Good question.
When gambling was legalized in Nevada in 1931, the State Legislature put control into the Tax Commission. Oversight was lax: they didn't care much about the backgrounds of licensees--all they were interested in was bringing money into the state and taxing the proceeds. Plenty of unsavory characters got licenses, including Bugsy Siegel, the real-life Moe Greene. In 1958, after constant bad publicity about organized crime involvement in gambling, the Legislature took control away from the Tax Commission and put it into a new Gaming Commission, which had much tougher standards for licensing.