Do I Have to Pay My Gambling Debt?

If you ever gamble, you may not realize that you are entering into a contract with the casino or other gaming enterprise you’re gambling with (the “house,” so to speak). When you purchase casino chips, for example, the casino is offering to allow you to use them in games of chance and exchange them for cash at an established rate. In exchange, you are promising to pay them for the chips, and if you lose them at a game of chance, allow them to keep the chips.

Although you probably don’t think of it in those terms, because you know how the system works, it is intuitive to you. But what about taking out a line of credit with a casino?

Many casinos offer casino markers, or a line of credit that allows you to gamble. To get casino markers, typically the casino will have you fill out a credit application, which they’ll use to check your bank account balances and run your credit to determine how much of a marker they’ll offer you.

MGM-Mirage’s Marker Limit Application, for example, contains the following language:

I give MGM Resorts International and its affiliates authorization to obtain and verify my financial information (including but not limited to account balance information) from any source, obtain my financial and employment history, and exchange information with others about my financial and account experience with MGM Resorts International and its affiliates. I agree not to hold any of the entities responsible or liable for the information released, nor MGM Resorts International and its affiliates for its use of any such information. I agree that MGM Resorts International and its affiliates may retain and use the information on this application and any information it receives based on my authorization whether or not I am granted marker signing privileges.

As a condition to being granted marker signing privileges, I agree to sign credit instruments, AKA markers or checks (hereinafter “markers”) in the amount of the funds (e.g. chips, cash, tokens, etc.) issued to me. Further, I authorize MGM Resorts International and its affiliates to complete any of the following information on those markers: (1) name of payee, (2) a date, (3) name, account number and/or address of any of my banks and financial institutions, (4) electronic encoding of the above, and (5) as otherwise authorized by the law. The information inserted may be for any account from which I now or may in the future have the right to withdraw funds, regardless of whether that account now exists, and whether I provided the information on the account to MGM Resorts International and its affiliates. I REPRESENT THAT AT THE TIME I SIGN ANY MARKER, I HAVE ON DEPOSIT IN ACCOUNTS ON WHICH I AM AN AUTHORIZED SIGNATORY FOR ALL PURPOSES, WITHOUT RESTRICTION, FUNDS SUFFICIENT TO PAY SUCH MARKER UPON DEMAND OR PRESENTMENT.

Assuming you obtain a credit line and then lost it gambling (a pretty good bet), do you have to pay the casino?

Your first-blush answer is probably “yes.” And generally you’d be right, but the issue is actually more complicated than that.

Since the United States declared its independence from Britain in 1776, we have been creating our own set of laws, separate from those of England. However, even now, to the extent a legal issue arises that is not covered by existing U.S. law, we rely on British law as precedent: “The common law of England, so far as it is not repugnant to, or in conflict with the constitution and laws of the United States, or the constitution and laws of this state, shall be the rule of decision in all the courts in this state.” W. Indies, Inc., v. First Nat. Bank of Nev., 67 Nev. 13, 19, 214 P.2d 144, 147 (1950).

One of those British rules that has made its way into American Jurisprudence is the Statute of Anne. The Statute of Anne was enacted in the early 1700s to protect the British aristocracy from “the consequences of their own actions.” Under the statute, any debts incurred as a result of extending any sort of gambling credit “shall be utterly void, frustrate, and of none effect, to all intents and purposes whatsoever.”

As of 1909, when gambling was not legal in Nevada, this was also the rule in Nevada (not surprisingly): “A check given for a gambling debt is void under the law of this state, and, there being no valid obligation, there could be no lawful consideration for the security as a pledge.” Menardi v. Wacker, 32 Nev. 169, 105 P. 287, 288 (1909).

However, gambling was legalized in Nevada in 1931, and in 1950 the issue came to a head again when West Indies, Inc., won $86,000 from one Leonard H. Wolff, which credit was extended to allow Mr. Wolff to gamble. Mr. Wolff died shortly thereafter. When West Indies, Inc. attempted to collect on the debt from the estate of the deceased, the estate denied the request, and West Indies sued.

The Nevada Supreme Court acknowledged that as a state, Nevada had previously recognized the validity of the Statute of St. Anne. However, since 1909, gambling was legalized, so West Indies argued that it was inapplicable, and it should be permitted to collect the gambling debt.

The Supreme Court disagreed. So as of 1950, a gambling house could still not maintain a legal action to collect on a gambling debt.

In 1983, however, the law changed. In 1983, NRS 463.368 became law. This statute, which is part of the chapter entitled “Licensing and Control of Gaming,” makes credit instruments extended by casinos valid and allows their enforcement through any legal process.

It was only as recently as 1983, then, that casinos in Nevada could escape the long reach of the statute of St. Anne and enforce the casino markers.

However, that is not the end of the analysis. Hearkening back to the fact that at its heart, gambling is contractual in nature, we can look at the defenses to a contract that would apply in any other breach of contract action.

Contracting While Intoxicated

Although Nevada courts have yet to expressly declare that intoxication can be a defense to a contract, intoxication as a contractual defense has a long and supported history throughout the United States. For example, a federal court in New Jersey ruled as follows: “when a casino comes to court to enforce a marker debt against a patron, it seeks to enforce a contractual debt. In that case, the patron is entitled to raise all the common law defenses to a contract, including that his capacity to contract was impaired by voluntary intoxication.” Hakimoglu v. Trump Taj Mahal Associates, 876 F. Supp. 625, 633 (D.N.J. 1994) aff’d, 70 F.3d 291 (3d Cir. 1995).

As a general rule, for intoxication to be a defense to a breach of contract, the person asserting the defense must prove that at the time the contract was entered, (1) they were intoxicated to a point where they were unaware of the legal consequences of entering into the contract, and (2) that the o
ther contracting party was a aware of the intoxication.

Statute of Frauds

Although generally a contract does not have to be in writing to be enforceable, some categories of contracts do. This is called the statute of frauds. For instance, in Nevada, “[e]very promise or commitment made by a person engaged in the business of lending money or extending credit to loan or extend credit of at least $100,000” must be in writing or the agreement is void. Therefore, if a casino extends more than $100,000 in credit, and does not get your agreement in writing, they would not be able to enforce the agreement.

If a casino is coming after you for unpaid gambling debts, contact an experienced contract attorney.


Zachariah B. Parry is an attorney and founding partner at the law firm Parry & Pfau and is an adjunct professor who teaches torts, contracts, and Nevada practice and procedure for UNLV’s paralegal program. He can be reached at 702-912-4451 or [email protected].

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