Accounting issues in the casino and gaming industry

The news sent shockwaves through the casino industry, serving as a stark reminder for casinos everywhere, including Miami, to prioritize compliance with the Bank Secrecy Act (BSA). In addition to paying $7.5 million in fines, the MGM Grand and the Cosmopolitan were required to undergo external reviews and overhaul their anti-money laundering (AML) protocols.

Now, imagine if it were your casino’s name in the headlines.

From table game operations to slot machine servicing, jackpot insurance, and chip accounting, casinos manage an overwhelming number of moving parts every day. With so much to oversee, even a single missed suspicious activity report could result in a BSA violation.

Non-compliance with BSA and AML regulations doesn’t just mean fines—it can lead to severe penalties for your casino and its executives. That’s why robust accounting practices are not just an operational necessity but a safeguard against these risks.

In this article, we’ll explore the most common accounting challenges in the casino and gaming industry and discuss how strong accounting practices can help ensure regulatory compliance and protect your business.

1- Revenue recognition in joint ventures

In August 2024, MGM announced that it would establish a joint venture with Grupo Globo from Latin America to launch BetMGM in Brazil.^[2] The venture hints at the gaming industry’s future global expansion.

When gaming operators decide to expand their operations, they have specific options, including entering into a joint venture as a partner or operator with no equity interest in the final project.

The agreements can vary depending on the type of partnership, offering each party different levels of control, responsibility, and rights. Cash flows, profits, and revenues are also allocated according to the agreement’s rules.

When such agreements are drafted without the help of an accountant familiar with the rules of financial reporting, problems regarding revenue recognition can arise. 

This oversight has disastrous consequences and can affect the company’s financial statements. Since the financial markets use the statements to evaluate a company’s financial strength, inaccurate statements can cause your casino to have a bad reputation.

2- Dealing with unique tax implications

The unique nature of casino revenue streams and regulatory environments creates intricate tax implications that require careful navigation. Casinos must understand and comply with various state, federal, and local tax requirements to avoid legal pitfalls. Adding to the complexity, tax reporting criteria can vary significantly depending on the type of game.

For instance, winnings from slot machines or bingo games must be reported using Form W-2G^[4] when payouts exceed specific thresholds. Table games, sports betting, and other revenue streams often have different reporting requirements. 

Also read: Tax brackets 2023-2024: How much business tax you owe

Additionally, many states collect a percentage of gambling revenue, with sports betting taxes ranging from as low as 6.75% in Iowa and Nevada to as high as 51% in New York, Rhode Island, and New Hampshire.^[5]

Understanding and managing these tax obligations is no small feat. Each game, revenue source, and jurisdiction brings its own set of rules. Failing to meet these requirements can result in fines, penalties, or increased scrutiny from tax authorities.

At CoCountant, we simplify the process with tailored tax advisory services designed specifically for the casino and gaming industry. From understanding tax brackets to ensuring accurate reporting, we’ll help you navigate the complexities of your tax obligations.

3- Ensuring compliance with the Bank Secrecy Act

Cases like this highlight the vulnerabilities casinos face when regulations aren’t enforced. The Bank Secrecy Act (BSA) was designed to address these challenges by establishing strict requirements to prevent money laundering and other financial crimes.

The Bank Secrecy Act (BSA) establishes strict regulatory requirements for casinos to prevent money laundering and other financial crimes. These include:

• Filing a Suspicious Activity Report (SAR) for any transaction involving $5,000 or more that raises suspicion.
• Filing a Currency Transaction Report (CTR) for any cash-in or cash-out transaction exceeding $10,000.
• Developing and maintaining robust anti-money laundering (AML) programs.

In the Las Vegas case, Han and Zhang confessed that casino hosts actively aided their illegal activities, introducing them to other players and receiving a share of the commission. Despite clear red flags, the casinos failed to file the necessary SARs, highlighting a major breakdown in their AML compliance.

For casinos, failing to implement and enforce AML programs can lead to severe penalties, reputational damage, and legal consequences. Filing SARs and CTRs, while being a regulatory obligation, is a safeguard against insider misconduct and financial crimes.

With professional bookkeeping services tailored to the casino industry, you can ensure compliance with BSA requirements. 

4- Recognizing and capitalizing on intangible assets

Gaming companies and casinos often hold multiple intangible assets on their balance sheets, such as trademarks, customer databases, and proprietary software. However, recognizing and capitalizing on these assets can be challenging due to the complexities involved in valuing and categorizing them.

Take, for example, software development. If a casino invests in creating software to enhance its operations, the software may qualify as a new intangible asset. The question becomes whether this asset will generate measurable economic benefits in the future. Similarly, accurately determining the cost of intangible assets is another hurdle. Casinos often struggle to separate the costs of developing intangible assets from the costs of maintaining them.

These challenges aren’t just theoretical—they have real-world implications for financial reporting and tax planning. Incorrectly recognizing or valuing intangible assets can lead to misrepresented financial statements, compliance issues, or missed opportunities to optimize asset management.

The situation’s complexity makes it impossible for someone without knowledge of casino accounting to figure out a solution. Only through accurate bookkeeping Las Vegas casinos can accurately recognize and capitalize on intangible assets.

5- Understanding the importance of currency exchange rates

For casinos in Las Vegas, where international visitors make up a significant portion of patrons, currency exchange is a routine yet critical part of financial operations. Many casinos offer currency exchange services for a small fee, but managing these transactions adds a layer of complexity to their financial systems. Accurate tracking of currency exchanges is essential for maintaining precise records and ensuring compliance with auditing requirements.

The challenge becomes even greater for gaming companies with online betting platforms. Accepting wagers in multiple foreign currencies introduces additional complications, including the need to account for fluctuating exchange rates and comply with international financial regulations. Without proper systems in place, discrepancies in reporting can lead to compliance issues and financial inaccuracies.

These complexities highlight the unique nature of casino accounting compared to general accounting. With professional bookkeeping and accounting expertise, casinos can effectively navigate the intricacies of currency exchange, ensure accurate financial reporting, and maintain compliance across jurisdictions.

The bottom line

From revenue recognition to unique tax implications, casino accounting has many facets that must be handled to ensure smooth operations on every table. Even if you fail to write a Suspicious Activity Report once, it can get you into hot waters with FinCEN.

However, while you are busy managing chip inventory and ensuring customer satisfaction, you will have a hard time maintaining accurate financial records.

So, how do you avoid penalties and fines while operating your casino? By hiring bookkeeping experts to take care of everything.

At CoCountant, we offer specialized and accurate bookkeeping services to startups and small businesses in Las Vegas. We handle everything from managing your financial transactions to tracking royalties so you can focus on offering the best services to your clients.

With us keeping your books in order, you can rest assured that FinCEN won’t come knocking at your door.