Cash or Free Slot Play

Casinos sometimes offer prizes in which the winner gets $x in cash or $y in free slot play. Last weekend in Las Vegas, my girlfriend and I heard, "... wins $500 in cash or free slot play." My girlfriend immediately asked why anybody would choose $500 in slot play over $500 in cash. Naturally, I agree with her on that. However, I've noticed that the majority of time, the offer for free slot play is higher than the one for cash, such as $500 in cash or $1000 in free slot play.

Knowing that the offer for free slot play is usually only valid for certain kinds of slot machines, it occurs to me that the percentage payback on the best slot machine available for free slot play would help determine whether or not choosing slot play would be the wiser course of action. For example, if the best offered had a theoretical return of 70%, then choosing $1000 in slot play has a theoretical return of $700, making it a somewhat better deal than the $500 in cash. Does this make any sense? Please note that I am not a slot machine player, and thus I may not be fully understanding of the terminology, or an appropriate theoretical payback percentage.

Assume for the sake of argument that a) the amount of $x is irrelevant to the winner, b) the enjoyment factor of playing $y in free slot play would be overpowered if the theoretical return is less than $x, c) an understanding by the winner that the theoretical return percentage will not necessarily be achieved, d) that the free slot play dollars can never be turned into cash, but any winnings off the free slot play can be turned into cash. What do you think should be the amount of free play $y to outshine the cash value of $x. I know that some people argue that the cash should always be taken over the amount of free play no matter what, but I am not interested in those answers. I would like a well thought out response on when you would choose the free slot play, and why.

As in my example, the idea of a theoretical return of $700 might sound better than an actual in hand of $500, but I don't think I would choose even that. I think my theoretical return would have to be somewhere near twice as much as the cash value in order for me to think I want to take the free slot play. I think a lot of that has to do with the simple fact that I don't enjoy slots all that much, thus the incentive for me to sit there hitting the button would have to be really big.

And, of course, if this has already been discussed, simply point me in the right direction and someone hit me in the head. :)

The "theoretical return" has been discussed, but I don't think this question has come up yet.

The short version of the theoretical return is that it includes the extremely rare jackpot prize. The actual return if you don't get the jackpot, is much less.

Personally, I'm not a big slot player either. But I do occasionally play certain flavors of video poker. If the free play was valid in a machine that I might be inclined to play anyway, then I do believe it's value is equal to cash. I.E. If I play $y of free play, it's worth $y of cash that didn't come out of my pocket. However, if I have to play a machine that I wouldn't ordinarilly play, then the $y free play is worth only what cash I can take out of the machine, which is probably less than the $x cash option. In that situation, I'd take the $x cash.

Does that make any sense?

If $x and $y are the same, then take the cash every time so you aren't committed to playing the full value.

For the record, when I get something like that, I always ask about getting table games match play coupons instead.

Your reasoning is correct. If the freeplay award is higher, you should take the expected value of the free play and compare it to the cash award. A good rule of thumb is a 90% payback for slot machines. So $1000 worth of free play has a real value of $900, more than the $500 cash. So you should take the freeplay. Now, if they allow it to be played on video poker, you can factor in the higher payback of those machines. For example, if they have 9/6 Jacks or Better, the payback is 99.54%, so the value of the freeplay would be $995.40. Either way the freeplay is going to be the better choice.
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Now, you won't always get that return and actually probably will get less. But maybe you will hit the royal. Whether you do or don't shouldn't be factored into the initial analysis, however.

take the free slot play. if you were playing a 99.54% video poker machine it probably returns 97% or so excluding the royal.

Any time you win cash at a casino you legally have to claim it as winnings. If it is over $600 the casino is going to provide you with a 1099 either instantly or at the end of the year. Now you have to claim it because it is documented. With free slot play the casino does not have to provide any documentation unless it is over $1200. If you are not totally law abiding, you don't technically have to claim it as winnings since you don't win until you play it and cash it out. You can easily show a loss on the money.

Quote: thlf

Any time you win cash at a casino you legally have to claim it as winnings. If it is over $600 the casino is going to provide you with a 1099 either instantly or at the end of the year. Now you have to claim it because it is documented. With free slot play the casino does not have to provide any documentation unless it is over $1200. If you are not totally law abiding, you don't technically have to claim it as winnings since you don't win until you play it and cash it out. You can easily show a loss on the money.

Well, the $600/$1200 rule doesn't apply if it's not gambling winnings. You didn't wager for it. It's a prize and those are taxable as gross income. The casino may or may not take withholding on it. Either way, it is your responsibility to report it on your tax return. This kind of thing is often left up to the discretion of the casino. But you shouldn't mess with the IRS.

Edit: I stand corrected. It looks like there is a $600 rule on prizewinnings reporting.

Quote: teddys

Well, the $600/$1200 rule doesn't apply if it's not gambling winnings. You didn't wager for it. It's a prize and those are taxable as gross income. The casino may or may not take withholding on it. Either way, it is your responsibility to report it on your tax return. This kind of thing is often left up to the discretion of the casino. But you shouldn't mess with the IRS.

Ah but yes grasshopper. The rules do apply. If you do the legal thing you can absolutely claim it as gambling winnings. You typically have to gamble something to get it. Whether it be drawing entry's or whatever. Therefore it is gambling. Thus you can also claim your gambling losses against it.

If we're going to talk about the legal thing to do, then we all know that no matter how much money is won or obtained through prizes, ALL of it has to be reported to the IRS. The blanket IRS rule is that any and ALL income, no matter the source, is taxable. Just because the casino doesn't report it doesn't mean it's not supposed to be reported by you. However, as well all know, if the casino doesn't issue a 1099, we're not going to report it. But it doesn't make sense to talk about what the legal thing to do is, since we're not going to follow the technical legal rules anyway.

Quote: DJTeddyBear

For the record, when I get something like that, I always ask about getting table games match play coupons instead.

Very interesting. Has this worked? I would much rather get table match play coupons, in which case I would probably most likely take them rather than the cash, as long as I could use them at PGP or craps.

Also, I thought afterwards about the fact that the slot machines may have varying payouts that, while still equaling a certain percentage return, could be very different during play. In other words, a machine with a large jackpot payout, but small or almost non-existent lower payouts would be balanced by a machine with a lot of lower payouts, and a small jackpot payout. I guess, assuming the same percentage return, I'd play a machine with a bunch of lower payouts, as then I'd have some chance of getting something.

Quote: rudeboyoi

take the free slot play. if you were playing a 99.54% video poker machine it probably returns 97% or so excluding the royal.

I know of no slot player who 'excludes the royal' in their mind. And they shouldn't. Although rare.. it is what helps make the return 99.54%... And the proper way to play includes the 'royal'. Of course you are not telling the free slot play player to keep aces instead of 4 to the royal... I know you are not..

Quote: konceptum

If we're going to talk about the legal thing to do, then we all know that no matter how much money is won or obtained through prizes, ALL of it has to be reported to the IRS.

This was a topic on Anthony Curtis' site the other day. Technically, that free play is reportable income too. Except, since you can't cash it out (i.e. you MUST lose it) and only cash out the winnings, if you report that income, you's automatically also report it as a loss. So it's essentially a wash, so don't bother reporting it.

Quote: konceptum

Just because the casino doesn't report it doesn't mean it's not supposed to be reported by you. However, as well all know, if the casino doesn't issue a 1099, we're not going to report it.

No comment. :)

Quote: konceptum

Quote: DJTeddyBear

For the record, when I get something like that, I always ask about getting table games match play coupons instead.

Very interesting. Has this worked?

It's like the old wise man once said, "You ain't gonna get, if you don't bother to ask."

Yeah, it works - sometimes.

Quote: teddys

Well, the $600/$1200 rule doesn't apply if it's not gambling winnings.

I'm pretty sure it doesn't matter if its from a wager or not. If you receive a prize for walking in the door and it's $600 or more the payor should issue you a 1099 MISC tax form.

Mark