Table of Contents

1. Introduction

1.1 The Story and the Players

1.2 A History of Casino Gambling

1.3 Casino Games

2. Blackjack

2.1 Blackjack Basic Strategy

2.2 Advantage Blackjack

2.2.1 Card Counting

2.2.2 Other Advantage Strategies

22.3 Legal Issues of Advantage Play

3. The Casino’s Side

3.1 Selection and Screening Process

3.1.1 Technology

3.2 Changes to the Game

4. Conclusion

5. Glossary

6. Appendix A-Basic Strategy Chart

7. References

*N.B. Many footnotes are definitions of gambling terms. They can also be found in

the glossary.
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1. Introduction

Robin Hood meets the Rat Pack when the best and the brightest of M.I.T’s

math students and engineers take up blackjack under the guidance of an eccentric

mastermind. Their small blackjack club develops from an experiment in counting

cards on M.I.T.’s campus into a ring of card savants with a system for playing

large and winning big. In less than two years they take some of the world’s most

sophisticated casinos for more than three million dollars. But their success also

brings with it the formidable ire of casino owners and launches them into the

seedy underworld of corporate Vegas with its private investigators and other

violent heavies. (Mezrich 2002)

The preceding comes from the back cover of “Bringing Down the House”, the popular

book of six M.I.T. students who won millions of dollars playing blackjack. This dramatic

account delves into the big money, fast-paced, and dangerous world of the M.I.T. card

counters and their trials, tribulations, and close-calls. Of course, this isn’t the first

instance of individuals making millions from casinos, although perhaps it is the most

flamboyant. Thirty years earlier, Ken Uston made over a million dollars using teams of

card counters in top casinos around the world. He was consequently barred from many

casinos. Many people who have made money from casinos have not been so public with

their successes; there are many more instances and methods of players exploiting an

advantage in order to make money at casinos. It is a story of cheaters and bribers, genius

and ingenuity, and the casinos that have to counter them.

The examples of cat and mouse moves between the casino and the player lead to

many questions. Is it really possible to make money long term at a casino? Is it possible
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to make enough money to justify the risk that players with an advantage at casinos face?

How do casinos catch these people and why do they put so much effort into doing it?

How does each party attempt to gain an edge? What sort of screening mechanisms do

casinos institute to attract or detract different types of clientele? How successful are

these and what impact does this have on their profits and the profits of the gamblers?

1.1 The Story and the Players

Casino gambling involves many inherent information asymmetries. Both parties,

the casino and the individual gambler, have incentives to gain an information advantage

over the other, and thereby increase profits. The casino engages in a selection process in

order to attract players that will be lucrative for the casino, and discourage or catch the

players with an advantage over the house. The gambler may engage in various tactics to

increase his or her odds against the house (become an “advantage player”1). In any

casino, the odds of the games favor the casino; this makes sense since casinos exist to

make profits. However, there are beatable games2 in which various strategies can tilt the

odds to be in the players favor. By doing this and becoming an advantage player, one can

potentially achieve long term profits. This paper focuses on the complicated relationship

between casinos and players, particularly in Nevada, and the ongoing battle to gain an

edge. Blackjack, sometimes also called “21”, is the primary game used in this analysis.

The incentives involved in casino gambling lead to steps and counter moves taken

by both parties in the transaction to gain an information advantage and increase profits.

In general, there are profound information asymmetries between the house and the player.

The obvious one for the player is that he does not know when he will win. He does not

1
Advantage player: An advantage player has a statistical advantage over the house. This can be achieved
through many different methods, some of which are technically cheating and some of which are not.
2
Beatable game: In a beatable game, it is possible to achieve long term positive profits.
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know with what frequency the slot machines will pay, and he does not know what cards

will be dealt at blackjack. He does not know when the dealer will shuffle (the relevance

of this will be explained later). He does not know or understand, in general, the inner

workings of the casino: the security, the surveillance, the policy on winning players, etc.

Similarly, the house does not know the players very well. The casino, initially at least,

does not know who its patrons are. It does not know if they have good skills, poor skills,

an information advantage, or if they are cheaters. The casino doesn’t know if a given

individual has hidden information or will engage in hidden action.

The primary goal of a casino is to achieve profits. The profits that come from

gambling are results of inherent house advantages built into the games. If the casino

cannot protect this statistical advantage, profits will decrease. Casinos, therefore, want to

increase their information regarding their patrons, in order to know which players are not

good for their business. Additionally, there will inevitably be players who would like to

also gain information about the casino, in order to achieve long term profits through

casino games. So what can we expect these players and the casino to do to achieve these

ends?

We expect the casino will invest in screening devices and selection processes in

order to monitor their patrons. While the monitoring costs will reduce profits, we expect

that it will not reduce profits so much as would a lost house advantage. In addition, these

monitoring costs will have positive externalities, such as increased security. We further

expect the casino to take as many precautions to shield themselves from advantage

players as possible, without reducing their marketing potential to other customers. We

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would also expect that this would be a continuing cycle as the house is required to

respond to innovations by the player.

On the side of the player, opportunistic behavior should lead to innovation and

willingness to take risks. The large profit potential will make some players risk-

preferring. We expect the players to invent strategies, both legal and illegal, as defined

by the Nevada Revised Statutes, and to take risks in order to gain an advantage over the

house. We expect advantage players to disguise their advantage and sometimes their

identities, making it more difficult for the house to detect them, which creates an adverse

selection problem.

The Nevada Gaming Commission and the State Gaming Control Board are the

primary institutions regulating gambling in Nevada. The Nevada Gaming Commission is

a part-time agency that writes the state's gambling rules and grants or denies gaming

licenses. The Gaming Control Board is a full-time agency that administers the state's

Gaming Control Act and its corresponding regulations. It further protects the stability of

the gaming industry through licensing and enforcement of laws and regulations, collects

gaming taxes and fees, and conducts investigations (Simpson 2002). The taxes and fees

are an essential source of state revenue. The commission also crafts and enacts new

regulations and approves control board nominations to Nevada's List of Excluded

Persons, the 42-year-old list of people barred from entering the state's casinos, popularly

called the Black Book. Regulators also deal with technology and social issues involved

with casino gaming.

Information asymmetries and opportunistic behavior of casino gaming lead to

imperfect market behavior: adverse selection, high monitoring costs, and hidden action.
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The casino and the player in the transaction have an incentive to do whatever it takes in

order to gain an information advantage and attain profits. The Nevada Gaming

Commission and the Gaming Control Board regulate the Nevada gaming industry by

writing and enforcing the Nevada Revised Statutes, collecting taxes and fees, and in

general, promoting industry stability. The advantage-seeking player, the casino, and the

regulatory institutions are the primary actors in this analysis.

1.2 A History of Casino Gaming

In the last two decades, casino gambling has increased dramatically in popularity

to become a major industry within the United States. Today, casino gambling is legal in

29 states and generated annual revenue of $40 billion dollars in 2001. Nevada was the

first state to legalize gambling in 1931, followed by New Jersey in 1976. There are two

types of casino: tribally owned and publicly traded private corporations (Garrett 2003, 4).

Corporate casinos are taxed and regulated by the state; however, tribal casinos are

sovereign entities from the state. This is relevant because the multi-billion dollar casinos

in Las Vegas and Atlantic City are corporate casinos. They pay money to the state and

are subject to the laws of the state. The 1990s saw an increase in the number of states

with legalized gambling, the primary reason being that states saw the casinos as potential

for economic growth (Garrett 2003, 5).

In 2004, 26% of Americans 21 and older gambled at a casino; this is 53.6 million

Americans that made at least one trip to a casino to gamble (Harrah’s survey 2004). The

greatest proportion of casino gaming revenue comes from slot machines and other

gaming devices (such as video poker); in 1998, 65.3% of Nevada’s gaming revenues

came from slot machines and 30.6% came from table games (Eadington 1999, 177).
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Seventy-five percent of casino gamblers play the slot machines and 13% play table

games. Table games include blackjack, craps, and roulette. Blackjack is the most

common table game played, accounting for nearly ¾ of all table gaming (Harrah’s survey

2004, 21). These numbers show that casino gaming is huge business and big money,

especially slot machines and blackjack. A lot of money can be made or lost at these

games.

1.2 Casino Games

For casino games, the house advantage can be measured with a probability

analysis of the game. Some games are fixed odds game (e.g. normal slot machines) and

some games have elements of strategy (e.g. blackjack). In slot machines (at least those

without progressive jackpots3, like some video poker machines), the odds are fixed and

the player is betting against an electronically or mechanically determined outcome. With

progressive jackpots, the house advantage changes as the size of the prize changes

(Eadington 1999, 178). In a typical slot machine, the house advantage is 5% (i.e. most

slot machines pay out about 95% of the money that is put into them) and for blackjack

the house advantage is between 1-2%, usually closest to 1.4% (Eadington 1999, 179).

That is to say that when a gambler makes 1000 bets on a slot machine, she can expect to

be down4 50 bets on average. So if Gambler A is playing a one dollar slop machine and

she plays 1000 times, she should lose $50 on average. Of course, she could win or lose

any amount, but in the long run, she should expect to lose $50 for every 1000 spins of the

slot machine. Similarly, a blackjack player who utilizes the perfect “basic strategy”5,
3
Progressive jackpot: A game in which the jackpot keeps growing as people play until someone wins.
Once it is large enough, the ratio between the money put in the machine and the expected pay-off makes it
a positive expectation game.
4
Down: To be “down” x amount of dollars since time y means that a player has lost $x since time y.
5
Perfect basic strategy: Set of rules in blackjack of the mathematically best plays given every possible
scenario. Appendix A show s a basic strategy chart and describes its use.
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which will be discussed later, can expect to be down 14 bets after 1000 hands played.

Under normal conditions, both of these games are negative expectation games; that is,

one can expect to see negative profits from playing them in the long run. However, when

perfect basic strategy is used, blackjack has a much smaller house advantage than slot

machines.

2. Blackjack

In casino blackjack, a player is dealt two cards, with the goal being that the total

value of the cards comes as close as possible to 21 without going over. If the player’s

cards are closer to 21 than the dealer, he wins. If the cards go over 21, the player has

“busted”6 and automatically loses; the dealer can also bust. All cards (2-10) have a value

equivalent to their face value. All kings, queens, and jacks have a value of ten. Ace has a

value of one or eleven. The player acts before the dealer. On his turn, the player may

“hit” (take another card) or “stand” (not take another card and stay on the amount he has

now). If a player is dealt two of the same cards, he may “split” them and have a bet on

each hand. Also, a player may elect to “double down” after he is dealt his first two

cards; this involves doubling his bet and he may only receive one more card. If the

player’s first two cards contain an ace and a ten (any king, queen, jack, or ten), it is

known as “blackjack” and the player wins one and a half times of his bet (commonly

denoted as 3-to 2 payout). If the dealer is showing7 an ace (that is, the up-card that is

visible to everyone is an ace), the player has an option of accepting “insurance”.

Insurance is a side bet of half the amount already bet, betting that the dealer has a ten-

value card facing down, thus giving him blackjack. If he has blackjack, the player loses

6
Bust: The total face value of the cards held is over 21.
7
Showing: Showing refers to the up-card that is visible to everyone at the table.
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his initial bet, but wins the side bet, so is then even. If the dealer does not have

blackjack, the player loses the side bet. One further option available at only some games

of blackjack is the option to surrender. Surrendering means that the player does not think

he can win given his cards and the visible dealer’s card, and is therefore willing to lose

half of the bet and not risk losing it all. This is a good option when the dealer is showing

a ten and the total of the player’s cards is 15 or 16; the player most often loses in this

scenario. The dealer must play according to predetermined rules, which vary from casino

to casino, but usually involve drawing8 to 17 (i.e. she must hit on 16 or less). If there is a

tie (the dealer and player have the same amount) it is considered a “push”, and all bets are

returned to the player. (Julian 2005, 165)

The player has several advantages over the house in blackjack. First, he doesn’t

have to play according to pre-set rules, as the dealer does. This flexibility is an

advantage. In addition, the pay-off for getting a Blackjack (21 with the first two cards) is

3-to-2 (he wins back 150% of his bet). However, the house advantage is more

significant: the house always wins if the player busts, even if the dealer busts also. If the

player played the exact same way as the dealer (i.e. following the same predetermined

rules), both the dealer and the player would bust about 9% of the time, thus giving the

house a 9% advantage. However, given the Blackjack 3-to-2 pay-off and the fact that

players do not have to (and hopefully they don’t) play just like the house, this

disadvantage can be much smaller. Using perfect basic strategy, the disadvantage can be

closer to 1 to 2 percent (Sklansky & Malmuth 1998, 10). Of course, this is not good

enough to achieve long term profits; to become an advantage player, other strategies must

8
Drawing: This involves taking another card to try to increase the value of the hand.
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be adopted.

2.1 Blackjack Basic Strategy

In 1962, Edward O. Thorp, a young MIT physics professor, developed the first

basic strategy for blackjack. Using computer analysis he determined the mathematically

correct play based upon the dealer’s up-card (the card that is showing) and the cards held

by the player. Since this early break-through in blackjack strategy, many other have used

computers to analyze the basic strategy. In short, basic strategy involves when to hit,

stand, double down, and split, based on the dealer’s up-card and the cards in the player’s

hand. Appendix A illustrates the basic strategy. This strategy also recommends to never

buy insurance. Insurance is basically a bet that the dealer’s down-card is a ten and the

casino is giving the player 2-to-1 odds on that bet. The true odds that the dealer has a ten

are 2.5-to-1, so it is always a bad bet unless the player has some extra information.

An in-depth discussion of basic strategy is not warranted here. However, it is

relevant to know that the basic strategy of blackjack does have some variations,

depending on the number of decks in use and the specific rules of the game. These

strategies were developed using millions of computer simulations, until it was clear what

the “correct” play was. It is not the case that every hand stands to win by using this

strategy, however, that it is the play that should lose the least in the long run (some hands,

like 14 versus the dealer’s shown 4 will always lose money whether the player hits or

stands; but if the player stands, he will win about 40% of the time, whereas by hitting, he

will win less). Clearly, a lot of work has been done to try to gain a statistical advantage

over the casino.

2.2 Advantage Blackjack

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The house has a long term statistical advantage over a blackjack player, even if he

utilizes a perfect basic strategy, as was mentioned earlier. In order to tilt the odds into the

player’s favor, he may adopt various strategies. There are many different ways to gain an

advantage; some are considered cheating (like marking the cards) and some are not

technically cheating, but are frowned upon by the casino, like card counting. These

methods are utilized by some blackjack players in response to the incentives of the game.

A player that is able to gain an information advantage about the cards will possibly be

able to win money in the long run, whereas a player without this advantage will lose

money. The casino, in turn, has an incentive to keep players from engaging in these types

of behavior, which threaten to reduce profits. The house needs to maintain its statistical

advantage in the games it offers, or it will eventually go out of business.

2.2.1 Card Counting

The cards that have already been played affect a player’s odds. If more low cards

(2-6) and fewer high cards (aces and ten-value cards) have not shown up early in the

deck, the deck is obviously richer9 than normal; that is there is a greater proportion of

tens and aces left in the deck. Since blackjack is a nearly even game when the player

engages in perfect basic strategy, this information advantage gives the player an

important and profitable edge. There are some advantages to a rich deck even if one isn’t

aware of it. Since there are more high cards in the deck, there will be more 20s and

blackjacks. Of course, that means that the dealer will get more also; but the dealer will

not get paid 3-to-2 for blackjacks as the player will. The player will come out ahead if

the dealer and player constantly trade blackjacks. Furthermore, the options of doubling

down and splitting are more lucrative when there are more high cards in the deck.
9
Rich: A rich deck is one in which a higher proportion of high cards remains.
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Of course, being aware of whether the deck is rich or not, gives the player even

more advantages. A card counter should deviate from basic strategy based on the count

of the deck. The basic strategy is sometimes not the proper strategy use, since the deck is

not always the same. If the deck is rich, the player can choose to not hit stiffs (cards

totaling 12-16), even though basic strategy says he should, because there is a higher

chance a ten will be dealt and he will bust. For example, if the player was dealt a 15 and

the dealer had a 5 showing, he is still an underdog to win, even by making the correct

basic strategy play of staying. However, if the deck is rich, he may actually be a favorite

to win the hand; since it is more likely the dealer has a 10 as his down card and will hit a

ten and bust. In addition to deviations from basic strategy, the player should bet more

when she knows that the deck is rich, especially when it becomes very rich, in order to

exploit this advantage as much as possible. By the same token, when the deck is very

poor (significantly more low cards left than high cards), she should bet as little as

possible; in order to minimize the disadvantage. Another important strategy change has

to do with insurance. It is a bad bet unless the remaining cards contain at least one-third

tens (Sklansky and Malmuth 1998, 27). When the deck becomes rich, it contains a higher

proportion of tens than this and buying insurance then becomes the correct play, since it

is much more likely than normal that the down card is a ten.

There are many variations of card counting systems. The first concept of

counting included forming a ratio between the number of tens and non-tens left in the

deck; this is called a ten count strategy. In a single deck there are 36 non-tens to 16 tens,

which give a ratio of 2.25 (Thorp 1962, 103). Thorp included strategy tables showing at

what ratios one should deviate from basic strategy and tables showing what changes in
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bet size were appropriate to each ratio. The ten count strategy, however, was too difficult

for most people, especially when multiple decks came into play. A new and easier

strategy was developed, called the “Point Count”. There are many variations of this

approach, but the most widely used one is the High-Low Count. This count simply adds

a 1 for each card dealt 2-6, subtracts 1 for every ace of ten-value card, and 7-9 count as

zero (or simply, can be ignored) (Sklansky and Malmuth 1998, 29). The significance of

the count depends on the rules of the particular blackjack game and the number of decks

in use. For example, a count of +3 in a single deck indicates a nearly 1% advantage for

the player. However, in a shoe10 game where there could be many more decks in play, +3

may not mean much, and will need to be higher before there is a real advantage (how

high, of course depending on the number of decks in the shoe and the specific rules of a

given game).

There are several very important components of a card counting strategy. The

betting strategy is of paramount importance. When a player is aware of an advantage, she

needs to maximize this advantage. The amount to bet depends on the number of decks in

use, the size of the advantage, and, very importantly, what kind of a spread in bet size the

casino will tolerate. The swings in bet size are the biggest tip-off to the casino that a

player is counting cards. Another extremely important factor is for the card counter to

find a game that she can be successful at. Most importantly is the penetration11 into the

shoe before shuffling. If the penetration is deep, the card counter has a sizable advantage

because the deeper the penetration, the more accurately the card counter can estimate the

composition of the remaining cards in the shoe.

10
Shoe: A set of a given number of combined decks.
11
Penetration: The penetration of the deck or shoe refers to how deeply the dealer deals before shuffling
again.
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A single card counter can be caught if he varies his bets too much or makes

obvious and profitable variations from basic strategy too often. Since the casino has their

eye out for possible card counters, a successful card counter will have to be discrete. A

popular form of card counting involves teams of card counters. This has several

advantages: pooling together a bank roll, more players even out losses and increase

profits, and a team can use the “big bettor” strategy (Julian 2005, 166). In the big bettor

system, one team member sits at a table making small bets and counting the deck. When

the deck becomes favorable, he signals the big-bet player who then sits down and makes

huge bets into a favorable deck. Nothing seems suspicious because no one has changed

their bets. Between March 1974 and June 1976 Ken Uston and his team of card counters

made over one million dollars from various casinos in Las Vegas, Europe, and South

America using this system (Uston 1977, 1). He was barred from at least eight of the

major Las Vegas casinos; a poignant example of the casino’s desire to exclude advantage

players from playing at their tables. However, the consensus in recent years is that the

big bettor strategy has been overused and is carefully watched for by casinos (Sklansky

and Malmuth 1998, 65).

Although card counting appears in popular media to be an easy way to make

money, it is in fact very difficult. In order to card count successfully, a player must have

a perfect command of basic strategies for all rule variations and shoe sizes. In addition,

he must memorize large tables of numbers and be able to count the cards accurately and

quickly, while appearing to be a casual player. Card counting also does not remove the

variance; there will still be large down swings, however, there will be a small long term

advantage over thousands of hands. The advantage is small, approximately between 1-

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1.5%. Also, a very important factor now is avoiding being caught by the casino

personnel; they can ask a card counter to leave, bar him from returning, or simply shuffle

the deck every time he increases his bet, thus removing any advantage.

2.2.2 Other Advantage Strategies

Aside from card counting, there are yet more strategies developed by players

seeking to gain an information advantage and attain profits. The monetary incentives

have led to a great deal of innovation. One of the oldest and simplest strategies involves

marking the cards in some way (known as card crimping) in order to be able to identify

what card the dealer has, what card is on top of the deck, and what cards other players at

the table have. This is largely ineffective today, however, because decks are changed so

often. In addition, this tactic is rather easy to spot and is decidedly illegal. Another

strategy is known as “ace tracking”. It involves memorizing the exact order of a few

cards that are placed in the discard pile before an ace in a deck. If the shuffle is simple

enough, if and when these cards appear together again, an ace is likely soon to follow.

One can then adjust strategy and bets accordingly. Another example is called

“Spooking”. This involves reading the dealer’s down card from behind as the dealer

checks to see if he has blackjack. Someone stands behind the dealer (normally sitting at

another table) and is able to see the down-card at the same time the dealer sees it. He

then signals his partner and the player plays the hand appropriately (Sklansky and

Malmuth 1998, 55-57). There are many other examples of simple strategies such as

these, but these few serve as good examples of the types of innovation created and risks

taken in response to the incentives.

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Of course, in an environment where large sums of money move around so easily,

forms of corruption are likely to emerge, on the part of the casino or the player. There

have been cases in which some players began to bribe dealers. A player may tip up to

half of their profits, in order to get help from the dealer. A tipped dealer may signal the

player whether he has a large or small card underneath a ten-value card, play fewer decks,

or signal a player that his table is not favorable because he is being monitored closely,

etc. (Gambling Times). The dealer here is also acting on incentives; if the player is

winning, she is winning.

2.2.3 Legal Issues of Advantage Play

According to the Nevada Revised Statutes on crimes and liabilities concerning

gambling, “Cheat” means to alter the elements of chance, method of selection or criteria

which determine:

 The result of a game;

 The amount or frequency of payment in a game;

 The value of a wagering instrument; or

 The value of a wagering credit (NRS, 465.015).

Given this, what is cheating in blackjack? In Sheriff v. Martin the Nevada Supreme

Court ruled that card crimping is illegal because it changes a crucial characteristic of the

game; however, card counting is not illegal because it does not alter any basic features of

the game, but the counter is using information that is available to everyone (Julian 2005,

175).

Other court cases have arisen on behalf of the card counter, claiming

discrimination. Casinos sometimes ban known card counters from playing in the casino.
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The M.I.T. card counters were banned from several casinos and Uston was banned from

at least eight. During the 1970s, Uston had $85 million in lawsuits pending against the

casinos that had barred him. These lawsuits were largely unsuccessful, especially in

Nevada. Since casinos are privately owned and on private property, they have the right to

determine who plays. Some have claimed that since casinos pay a lot of state taxes, the

government has an interest in not seeing casinos fail and legislation is usually in their

favor (Julian 2005, 171).

3. The Casino’s Side

With Uston’s success, a new era in casino blackjack began: the casinos became

aware of the huge losses they could suffer to advantage players. As was earlier

mentioned, the house advantage at blackjack is approximately 1.5%. Imagine a player is

making $100 bets at a blackjack table for 2 hours, estimating that 100 hands can be dealt

in this time. The casino will on average make $100*100*.015, which is $150. It is also

important that most players will not play with a perfect basic strategy, and this number

would increase. Now, if a card counter can increase their odds of winning to 2%, the

casino will lose $100*100*-.02, which is $200. The casino expected to make

approximately $150 off of the player; however, they end up losing $200. Of course, if

there is more than one player, making much bigger bets, and playing much longer, the

casino can lose a lot of money. In addition, the casino may inadvertently comp the card

counter(s), thus increasing their losses even more to advantage players. So what have

they done given this information?

Casinos have implemented many strategies to counteract card counters and other

advantage players; for example, more decks in the shoe, less penetration through the
 Schabacker 19

shoe, continuous shuffling shoes, shuffling at will, changing and regulating minimum and

maximum wagers, etc. (Julian 2005, 169). In addition, casinos have implemented high

cost security systems, advanced surveillance technology, face recognition systems, and

computers at table games (Mindplay). Clearly, the casino believes preventing advantage

players from being able to play is worth a great deal of effort and money. Their

incentives are monetary, as well, and they need to screen the players that are allowed to

play.

3.1 Selection and screening process

Given the large amounts of money involved, casinos have a strong incentive to

monitor and understand the behavior of their patrons and gain an information advantage.

This information edge allows a casino many favorable options that would otherwise not

be available to them. The casino would be able to recognize advantage players and

cheaters, as well as normal players who are favorable to the casino. The casino could

then take appropriate actions. Unfortunately for the casino, the player has more

information about herself than is immediately available to the house. This information

asymmetry leads the casino to invent and utilize various methods to screen and select

players.

The casino seeks to identify and reward patrons they want to keep and to attract

new ones. Casino marketing is largely dependent on knowing who to advertise to and

what their most popular games are, etc. Favorable players make money for the casino and

the casino wants to encourage their patronage; this is commonly done through

complimentary goods and services, known as “comps”. Comps can range from a t-shirt

for a “low-roller” to a penthouse suite for a high-roller. On average, casinos spend 21%
 Schabacker 20

of their adjusted gross income on comps (Garrett 2003, 7). In order to best distribute

these comps, casinos need to know how much revenue the player is bringing into the

casino; this is done through player tracking systems (Eadington 1999, 180). Slot players

are typically encouraged to sign up for “slot clubs” where they are able to accumulate

points which can are redeemable for prizes (comps). These clubs encourage customer

loyalty; but more importantly, provide the casino with valuable information on the

players, including frequency and length of play, handle (total amount of money wagered),

and amounts won or lost. This is helpful for marketing purposes and for the selection

process, as well. (Eadington 1999, 181)

3.1.1 Technology

In addition, casinos seek to identify advantage players and cheaters. This is

especially important in variable odds table games, like blackjack, where an advantage

player or cheating player can beat the house. The casino cannot risk accidentally

removing non-advantage/non-cheating players too often because they will be losing

money and offending customers. One recent innovation to help casinos monitor table

games is a computer system built into the gaming table which is able to scan all the cards

dealt and the money wagered. One version of this system is called MindPlay. According

to an article from USA Today, some casinos in Las Vegas invested in blackjack tables,

called MindPlay tables, with miniature built-in sensors, which tracks both the card being

played and the betting chips. MindPlay technology increased the information available to

the house about the players; they could more easily weed out counters and more

accurately reward big players with comps. This is an example of the casino using a

highly technological method to gain an information advantage.

 Schabacker 21

These technological approaches raised new legal questions. Several lawsuits

were filed against the Nevada Gaming Control Board and a few casinos to stop Nevada

casinos from using MindPlay. The lawsuit claimed that the system limited the Blackjack

player’s chances of winning. Furthermore, the dealers and pit bosses used the system to

detect when the deck was favorable for the players and promptly reshuffled. The Nevada

Revised Statutes on Use of Device for Calculating Probabilities says: It is unlawful for

any person at a licensed gaming establishment to use, or possess with the intent to use,

any device to assist:

o In projecting the outcome of the game;

o In keeping track of the cards played;

o In analyzing the probability of the occurrence of an event relating to the game; or

o In analyzing the strategy for playing or betting to be used in the game,

except as permitted by the commission. (NRS 465.075) Since MindPlay in essence

marks the cards and tracks them, it seems to be against Nevada state laws to use this

system. Particularly in the case where preferential shuffling is done in response to the

count given by MindPlay. As of May 2005, the attorney for Nevada Gaming has

announced that MindPlay has been approved by Gaming, but subject to at least two

significant restrictions:

1. No information regarding the balance of the undealt cards can be available to

the casino until the shuffle point is reached.

2. Any information regarding the "count" of the cards is subject to an eight hand

delay.
 Schabacker 22

The eight hand delay would keep the casino from preferential shuffling; however, the

issue of enforcement is still at hand.

Another technological advancement made by casinos in order to better screen

their patrons is a face recognition security system. Faces are captured by the casino’s

cameras and are then compared to databases of known cheaters and card counters. If a

match is made, the casino will either eject the person, or monitor their every move.

These expensive high-tech systems are “A tool for us to identify people who could

possibly come in and take advantage of our casino,” according to one Trump casino

security director (CBS News 2001).

3.2 Changes to the Game

One method the casinos use to combat card counting is increasing the number of

decks in the shoe. This makes it more difficult for the card counter to estimate where the

deck is the most favorable, particularly if the penetration is shallow. The dealer may also

only penetrate a short way into the stack before reshuffling; again, this is so the counter

cannot have a very good idea of where their good cards are going to be. Shallow

penetration through a shoe is a very effective means of taking the advantage away from

card counters.

The casino may implement a flat betting rule or a bet cap on the gambler

suspected of card counting. The casino forbids the player to increase or decrease the bet

size significantly. This takes away a large advantage available to card counters. Since

card counters are normally able to increase their bet proportionally or more to their

advantage, the advantage pays off. In addition, when the card counter has a disadvantage
 Schabacker 23

he bets as small of an amount as possible to minimize the effect of the disadvantage. By

taking away their betting spread, the card counter has lost a great deal of his edge.

Preferential shuffling is when a dealer shuffles the deck because it has been

detected to be favorable to the player. This can simply happen if the dealer is instructed

to shuffle when a lot of low cards have been dealt early and to deal an extra round when a

lot of high cards are dealt first. It can also occur when a player is suspected of card

counting; either because of changes in bet size or because peculiar plays that are

characteristic of card counting have been made. In addition, preferential shuffling can

and has occurred when systems such as MindPlay detect a rich deck.

In some single deck or small shoe games, casinos may offer a 6-to-5 payout for

blackjacks, instead of the standard 3-to-2. While single deck games are easier for card

counters to keep track of, this reduced blackjack payout shifts the odds heavily towards

the house. The decreased pay-out for blackjack cancels out any advantages of having a

single deck game.

4. Conclusion

In the casino gaming industry, the monetary incentives lead to an on-going battle

between the casino and players seeking long-term profits. Especially in variable odds

games, like blackjack, both parties have evolved, adapted, and innovated over the years

in order to protect or achieve an information advantage. The teams of M.I.T. card

counters and Ken Uston illustrate the most striking and well-known examples of

advantage players having great success at blackjack. In response to these individuals, as

well as to many others, casinos have and continue to change their games, rules, and

screening processes in order to maintain large positive profits. These changes have
 Schabacker 24

profoundly affected the game of blackjack and have made it much more difficult for the

average card counter or any other type of advantage player. However, as the past has

shown, the huge profit potential will drive players to develop new ways to beat the house

and gain long term statistical advantages. By the same token, the casino will continue to

engage in the screening and selection processes, particularly through technological and

information sharing means, in order to protect their interests.

Glossary of Gambling Terms

 Schabacker 25

Advantage player: An advantage player has a statistical advantage over the house. This
can be achieved through many different methods, some of which are technically
cheating and some of which are not.
Basic strategy: Set of rules in blackjack of the mathematically best plays given every
possible scenario.
Beatable game: In a beatable game, it is possible to achieve long term positive profits.
Bust: The total face value of the cards held is over 21.
Double down: This involves doubling the initial bet and then receiving only one more
card.
Down: To be “down” x amount of dollars since time y means that a player has lost $x
since time y.
Drawing: This involves taking another card to try to increase the value of the hand
Handle: Total amount wagered.
Hard hand: Where any ace in the hand would have to be counted as one.
Hit: To accept another card.
Insurance: Insurance is a side bet of half the amount already bet betting that the dealer
has a ten-value card facing down, thus giving him blackjack. If he has blackjack,
the player loses his initial bet, but wins the side bet, so is then even. If the dealer
does not have blackjack, the player loses the side bet.
Penetration: The penetration of the deck or shoe refers to how deeply the dealer deals
before shuffling again.
Progressive jackpot: A game in which the jackpot keeps growing as people play until
someone wins. Once it is large enough, the ratio between the money put in the
machine and the expected pay-off makes it a positive expectation game.
Push: When the player and dealer have the same amount (i.e. there is a tie) and all bets
are returned to the player.
Rich: A rich deck is one in which a higher proportion of high cards remains.
Shoe: A set of a given number of combined decks.
Showing: Showing refers to the up-card that is visible to everyone at the table.
Soft hand: Where the hand contains an ace and the total is not over 21 even if the ace is
counted as eleven.
Split: If a player is dealt two of the same cards, he may “split” them and have a bet on
each hand.
Stand/Stay: To not take another card and stay on the value currently held.
Stiff: A hand totaling 12 through 16.

Appendix A
 Schabacker 26

H Hit
S Stand
D Double if allowed, otherwise hit
Ds Double if allowed,otherwise stand
P Split
H/P Split if you can double after split,otherwise hit
H/R Surrender if allowed,otherwise hit
P/RSurrender if allowed, otherwise split
S/RSurrender if allowed,otherwise stand

The chart above is a basic strategy for a muliple deck game in which the dealer

must hit on soft 17. A soft hand is where the hand contains an ace that can be 1 or 11,

with out equaling or going over 21. To use a basic strategy chart, one simply needs to

match up the cards he is holding and match it with the visible dealer card, and act

appropriately. This chart represents the mathematically correct play for every given set

of cards.

References
 Schabacker 27

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