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Blueberry comments on Open Thread: July 2010, Part 2 - Less Wrong
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This really doesn't have much to do with the market. While I don't know the details of gambling laws in all the US states and Indian nations, I would be very surprised if there were regulations on roulette odds. Many casinos have roulette wheels with only one 0 (paid as if 1/36, actual odds 1/37), and with other casino games, such as blackjack, casinos frequently change the rules as part of a promotion or to try to get better odds.
There is no "gambling market": casinos are places where people pay for entertainment, not to make money. While casinos do offer promotions and advertise favorable rules and odds, most people go for the entertainment, and no one who's serious about math and probability goes to make money (with exceptions for card-counting and poker tournaments, as orthonormal notes).
Also see Unnamed's comment. Essentially, the answer is that a casino is not a market.
A single casino is not a market, but don't all casinos and gamblers together form a market for something? Maybe it's a market for entertainment instead of prediction ability, but it's a market for something, isn't it? Moreover, it seems, at least naïvely, to be a market in which a casino would attract more customers by offering more realistic odds.
Some casinos in Vegas have European roulette with a smaller house edge. I know this from a Vegas guidebook which listed where you could find the best odds at various games suggesting that at least some gamblers seek out the best odds. The Wikipedia link also states: