The IOTD team wrote an article posted on 9/14/2012.
Joe Brown did not scratch Binions name off the chips. It was done 2 years before Joe took over.

Excerpt from it.

However, at the same meeting of the Tax Commission, after being personally assured by Dr. Monte Bernstein that Binion would be excluded from all gambling operations at the Horseshoe Club, the Commission approved Bernstein’s application for a gambling license.

Bernstein then had to apply for another gambling license, this time from the Las Vegas City Commissioners. The Commissioners, initially reluctant to give Bernstein a license because they felt he had botched the operation of the El Dorado Club so badly, granted Bernstein the Horseshoe’s gaming
license on August 8th 1951 (the day before on a ranch outside of Dallas, Herbert Noble met his maker).

The Commissioners granted Binion licenses to operate the Horseshoe’s bar and restaurant (the Las Vegas City Commissioners felt that the State of Nevada Tax Commission should have given Binion
the Horseshoe’s gambling license).

On Tuesday August 14th 1951 at 11 A.M. the Horseshoe Club would hold its grand opening. On the day before the opening, August 13th, Bernstein was at the Horseshoe helping to prepare the gambling room for its big opening the following morning when he found himself in a major bind. After having given his personal assurances to the Nevada Tax Commission--which included the Governor--that Benny Binion
would have absolutely nothing to do with the gambling at the club, Bernstein was stunned when the chips arrived and Binion’s name was inscribed in gold on all of them (oooopss!!).

Too late to get replacement chips, Bernstein grabbed several ladies who were working at the club and immediately put them to work scraping Binion’s name off the chips..They spent most of the night doing so. When the club opened the following morning these chips were on the tables:

It’s been said that the chips were scraped when Joe W. Brown took over the Horseshoe in Dec.1953 and that the “B” and the “n’s” remained on the chip because it could be viewed as saying “Brown’s”—the same could be said for “Bernstein’s”, but it’s uncertain whether Bernstein had this in mind. His main concern was making Binion’s name illegible.