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DIAMONDHEAD CASINO CORPORATION

DIAMONDHEAD CASINO CORPORATION

150 153RD AVENUE, SUITE 201

MADEIRA BEACH, FLORIDA 33708

Telephone 727-393-2885

Facsimile 727-391-9200

May 10, 2005

via EDGAR

David R. Humphrey

Branch Chief

Securities and Exchange Commission

Washington, D.C. 20548

    Re:
    Diamondhead Casino Corporation

Form 10-KSB for the year ended December 31, 2004

Commission File Number: 000-17529

      Dear Mr. Humphrey:

      This will acknowledge receipt of your letter dated April 20, 2005. This will confirm our
understanding as requested in your letter of the following: that the Company is responsible for the
adequacy and accuracy of the disclosure in the filings; that staff comments or changes to
disclosure in response to staff comments in the filings reviewed by the staff do not foreclose the
Commission from taking any action with respect to the filing; and, that the company may not assert
staff comments as a defense in any proceeding initiated by the Commission or any person under the
federal securities laws of the United States.

      Following are responses to your comment letter. Items are addressed, for the most part, in
the order in which they appear in your comment letter. Please feel free to let me know should any
additional information be required for you to complete your review.

Item 6 Management’s Discussion and Analysis, page 20.

1. It is unclear from your current disclosure how you acquired the 404.5 acre property
and how such property became unencumbered. Supplementally explain to us the facts and circumstances
surrounding your acquisition of the option to purchase the acreage, and how you acquired the funds
to pay the First Union National Bank of Florida loan in full. In this regard, we note that you have
no current business operations. Your single significant asset as of December 31, 2004 consists of
land under development and your current business plan appears to rely solely upon the development
of a casino resort on that land. Accordingly, please expand your MD&A discussion to include an
Overview section in which you briefly discuss the history of the company and of the property. For
example, when and

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how did you become engaged in your current activities? How and why did you acquire this
property and how was the acquisition financed? As there is no assurance that regulatory approvals
can be obtained or that financing for development will be available, what are your alternative
business plans? Please revise your discussion accordingly.

      From inception through approximately mid-2001, the Company operated gaming vessels
sailing from various ports to international waters (“cruises-to-nowhere”). The Company, in
anticipation of possible legalization of gaming in Mississippi, originally optioned the
Diamondhead property from Purcell Co., Inc. On June 19, 1993, Mississippi Gaming Corporation
(MGC) exercised its option to purchase approximately 322.9 acres of the approximately 404
acre tract of property for $4,000,000. To purchase the property, MGC received a $2,000,000
loan from Casinos Austria Management Corporation (CAM) which was collateralized by a first
mortgage on the property. The first mortgage loan was payable interest only at 8% per annum
for fifteen months and the full principal balance was due and payable on September 17, 1994.
MGC also received a second mortgage from a private lender in the amount of $1,000,000 with
interest at the rate of 8% per annum. The balance of the purchase price of approximately
$980,000 was paid in cash. On September 17, 1993, the Company paid the private lender the
full amount due pursuant to the second mortgage which was then released. On August 4, 1994,
CAM granted the Company an extension of the due date for the first mortgage from September
17, 1994 to June 30, 1995. On May 23, 1995, the Company received an approximate 11.35% loan
of $6,446,332 from First Union National Bank of Florida (“the original loan”). The first
mortgage held by CAM was paid with proceeds from this loan.

      In August 1995, the Company borrowed an additional $1.2 million from First Union
National Bank of Florida (“the second loan”) to pay off the Company’s food service vendor,
which had seized three of the Company’s ships to secure payment of amounts then due the
vendor. The $1.2 million due pursuant to this loan initially matured September 1, 1996, but
was extended to January 31, 1997. On October 31, 1996, the Company obtained a $2,250,000
loan from dEBIS Financial Services, Inc. The Company used the proceeds of this loan to pay
off the $1,100,000 balance due First Union on January 31, 1997 on its second loan and to pay
an additional $600,000 to First Union on its original loan. The Company made regular monthly
payments on the original loan due First Union from its operating revenues until it was no
longer able to due so due to intense competition in all three of its ports. The Company
eventually paid First Union the full balance of all amounts due First Union from the sale of
its four gaming vessels and port rights.

      See (2) below for our alternative
business plan.

      Since the company intends to shift its casino operations to Mississippi, and inasmuch
as the Company no longer operates casino ships out of Florida ports, the Company has tried
to maintain the focus of its disclosures on matters relating to the development of the
Diamondhead property, the Company’s critical asset. The foregoing information on financing
is seriously dated, and has been disclosed time and again in past filings. In addition, our
understanding of Regulation SB, Item 303, Paragraphs (a) and (c), is that this type of
historical data is not required in Item 6 of our annual report. The inclusion of the
foregoing information at this late date serves no purpose and may tend to confuse

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shareholders who purchased stock long after the foregoing occurred or imply that something
may be amiss with respect to payment for the property which is why the Company is now
reporting it. Therefore, we would request that we not be compelled to repeat this
information in future filings.

2. Finally, we see that the property is currently carried at approximately $5.5 million. In
the event that regulatory approval cannot be obtained, what is the fair value of the
property? We note that the appraisals you refer to on page 2 of your filing are not current
and they have been prepared assuming that the site has been fully permitted and zoned as a
casino site. What support, if any, exists regarding the recoverability of the property on a
standalone basis? Please advise supplementally and address in your disclosures.

      We carry the land value at its historical cost of $5.5 million, which includes some
capitalized costs for licenses and engineering. The appraisal performed in August of 1997
took into consideration alternative uses for the property other than as a gaming site. More
specifically, the appraiser sub-divided the property into four separate parcels, including
one parcel encompassing approximately 34 acres for potential gaming use, which was valued at
$18.9 million. The remaining three parcels, totaling approximately 130 acres for potential
residential real estate development, were valued at $22.8 million. Residential real estate
development would not be dependent on the regulatory and permitting issues relating to the
design, placement and construction of a casino vessel in the Bay of St. Louis.

      The property is one that meets the Mississippi Gaming Commission’s requirements for a
legal gaming site. Accordingly, we believe that use of the property as a gaming site
represents the highest and best use of the property and provides for the greatest potential
in shareholder value. Alternatively, in the event the Company was unable to obtain all of
the permits required to develop a casino resort, the property could obviously be used for
other commercial or residential purposes since it fronts Interstate 10, a major east-west
highway and the Bay of St. Louis. Given the recent increase in condominium development on
the Mississippi Gulf coast, the property would likely be used, in part, for condominium and
residential development. Finally, we are not aware of any property in this area which has
declined in value. Management regularly checks on adjoining property values with local
realtors. We are aware of nothing to suggest property values have declined in or around the
area in which the property is located.

3. As a related matter, supplementally explain to us the limitations attached to the
underlying parcels totaling 80 acres necessitating the purchase option, and why the option
was not exercised until 2002. We may have further comment on your response.

      The Company obtained an option to purchase the remaining 81.10 acres of the 404 acre
tract for an exercise price of ten dollars. Approximately 81.10 acres of the tract was part
of an undeveloped platted area that consisted of approximately 253 lots with dedicated, but
undeveloped streets, alleys, and common areas. The optioned property was not conveyed at the
original closing to avoid liability for property assessments which would have been due to
the Diamondhead Property Owner’s Association upon such conveyance. Once the restrictive
covenants were voided, that potential liability was eliminated. In addition, the Seller
could

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not convey this property to a third party until the plats were vacated. On March 11,
1993, Purcell Co., Inc., filed a Petition in the Chancery Court of Hancock County, Mississippi to
vacate the plat of the subdivision. On August 23, 2002, the Chancery Court entered an Order
granting Purcell’s motion for summary judgment to vacate the plats. No appeal was filed in
the case. On October 1, 2002, after the appeal period had run, the Company gave notice of
its election to exercise its option to purchase the 81.10 acres. On or about December 20,
2002, the Company tendered a check in the amount of $10.00 in payment of the exercise price.
On December 19, 2002, a Warranty Deed, similar to the deed conveying the original 322.9
acres was filed, transferring the property covered by the Option Agreement to Mississippi
Gaming Corporation. Thus, the Company exercised its option as soon as possible following the
expiration of the appeal period in the case.

Financial Statements

Consolidated Statements of Operations, page F-4

4. Supplementally explain to us why you have included dock lease income, interest earned on
invested cash, and other income within revenues from operations and not in other income. Similarly,
please explain to us why you have included interest expense in costs and expenses of operations and
not in other expenses. We may have further comment on your response.

      We do not believe that we have included any revenues or any costs and expenses within
the “from operations” classification. We do understand that the statement in question could
just as easily been stated as one line item of “other expenses in excess of other income”.
However, we have chosen to list the categories of revenues and those of costs and expenses
as a more informative presentation to the reader. Our consideration included the fact that,
since we do not have operations, the reader does not get the benefit of the management
analysis that would be required in Item 6 of the report as prescribed by Regulation SB, Item
303 (b).

      In future filings we will refer the
statement as “Consolidated Statements of Loss”, and,
we will categorize the items of dock lease income, interest earned on invested cash,
interest expense, and other in a grouping entitled Other income net of other expense.

Consolidated Statements of Changes in Stockholders’ Equity, Page F-5

5. It appears from your disclosure in Note 5 on pages F-17 and F-20 that the issuance of
common stock for services noted in your Consolidated Statements of Changes in Stockholders’ Equity
for fiscal year 2003 relates to the 50,000 shares of common stock issued as compensation to an
Officer (Mr. Gregory Harrison) of the company. Supplementally explain to us how you valued this
stock. We may have further comment on your response.

      The 50,000 shares were awarded to the Officer by the Board of Directors and valued at
the quoted market price on the date of the award.

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Note 3-Summary of Significant Accounting Policies

Net Loss per Common Share, page F-12

6. Please revise your disclosure to include the number of antidilutive shares that may be
dilutive in the future. Refer to paragraph 40(c) of SFAS 128.

      In future filings we will disclose the number of antidilutive securities that may be
dilutive in the future.

Note 5- Stockholders’ Equity

Non-Plan Stock Options, page F-17

7. We note from you disclosure that, in March 2003, you redeemed 860,000 options issued to
former Directors and a former key employee for $43,000. Supplementally explain to us how you have
accounted for this redemption, and how the terms of the original option allowed for such a
redemption. Include in your response how the cash paid at redemption impacted your method for
accounting for these awards. Refer to guidance in paragraph 11(g) of APB 25 and paragraph 39 of FIN
44.

      In March 2003, the Board of Directors, in an effort to reduce the number of outstanding
options to purchase common stock, made a one-time offer of consideration to former Directors
and a former key employee of the Company to forfeit all of their existing fully vested,
unexpired, out-of-the-money, fixed stock options. The offer gave the grantee the choice of
accepting the consideration or alternatively, refusing the consideration, in which case the
fixed option terms remained in effect and unchanged. The Company subsequently expensed
$43,000, the amount of consideration paid for the forfeiture of fixed option contracts for
860,000 options to purchase common stock of the Company.

      Notice is taken of your referral to
paragraph 39 of FIN 44. However, we have relied on our interpretation of paragraphs 65 and 66
of FIN 44. That states in pertinent part, that when cash is paid to an employee to settle an
outstanding stock option, total compensation cost shall be measured as the sum of:

a) The intrinsic value of the award at the original measurement date.

b) The amount of cash paid to the employee (reduced by any amount paid by the employee to
acquire the shares) that exceeds the lesser of the intrinsic value (if any) of the award (1)
at the original measurement date or (2) immediately prior to the cash settlement.

      Since the intrinsic value of the awards at the original measurement date was zero, and
the employee paid no money, the transaction was accounted for in
accordance with APB 25 and FIN 44.

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Note 6-Gain on Sale of Assets, page F-20

8. It appears from your disclosure on page F-20 that the transaction involving the Florida
office condominiums constitutes a sale/leaseback transaction. Please supplementally explain why the
$77,732 gain on the sale of the Florida office condominiums has not been amortized over the period
of the lease term (two years) or revise your financial statements to reflect the treatment
prescribed in paragraph 34 of SFAS 13.

      We note your reference to paragraph 34 of SFAS 13, however, we are not the
purchaser–lessor in this transaction. We do, however, note reference to paragraphs 32 and 33
of SFAS 13 and discussion therein of sale–leaseback transactions.

      The sale transaction was for a double (or two) condominium units, described as Suite
202 in our disclosure. The units total approximately 1,650 square feet of office space. Our
leaseback transaction was for a single office only, involving approximately 280 to 300
square feet of the space. The lease does not meet any of the criteria of paragraph 7 of SFAS
13 and is properly accounted for as an operating lease. We refer to paragraph 28 of SFAS 13
which discu