SecProbe.io

CORRESP
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   writer’s direct dial:

  (302) 426-2806

   telecopy:

  (302) 426-3555

   email:

  kbelohoubek@doverdowns.com

April 11, 2005

Via EDGAR

CORRESP

and Regular Mail

Linda Cvrkel

Branch Chief

United States Securities and Exchange Commission

Division of Corporation Finance

450 Fifth Street, N.W.

Washington, DC  20549

Re:          Dover Downs Gaming & Entertainment, Inc.

Form 10K for the year ended December 31, 2004

SEC File Number 001-16791

Dear Ms. Cvrkel:

Thank you for your
comment letter dated March 28, 2005.  As
I have discussed with Ms. Claire Lamoureux, we have prepared Form 10-K/A and
are prepared to file it with the Securities and Exchange Commission as soon as
the Division of Corporate Finance advises us that it has no further comments to
our response letter.

Our response to your
comment letter follows.  For ease of
reference, we first reproduce the entire comment in underlined text and then
provide our response.

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

Management’s
Discussion and Analysis

- Liquidity and
Capital Resources, page 18

1.       We
note that beginning in 2005 you will no longer be required to pay a management
fee to Caesars to supervise, manage, and operate the video lottery machine
casino.  Please disclose if your costs
will change materially due to either those functions not being needed in the
future or the need to replace these functions with internal staff or
third-party vendor.  In this regard, the
discussion in MD&A should not solely duplicate the Note (11) disclosure but
also provide an analysis of the impact from this change, quantified to the
extent practicable.  Refer to the
guidance in Item 303(a)(3)(ii) and Instruction 3 to paragraph 303(a) in
Regulation S-K.

We have reviewed
the guidance in Item 303(a)(ii) and Instruction 3 to paragraph 303(a) in
Regulation S-K and agree that additional detail concerning the expiration of
our agreement with Caesars is

appropriate.  The additional disclosure is brief since we
discontinued our reliance on Caesars and have no need to replace personnel,
systems or procedures in connection with the termination of the Caesars
agreement.  We have revised the paragraph
on page 18, under the heading Liquidity and Capital
Resources, which discusses the expiration of the Caesar agreement to
read as follows:

“Since our video lottery (slot) machine casino
opened in 1995, we have been party to a management agreement with Caesars,
under which Caesars was our agent to supervise, manage and operate our video
lottery (slot) machine casino.  Effective
December 28, 2004, that management agreement expired and we opted not to renew
the agreement.  During the year ended
December 31, 2004, although we remained contractually obligated to pay a
management fee to Caesars, Caesars did not have any of its personnel physically
assigned to our facility and we did not rely on any Caesars personnel or any
Caesars systems or procedures in connection with our operations.  Accordingly, we do not expect to incur any
material costs to replace functions for which Caesars had responsibility under
this agreement.  Beginning in 2005, we
will no longer be required to pay to Caesars a management fee.  Caesars’ performance-based fees were
$4,448,000 for the year ended December 31, 2004.”

Critical Accounting
Policies - Accrued Pension Expense, page 20

2.       Please
expand your disclosure to include a sensitivity analysis that details the
impact on pension expense for a 1% change in weighted-average discount rate and
expected long-term rate of return on plan assets.  In addition, also include any other changes
in pension plan assumptions that would have a significant impact on your
pension expense.

We will replace
the last sentence under the heading Accrued Pension Cost
with the following text:

“We evaluate these assumptions annually.  The discount rate is the most significant
assumption and is necessary to state expected future benefit payments at a
present value on the measurement date.
The discount rate assumption is based upon the yields on high quality
bond rates for bonds with maturities that match our projected benefit
payments.  A lower discount rate
increases the present value of benefit obligations and increases pension
expense.  A 1% reduction in the discount
rate used would increase our pension expense by approximately $300,000.”

Since a 1% change
in our expected long-term rate of return on plan assets would result in about a
$30,000 impact, we have not included any discussion relative to that
assumption.

Financial Statements

Statement of Earnings,
page 34

3.       We
note that interest expense is presented “net” in item 6. Selected Financial
Data.  Please supplementally tell us if
interest expense is also presented net of interest income in the income
statement.  If the amount is presented “net”,
please separately present interest income and interest expense to the extent
the amounts are material.  It appears
interest income may be significant in view of the significant amount of cash on
your balance sheet, Refer to the guidance in Rule 5-03(b)(7)-(8) of Regulation
S-X.

While
we do have significant amounts of cash on our balance sheet, we have had no
interest income for several years.  We
did not recognize any interest income during the years ended December 31, 2004,
2003 or 2002 because we did not have any investable cash during the
period.  The majority of cash reported on
our consolidated balance sheet (93.3% and 94.5% as of December 31, 2004 and
2003, respectively) represents non-interest bearing cash held in our casino
vault and video lottery

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(slot)
machines.  The remainder of our cash is
held in other non-interest bearing accounts.
Interest expense is presented “net” in Item 6. Selected Financial Data
but not in our consolidated statement of earnings and comprehensive earnings
due to the fact that we only had interest income during the year ended December
31, 2001 and the six months ended December 31, 2000.

4.       From
disclosure in note 3 (revenues and expense recognition), we note that other
operating revenues represent the aggregation of your non-gaming
activities.  In accordance with the
analogous guidance in Topic 11L of the Staff Accounting Bulletins (SAB) please
disclose the hotel room and food and beverage revenue producing activities and
the expenses attributable to each of these major revenue producing activities
separately on the face of the consolidated statement of earnings.  In this regard, this SAB provides that
separate major activities should be presented without regard to the 10% materiality
threshold cited in Regulation S-X, as the purpose of this detailed presentation
affords an analysis of the relative contribution to operating profits for each
major revenue activity.  In your
circumstances, the contribution to operating profits significantly varies.  As a percentage of its respective gross
revenues, your “gaming” expenses approximate 77-80%, while “other operating”
expenses only approximate 31-40% during the three-year financial statement
period.  Therefore, as the “other
operating” category contribute significant amounts to consolidated operating
profits, separate disclosure of its major revenue producing activities should
be set forth.  Please revise accordingly.

We considered the
guidance in Staff Accounting Bulletin (SAB) Topic 11L and Regulation S-X (Rules
5-03.1 and 5-03.2) when preparing our consolidated statement of earnings. We
believe there are two questions to be answered:
(1) Is revenue presented properly? and (2) Are the associated expenses
presented properly?

Pertaining to question
(1), the Regulation S-X Rules require the presentation of revenues and related
costs and expenses applicable to major revenue producing activities.  Specifically, 5-03(b) states that “each class
which is not more than 10 percent of the sum of the items may be combined with
another class”.  As shown in the chart
below, all “other” operating activities combined represent no more than 6.7% of
total net revenues for any of the years presented.

As for question (2), we
believe (SAB) Topic 11L requires that the expenses be broken down in the same
manner as the revenues in order to allow for an analysis of the profit
contribution by each major revenue stream.
We do this on the face of the statement of earnings.

As a racetrack with slot
machines (commonly known as a racino), the composition of our total revenue and
operating profits is very different than a traditional casino-hotel.  Though we have hotel, food & beverage and
horse racing activities, our revenue and operating profit consists primarily of
video lottery casino win.  The following
table sets forth our net revenues and contribution to consolidated operating
earnings by activity, excluding non-recurring charges and before general and
administrative and depreciation expenses:

  2004

  2003

  2002

  Net Revenues:

  Gaming

  $

  193,922,000

  93.3

  %

  $

  175,023,000

  93.3

  %

  $

  193,723,000

  93.8

  %

  Other

  13,822,000

  6.7

  %

  12,509,000

  6.7

  %

  12,752,000

  6.2

  %

  Total

  $

  207,744,000

  100.0

  %

  $

  187,532,000

  100.0

  %

  $

  206,475,000

  100.0

  %

  Operating Earnings:

  Gaming

  $

  41,197,000

  98.1

  %

  $

  36,600,000

  93.3

  %

  $

  44,906,000

  94.9

  %

  Other

  809,000

  1.9

  %

  2,610,000

  6.7

  %

  2,401,000

  5.1

  %

  Total

  $

  42,006,000

  100.0

  %

  $

  39,210,000

  100.0

  %

  $

  47,307,000

  100.0

  %

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It is important to use
net revenues in this analysis, as each expense line already reflects the
elimination of interdepartmental activities (shown as the contra-revenue line
item “promotional allowances”) and the allocation of the cost of those
activities to the gaming department.  As
such, net revenues must be used when assessing the profitability of each
activity.

Contributions from all
other operating activities combined represent no more than 6.7% of total net
revenues or operating earnings for the periods presented.  Most traditional casino-hotels derive a
considerably larger portion of their revenue from non-casino activities.  For example, other revenues at Mandalay
Resort Group exceeded 50% of net revenue for the year ended January 31, 2004
while other revenues for Caesar’s Entertainment for the year ended December 31,
2003 were 27.9% of net revenues.

Given the immaterial
nature of all of our other operating activities, both individually and in the
aggregate, we believe that revenues and expenses applicable to our major
revenue producing activities have been properly disclosed in our consolidated
statement of earnings in accordance with SAB Topic 11L and Regulation S-X
(Rules 5-03.1 and 5-03.2).

We have added a further
discussion of the components of and changes in other operating revenues and
other operating expenses to Item 7 as follows:

“Other operating revenues
were $33,795,000 and $32,476,000, respectively, for
2004 and 2003 and included $19,973,000 and $18,667,000,
respectively, related to promotional items provided to customers without
charge. The increase in promotional allowances is primarily due to the Company’s
expanded marketing efforts to attract more casino customers to the hotel by
providing additional complimentary and discounted hotel rooms.  Other operating revenues,
net of promotional allowances, were $13,822,000 in 2004 as compared to
$13,809,000 in 2003.  Food and beverage
revenues, net of promotional allowances, increased by $922,000 to $9,098,000
from $8,176,000 in 2003, primarily due to an increase in cash sales and a
reduction in the amount of complimentary beverages being offered to
patrons.  Additionally, the Company
promoted an outdoor concert for the first time in 2004 that generated revenues
of $840,000.  Partially offsetting these
increases was the receipt of $1,300,000 in 2003 related to the settlement of a
business interruption insurance claim and a decrease in hotel rooms revenue,
net of promotional allowances, due to the change in the Company’s marketing
efforts which focused on providing a higher percentage of its hotel rooms to
customers on a complimentary basis.

Other operating expenses
increased by $3,114,000, or 31.5%.  Expenses related to our food and beverage operations were $9,480,000 in
2004 as compared to $7,350,000 in 2003.
The increase resulted primarily from higher payroll and related costs
and food costs necessary to support added amenities at the Company’s facility
and the addition of higher quality menu items. Additionally, less food and
beverage expenses were transferred to the gaming operations through
interdepartmental charges in 2004 since a lower percentage of food and
beverages were provided to gaming customers on a complimentary basis.  Concert promotion expenses of $1,212,000, relating to a large outdoor concert promoted
by the Company in the third quarter of 2004, represented the remainder of the increase in other operating expenses.”

5.       We
note that the amount of cash on the balance sheet is significant to current
assets.  Please disclose the details of
any amounts other than cash included in that line item (i.e., cash
equivalents).  Also refer to the guidance
in paragraphs 7-9 of SFAS 95.

Please
refer to our response to comment number 3 above.  Cash reported on our consolidated balance

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sheet
represents cash held in our casino vault, video lottery (slot) machines and
other non-interest bearing accounts.  We
did not maintain any cash equivalents as of December 31, 2004 or 2003.

Notes to the Financial
Statements

General

6.       We
note from the Proxy Statements dated 3/29/04 that the combined ownership
percentage of Henry Tippie and the Estate of John Rollins, for which he is the
executor, exceed 50% of the voting stock of the Company and have the effective
power to control the vote on substantially all significant matters without the
approval of other stockholders.  Please
revise the footnotes to the financial statements to disclose the existence of
this potential control relationship with respect to your outstanding common
shares.  Refer to the requirements of
paragraph 2 of SFAS 57.

The voting control
which Mr. Tippie enjoys with respect to the Company is already described in
considerable detail in our proxy statement as is the common management
control.  We have added several
paragraphs to the end of Note 10 — Related Party Transactions that adapt
language from our proxy statement and reads as follows:

Mr.
Tippie controls in excess of fifty percent of the voting power of the
Company.  This means that Mr. Tippie has
the ability to determine the outcome of the election of directors at the
Company and to determine the outcome of many significant corporate
transactions, many of which only require the approval of a majority of the
Company’s voting power.

Mr.
Tippie’s voting control with respect to the Company emanates from his personal
holdings of Common Stock and Class A Common Stock, from his status as executor
of the Estate of John W. Rollins, our largest stockholder, and from certain
shares as to which he has voting rights pursuant to a voting agreement with
another one of our directors.  As of
March 25, 2005, Mr. Tippie has control over approximately 51.1% of the voting
power of the Company.

Patrick J. Bagley, Kenneth K. Chalmers, Melvin L.
Joseph, Denis McGlynn, Jeffrey W. Rollins, John W. Rollins, Jr., R. Randall
Rollins and Henry B. Tippie are all Directors of both companies. Denis McGlynn
is the President and Chief Executive Officer of both companies, Klaus M.
Belohoubek is the Senior Vice President – General Counsel and Secretary of both
companies and Patrick J. Bagley is the Senior Vice President – Finance and
Chief Financial Officer of DVD.  Mr.
Tippie controls in excess of fifty percent of the voting power of DVD.

We note that in
our discussion of various shared services involving