I found this information on the web while looking for information on the supposed state tax on casino markers. Good background on why the casinos give away thousand dollar (or even higher) free play chips to encourage more play.

Expanding on the marketing strategies which had brought success through variety and creativity, licensees began offering promotional chips to prime the pump of player activity. The Golden Nugget, for example, issued one 50-cent ticket for every $75 wagered – regardless of gains or losses – to patrons enrolled in the “24 Karat Club.” Tickets could be traded for “Gold Certificates,” which could in turn be redeemed for gaming tokens, cash, room rental, food, beverages or merchandise.35 When the Golden Nugget sought to exclude 50 cents per ticket issued from its gross revenue computation as a loss paid out to patrons, the board disagreed and assessed the tax. The Nevada Supreme Court ultimately agreed with the board and issued its decision that the 50 cent ticket did not constitute a loss which could be excluded from the computation of gross revenue because the 50-cent ticket was not “won” by the patron as the result of a legitimate wager between the patron and the licensee.36 The licensee had to accept that this type of perk was a cost of doing business, just as if it were handing out a lollipop to encourage each pull on the slot machine.

But what happened when a player chose to play with the 50 cent ticket instead of trading it in for food or merchandise? The casino received no cash in exchange for the ticket, and its return to the casino did not create an increase in the licensee’s gross revenue. Representatives of the gaming industry again approached the Legislature to clarify that licensees would not be required to pay a tax on promotional chips eventually ending up back in the cage. Although this made perfect sense under a gross revenue system, regulators also noticed the flip side of the coin. For example, say that a casino issues a $100 chip to a patron to promote play. If the player puts the chip down on the blackjack table and loses it in the first hand, the casino hasn’t “won” anything. No tax is paid on the value of the chip, but if the player stays at the table then any money subsequently won by the casino is taxed as gross revenue. Everyone agreed that this result was appropriate. On the other hand, if the player placed a bet with the $100 chip and won $1,000, the casino had to pay that money to the patron. The casino’s tax liability would in turn be reduced by $1000, and the regulators saw the opportunity to collect the resulting sixty dollars slipping away.

After extensive debate and extreme mental gymnastics, the Legislature concluded that a casino would never give away promotional chips knowing that they would be converted into cash for the patron’s use somewhere outside the property – Nor, for that matter, would a casino pay out $1,000 for the opportunity to reduce its overall tax liability by about sixty dollars.37 To account for the promotional play, the list of deductions from the computation of gross revenue was expanded to include “Any portion of the face value of any chip, token, or other representative of value won by a licensee from a patron for which the licensee can demonstrate that it or its affiliate has not received cash.”38

The issue re-appeared in 1997 when the board approached the Legislature for a clarification of the policy behind the 1995 amendment. The board believed that the deduction from gross revenue applied only to chips which were negotiable and could either be wagered or redeemed for cash, while the industry asserted that the deduction applied to negotiable and non-negotiable chips alike. The board’s reasoning was that a non-negotiable promotional chip was not a “representative of value” because it could only be used for play at the gaming property and had no value beyond the premises. Play with such chips could not constitute a “wager” because the patron did not risk anything, and as a result, any money paid out by the licensee could not constitute a “loss” to be deducted for purposes of calculating gross revenue.39 By adding the definition that “‘Representative of value’ means any instrumentality used by a patron in a game whether or not the instrumentality may be redeemed for cash,” and that “‘Wager’ means a sum of money or representative of value that is risked on an occurrence for which the outcome is uncertain,” the Legislature agreed with the industry and avoided a result that would have gone against the spirit of the law.

See the link below if you want to read more lawyer talk on how the casinos are taxed by Nevada.