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  writer’s direct dial:

  (302) 426-2806

  telecopy:

  (302) 426-3555

  email:

  kbelohoubek@doverdowns.com

April 29, 2005

Via EDGAR

CORRESP

and Regular Mail

Joseph Foti

Senior Assistant Chief
Accountant

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 Mr. Foti:

                Thank you again for allowing us
and our independent registered public accountants the opportunity this week to
confer with you, Claire Lamoureux and Louise Dorsey, to present additional
information to the Commission and to explore with you in more depth certain
aspects of our customer loyalty program.
This letter is our written response to your most recent comment letter
dated April 15, 2005.  As noted in our
prior April 11, 2005 response, we have prepared Form 10-K/A and remain prepared
to file it with the Securities and Exchange Commission as soon as the Division
of Corporate Finance advises us that is 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

Statement of Earnings,
page 34

1.               We note your response to comment 4.  In addition to your proposed expanded
MD&A disclosure, please also disclose in the notes to the consolidated
financial statements (i.e. Revenue and expense recognition, page 40) that an
operating margin for “Other Operating” activities would be computed by netting
promotional allowances against gross revenues - other operating (i.e. “net”
revenues - other operating) less “other operating” expenses.

In addition to the expanded MD&A disclosure set forth in our April
11, 2005 letter, we have added the following further discussion in Note 3 to
our financial statements:

                                                                        The Company’s operating margin
for other operating activities is computed by netting promotional allowances
against other operating revenues less other operating expenses.

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Note 3. Point Loyalty
Program, page 39-40

MD&A - Results of
Operations, page 15

2.               We note from your response to comment 9 that you
believe the accounting treatment of recording a charge in the period of change
was appropriate.  After considering the
points discussed in your response, we believe that prior to 2004 you had a
liability related to non-cash redeemable points that should have been
recognized in your consolidated financial statements and therefore your
accounting treatment of the change may not be appropriate and should most
likely be considered a correction of an error.
We have addressed your significant response points in the discussion
below.

First, we note your
response that EITF 01-9 required your change in accounting policy.  We understand that once you made the decision
to give cash for points, you were required to present that liability as a
reduction of revenue, but we do not understand from your response how adding
cash to the selection of redeemable gifts available to your customers required
you to change your accounting policy for the non-cash gifts and record a
liability for those amounts.
Additionally, you state that the adoption or modification of an
accounting principle necessitated by transactions or events that are clearly
different in substance from those previously occurring is not a “change in
accounting principle.”  We note from the
statement of earnings that the majority of your non-recurring gaming charge is
under the expense line item and relates to points redeemable for products and
services.  Assuming the prior accounting
policy was a generally accepted policy, which does not appear to be the case,
please tell us what transactions or events related to the non-cash redeemable
points are clearly different in substance in 2004 from previous years that
would cause the change to fall under the exemption in paragraph 8 of APB 20.

Secondly, referring to the statement in your response
in paragraph 2, that your approach was common in the industry and put in place
when you opened your facility in 1995, please provide
details of other casinos that have expensed points when redeemed and the time
period during which they utilized this policy.
We do not believe the fact that this policy was put in place in 1995 by
an industry leader, in itself supports the appropriateness of the accounting in
the subsequent years.  We note your
position that the industry views points as the cost of getting a customer to
return to the property, akin to a coupon.
We do not believe this is a valid reason not to accrue a liability and
point out that companies in industries such as food, frequently issue coupons,
presumably with the purpose of getting customers back to buy more of their
product, and record a liability for the coupon amount at the time the coupon is
given.  You mention that your program is different
from the airlines, where there is insignificant revenue generated upon
redemption, however theoretically one of your customers can come back to the
casino solely to redeem points just as theoretically, the airlines frequent
flyer points can be redeemed by the frequent flyer who will not significantly
effect revenue on a flight.  On the other
hand just as you assume that your customers will probably come back to the
casino and play more casino games, the airline frequent flyer may come back to
the airlines to utilize the awards along with other fare paying family members
and friends who would be generating revenue for the airlines.  Please advise us if you have found anything
in the accounting literature that takes into account whether or not customers
return to generate revenues, in the consideration of a liability.

Additionally, in regards to considering your points
akin to “coupons,” EITF 01-9 addresses coupons as an item similar to cash,
requiring them to be accrued when earned.
Therefore, please explain to us how your discussion on the type of
loyalty program and your statement at the end of paragraph 4 that, “for these
reasons, we believe that the costs incurred are appropriately recorded when
that earnings process occurs at redemption,” supports your decision that in
2004 there was a change that resulted in the determination that a liability was
appropriate for the points (cash and non-cash) at the time they were
earned.  Furthermore, as the customers
earn points on their play whereby revenue was previously recognized, the
accrual of a liability (expense) when earned would have represented the
appropriate matching of costs with its associated revenues.  Although a customer has to redeem in person,
they are not obligated to play to earn those previous points.  Therefore, we do not concur with your
statement on your former historical treatment
that

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“the costs incurred are appropriately recorded when
that earnings process occurs at redemption.”

Further, in reference to
your discussion of the characteristics of a liability, we believe that in
addition to the three characteristics of a liability, you should consider
paragraph 40 of Statement of Financial Accounting Concepts No. 6 which
addresses liabilities that stem from equitable or constructive obligations,
that are commonly paid in the same way as legally binding contracts, but lack
the legal sanction that characterizes most liabilities and may be binding
primarily because of social or moral sanctions or custom.  We believe that although legally you may
terminate the program and not be bound to pay out all points, there is a
constructive obligation you have when setting up a point program such as your
current program.  In addition, other
industries, such as the airline industry, may set up a loyalty program (e.g.
frequent flyer mileage) with similar features whereby they reserve the right to
terminate or change the provisions of their programs but they have historically
still estimated and accrued a liability for the programs expense upon points
being earned.  Please supplementally
address how you considered paragraph 40 of SFAC No. 6 in your determination of
whether a liability existed prior to 2004 for non-cash redeemable points.

We note your response
that even if the change was considered to be a correction of an error the
impact would be immaterial.  The
consideration of immateriality should include all annual and quarterly amount
and it appears that the 4th quarter fiscal 2004 charge was material to the
operating results of that quarter based on the data in note 12 (page 50).  You have responded that in the fourth quarter
you fully discussed the changes in the points program, however we do not
believe your discussion was of the appropriate accounting treatment.  We continue to believe that if the change
represents a correction of an error, it appears that prior consolidated
financial statements should be restated accordingly.  In this regard, the disclosure in the notes
should set forth in a clear and transparent manner that the consolidated financial
statements have been revised for the misapplication of GAAP m prior periods
(including the prior and current accounting treatment.)

Finally, we do not understand how you have determined
that the impact on the past three years would be approximately $180,000 per
year.  Considering that the non-recurring
charge is $1,802,000 (non-cash points only) in 2004, it would seem that a
higher amount of that total would have been earned during the last three years,
with a much lesser amount outstanding from the earlier years.  Please tell us how this allocation was
determined and what the prior period adjustments would be for each of the
quarters and years ended 2002, 2003 and 2004, as this assessment should consider
the immateriality on all annual and quarterly consolidated financial
statements.

We believe that the accounting for this transaction as
a non-recurring charge in the current year may not be appropriate.  Please advise and revise your consolidated
financial statements and MD&A accordingly.

As we have discussed with
the Commission in some detail, both the Company and its independent registered
public accountants remain of the position (1) that the Company’s historical
accounting treatment for its customer loyalty program was acceptable, and (2)
that it was appropriate for the Company to record a charge in the 4th
quarter of 2004 — the period during which the customer loyalty program change
was made which mandated the accounting policy change.

We have set forth
much of our reasoning in our earlier April 11, 2005 response letter.  The Commission has set forth its reasoning
and we acknowledge that there is support for the position that a liability has
existed that should have been accrued.
We believe that both positions have merit and that either approach would
have been an acceptable one under generally acceptable accounting
principles.  We believe it would be
helpful, both to the Commission and to those that may read the Commission’s
concerns and our responses, to supplement our earlier submission.  In particular, we think additional background
on the evolution of customer loyalty programs coupled with an understanding of
the diversity in practice that existed in accounting for these programs
historically may be helpful.  In
addition, we would like to expand our discussion relative to the
appropriateness of our past disclosures

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and our assessment
of the impact that a restatement would have on the users of our financial
statements.

Background

Our casino opened in December of 1995.  From the beginning, Caesars World Gaming was
hired to manage our casino, and it was their responsibility to establish all
policies and procedures related to the casino operations, internal controls and
accounting practices.  Generally, Caesars
utilized the same operating and accounting policies that existed in their
casinos at the time.  As we have shared
with the Commission, we believe that the accounting policies for points
established by Caesars for our operations mirrored both the policies that
Caesars then had in place and those that were in place throughout the industry.

While casinos have had points programs for their
customers for many years, these programs have significantly evolved over the
last ten years with the advent of more sophisticated technology and database
tools that have greatly benefited customer relationship management.  Marketing programs in casinos have always
included, in addition to what is now characterized as “non-discretionary”
points programs, such things as direct mail programs and distribution of
coupons for free rooms, meals and various forms of entertainment.  As we have shared with the Commission, both
“discretionary” and “non-discretionary” programs have become increasingly sophisticated
and complex over the years and are used by casinos more and more as efficient
marketing tools.  Of particular
importance, we believe, is that all of these offers, regardless of the name of
the program or promotion, are very similar in one critical aspect — they are
and historically have been, driven by the play levels of customers.  The purpose of these programs is to bring the
customer back into the casino for future revenue generating events. There just
was not the distinction made between discretionary and non-discretionary
programs that is made in the draft accounting literature today, and some might
argue that distinction remains less than clear even today.  We point that out to help the Commission
understand the original selection of our accounting policy.

Our accounting
policy was established almost ten years ago in what was a very different
operational environment from a casino marketing standpoint.  It was established by experienced industry
professionals.  It was based on what we
believe was acceptable at the time.  It
was modeled after what many others in the industry were doing.  And, of course, it was done in consultation
with our independent registered public accountants and based on what our
accountants had concluded was acceptable after consulting with others in the
industry and with the professionals in their National Office.

Diversity
in Practice

Ten years ago, practice was mixed in the gaming
industry with some companies expensing points when earned and others expensing
points only when redeemed.  Though it is
difficult to find any public disclosure on relevant accounting policies due to
the relative inconsequential nature of most points programs, we have
supplementally shared with the Commission anecdotal and other evidence regarding
the accounting treatment used by several other gaming companies.

We have also supplementally shared with the Commission
the public disclosures of a recognized leader in the casino industry (and a
recognized leader in customer loyalty programs) and various articles, industry
releases and company releases that lead us to conclude that this company
accounted for its loyalty program in the same fashion we did and only began
accruing a liability several years ago due to a change in its program.  That company also took a 4th
quarter charge for its points program in response to changes in its program
which afforded customers greater flexibility over how to redeem points.

Further supporting the diverse practice, we believe,
is the significant attention the subject has received

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in recent years.

EITF 00-22 (Accounting for Points and
Certain Other Time-Based or Volume-Based Sales Incentive Offers, and Offers for
Free Products or Services to be Delivered in the Future ) attempted
to add guidance for points programs and offers for free products or services,
and was unable to reach a consensus on point loyalty programs.