Before the casinos, Galveston was legitimate wealth. By 1900, the island city was the largest in Texas, its port rivaling New York as a cotton exporter, its downtown earning the nickname 'Wall Street of the Southwest' for its concentration of financial power. The city boasted one of the highest per capita incomes in the country. Then, on September 8, 1900, the deadliest hurricane in American history killed between 6,000 and 12,000 people and flattened the island. Galveston rebuilt, constructing the Hotel Galvez in 1911 and the fastest interurban rail line in the country to connect to Houston. But the opening of the Houston Ship Channel in 1915 redirected commerce inland. By 1930, mapmakers showed Houston as the major city on the Texas coast. Galveston needed a new economy, and it found one in the very vices that respectable society was trying to stamp out.

The Maceo brothers arrived from Sicily via Louisiana and opened a barbershop. When Prohibition hit in 1919, Rosario and Salvatore Maceo started giving customers gifts of smuggled wine. The side hustle grew. They allied with the Beach Gang, invested in gambling, and opened the Hollywood Dinner Club, the first venue in America to combine high-class gaming, dining, live entertainment, and air conditioning under one roof. Guy Lombardo played the opening night. A young Walter Cronkite introduced Ben Bernie's orchestra during one of the nation's first remote radio broadcasts. Sam Maceo's smooth personality made him the public face of an empire that soon controlled most of the gambling and liquor on the island. Their other landmark venture, the Balinese Room, opened in 1929 as a casino built on a pier stretching over the Gulf. The Maceos cultivated relationships with establishment families like the Moodys, Sealys, and Kempners, and their influence held for nearly three decades.

The Free State economy was staggering in scale. A 'rum row' of ships from Cuba, Jamaica, and the Bahamas anchored offshore, supplying liquor that Galveston distributed to Houston, Dallas, Denver, St. Louis, and as far north as Detroit. The island's red-light district on Postoffice Street was so extensive that one in every 62 residents was a prostitute, working in more than fifty bordellos. The city required health inspections for sex workers to protect their clients. The annual Pageant of Pulchritude, which became the first international beauty contest, tripled the island's population each time it ran. Mardi Gras brought extravagant spring celebrations. Not a single Galveston bank failed during the Depression, and unemployment was almost unheard of. As Texas Monthly writer Gary Cartwright observed, 'Galveston's red-light district may have been the only one in the country that thrived with the blessings of both city hall and the Catholic church.'

By the late 1940s, the Maceos saw the writing on the wall. State investigations were closing in, and a new entertainment destination was rising in the Nevada desert. The brothers became major investors in the Desert Inn, the largest casino resort on the Las Vegas Strip when it opened in 1950. Their Galveston empire passed to the Fertitta family. Without the Maceos' iron hand, darker elements moved in. The New Orleans crime syndicate ran guns to Cuba through the island. Fugitives used it as a safe haven. Texas Rangers raided the Balinese Room in an undercover operation, though locals claimed most gaming equipment had already been shipped to Las Vegas before authorities arrived. By 1957, the Free State was effectively gone.

When the vice industries collapsed, everything else went with them. Tourism dried up. The city's television station relocated to Houston. The telephone company headquarters left. The three establishment families had unrivaled control of a stagnating island. For decades, Galveston drifted, its grand buildings aging, its economy muted. The era left behind a rich residue in popular culture: novels, a ZZ Top song about the Balinese Room, and a musical theater production about the Maceo brothers that opened at the Strand Theatre in 2003. Gambling has returned in a sanitized form, aboard cruise ships departing from the port. But the Free State itself belongs to a vanished world where a barrier island in the Gulf ran by its own rules, answering to no one but the tide and the next shipment of Caribbean rum.