The following discussion and analysis, including the critical accounting policies contained herein, should be read in conjunction with our consolidated financial statements and the related notes which are included elsewhere in this report.

Overview

We own and operate The Mountaineer Casino, Racetrack & Resort in Chester, West Virginia; Presque Isle Downs & Casino in Erie, Pennsylvania; and Scioto Downs in Columbus, Ohio. We consider these three properties, which are located in contiguous states, to be our core assets. We also own a 50% interest in North Metro Harness Initiative, LLC, which operates Running Aces Harness Park in Anoka County, Minnesota, and a 90% interest in Jackson Trotting Association, LLC.

Presque Isle Downs commenced slot machine gaming operations on February 28, 2007, and live thoroughbred horse racing with parimutuel wagering on September 1, 2007. We expect that Presque Isle Downs will continue to generate significant revenues and profits and diversify our operations.

Mountaineer opened 37 poker tables on October 19, 2007 (which increased to 40 tables in 2008), and opened 50 table games on December 20, 2007 (which increased to 55 tables in 2008). The poker tables are located in the facility's Grandstand, and the table games are located in the Speakeasy Gaming Saloon (connected to our hotel) as well as the Grandstand.

On March 7, 2008, we sold 100% of the stock of our wholly-owned subsidiaries, Speakeasy Gaming of Fremont, Inc., which owned and operated Binion's Gambling Hall & Hotel, and Speakeasy Fremont Experience Operating Company in accordance with the terms of a Stock Purchase Agreement dated June 26, 2007 (as subsequently amended), executed between the Company and TLC Casino Enterprises, Inc. The transaction was subject to purchase price adjustments based on changes in the net working capital, certain capital expenditures between execution and closing, and a $3.5 million working capital adjustment which remained with Binion's upon closing. Net cash to the Company at closing was approximately $28.0 million, of which $27.6 million was utilized to reduce amounts outstanding under our credit facility. Reclassifications have been made to the prior period presentation to reflect the assets and liabilities of Binion's as held for sale and the operating results and cash flows as discontinued operations. In January 2009, the post-closing purchase price adjustment was settled with TLC Casino Enterprises, Inc. Accordingly, we paid TLC the total amount due of approximately $1.5 million.

On June 3, 2008, our wholly-owned subsidiary, Speakeasy Gaming of Las Vegas, Inc., sold the gaming assets of the Ramada Inn and Speedway Casino to Lucky Lucy D, LLC in accordance with the terms of an Asset Purchase and Sale Agreement dated January 11, 2008. Pursuant to the terms of the agreement, Lucky Lucy paid $2.0 million in cash for the gaming assets and is obligated to pay an additional amount of up to $4.775 million subject to an earn-out provision based on the property's gross revenues over the four-year period that commenced January 11, 2008. Any proceeds that are received will be recorded as the amounts are realized. This sale was the second part of the transaction, the first part of which involved the sale of Speedway's real property to Ganaste LLC on January 11, 2008. A shareholder of Ganaste LLC is the sole owner of Lucky Lucy. Ganaste paid $11.4 million in cash for the real property. Reclassifications have been made to the prior period presentation to reflect the assets and liabilities of Speedway as held for sale and the operating results and cash flows as discontinued operations.

On December 4, 2008, Jackson Trotting Association, LLC ceased the operations of racing and simulcast wagering at Jackson Harness Raceway in Jackson, Michigan and surrendered the racing license to the Michigan Racing Commission. Accordingly, live and simulcast racing will not be

scheduled in 2009. Through our wholly-owned subsidiary, Jackson Racing, Inc., we acquired a 90% interest in Jackson Trotting Association LLC in December 2005. Reclassifications have been made to the prior period presentation to reflect the assets, liabilities, operating results and cash flows of Jackson as discontinued operations.

The following table sets forth a reconciliation of net income (loss), a GAAP financial measure, to EBITDA, a non-GAAP measure, for the years ended December 31.

                                                          2008        2007
                                                           (in thousands)
        Continuing Operations:
        MTR Gaming Group-(Consolidated):
        Loss from continuing operations                 $ (15,278 ) $ (5,868 )
        Interest expense, net of interest income and       40,520     34,334
        minority interest
        Benefit for income taxes, net of minority          (3,197 )   (1,962 )
        interest
        Depreciation, net of minority interest             29,839     27,791
        Loss on debt modification                           3,820          -
        Equity in loss of unconsolidated joint             12,300        234
        venture
        Loss on disposal of property, net of minority       2,956        133
        interest

        EBITDA                                          $  70,960   $ 54,662

        Mountaineer:
        Income from continuing operations               $  16,703   $ 12,962
        Interest expense, net of interest income            8,973      8,739
        Provision for income taxes                          9,309      7,158
        Depreciation                                       14,781     15,772
        Loss on disposal of property                        1,655        143

        EBITDA                                          $  51,421   $ 44,774

        Presque Isle Downs:
        Income from continuing operations               $  11,056   $  8,478
        Interest expense, net of interest income            1,534      1,260
        Provision for income taxes                          5,423      3,453
        Depreciation                                       13,896     10,541
        Loss on disposal of property                        1,539          -

        EBITDA                                          $  33,448   $ 23,732

        Scioto Downs:
        Loss from continuing operations                 $  (1,511 ) $ (1,937 )
        Interest expense, net of interest income              108        124
        Benefit for income taxes                             (806 )   (1,053 )
        Depreciation                                          904      1,154

        EBITDA                                          $  (1,305 ) $ (1,712 )

                                                          2008        2007
                                                           (in thousands)
        MTR-Harness/Running Aces:
        Loss from continuing operations                 $ (10,892 ) $    (378 )
        Interest expense, net of interest income and           14          42
        minority interest
        Benefit for income taxes, net of minority          (1,491 )       (94 )
        interest
        Depreciation, net of minority interest                  -           3
        Equity in loss of unconsolidated joint             12,300         234
        venture

        EBITDA                                          $     (69 ) $    (193 )

        Corporate:
        Loss from continuing operations                 $ (30,634 ) $ (24,993 )
        Interest expense, net of interest income           29,891      24,169
        Benefit for income taxes                          (15,632 )   (11,426 )
        Depreciation                                          258         321
        Loss on debt modification                           3,820           -
        Gain on disposal of property                         (238 )       (10 )

        EBITDA                                          $ (12,535 ) $ (11,939 )

        Discontinued operations:
        Binion's Gambling Hall & Hotel:
        Loss from discontinued operations               $  (1,507 ) $  (5,171 )
        Interest income, net of interest expense              (29 )       (26 )
        Benefit for income taxes                             (929 )    (2,801 )
        Depreciation                                            -       1,916
        Other income                                            -      (1,268 )
        Loss on disposal of property                          903       1,995

        EBITDA                                          $  (1,562 ) $  (5,355 )

        Ramada Inn and Speedway Casino:
        Income from discontinued operations             $   1,600   $      32
        Interest expense                                      163         389
        Provision for income taxes                            861          13
        Depreciation                                          199         826
        Gain on disposal of property                       (3,578 )         -

        EBITDA                                          $    (755 ) $   1,260

        Jackson Racing:
        Loss from discontinued operations               $  (2,526 ) $    (352 )
        Interest expense, net of interest income and            2           5
        minority interest
        Benefit for income taxes, net of minority          (1,360 )      (191 )
        interest
        Depreciation, net of minority interest                 30          20
        Impairment loss                                     2,586           -
        Loss (gain) on disposal of property, net of           160          (5 )
        minority interest

        EBITDA                                          $  (1,108 ) $    (523 )

EBITDA represents earnings (losses) before interest expense (income), income tax expense (benefit), depreciation and amortization, loss on debt modification, equity in loss of unconsolidated joint venture, (gain) loss on disposal of property and loss on asset impairment. EBITDA is not a measure of performance or liquidity calculated in accordance with generally accepted accounting principles ("GAAP"), is unaudited and should not be considered an alternative to, or more meaningful than, net income or income from operations as an indicator of our operating performance, or cash

flows from operating activities, as a measure of liquidity. EBITDA has been presented as a supplemental disclosure because it is a widely used measure of performance and basis for valuation of companies in our industry. Uses of cash flows that are not reflected in EBITDA include capital expenditures (which are significant given our expansion), interest payments, income taxes, and debt principal repayments. Moreover, other companies that provide EBITDA information may calculate EBITDA differently than we do.

Year Ended December 31, 2008 Compared to Year Ended December 31, 2007

    The following tables set forth information concerning our results of
operations by property for continuing operations for the years ended
December 31.

                                                      2008        2007
                                                       (in thousands)
            Net revenues-Continuing operations:
               Mountaineer(1)                       $ 289,986   $ 261,386
               Presque Isle Downs(2)                  176,761     149,858
               Scioto Downs                             4,092       4,562
               North Metro/Running Aces                     -          28
               Corporate                                   12          12

            Consolidated net revenues               $ 470,851   $ 415,846

º (2)
º Presque Isle Down's commenced slot operations on February 28, 2007 and racing operations on September 1, 2007.

                                                            2008        2007
                                                             (in thousands)
       Operating income (loss)-Continuing operations:
          Mountaineer(1)                                  $  34,986   $  28,859
          Presque Isle Downs(2)                              18,012      13,191
          Scioto Downs                                       (2,208 )    (2,866 )
          North Metro/Running Aces                              (69 )      (356 )
          Corporate                                         (12,556 )   (12,250 )

       Consolidated operating income                      $  38,165   $  26,578

º (2)
º Presque Isle Downs' operating income for 2007 includes project opening costs of $3.0 million.

Mountaineer's Operating Results:

During the year ended December 31, 2008, Mountaineer's operating results (particularly gaming and food, beverage and lodging) benefited, as expected, from the introduction of poker and table games in the fourth quarter of 2007, but continued to be adversely affected by competition, primarily from the implementation of slot operations in Pennsylvania. Net revenues increased by $28.6 million, or 10.9%, primarily due to a $24.1 million increase in gaming revenues. Net revenues earned from food, beverage and lodging operations increased by $4.6 million, and net revenues earned from other sources,

including parimutuel commissions, increased by $1.3 million. Promotional allowances increased by $1.4 million. Mountaineer's operating margin increased to 12.1% in 2008 from 11.0% in 2007.

Significant factors contributing to Mountaineer's 2008 operating results were:

º •
º an increase in gross profit from gaming operations, as well as food, beverage and lodging operations (as discussed below);

º •
º the absence of project opening costs in 2008, which were $2.6 million in 2007;

º •
º a decrease in depreciation expense of $1.0 million in 2008; and

º •
º the absence of a non-recurring assessment of West Virginia use tax in 2008, which was $1.0 million in 2007; offset by

º •
º an overall increase in compensation and benefits costs of $17.6 million during 2008, resulting primarily from addition of approximately 800 employees related to introduction of poker and table gaming in the fourth quarter of 2007 and expanded 24/7 operations;

º •
º severance costs of $0.5 million in the fourth quarter of 2008 related to a reduction in workforce; and

º •
º an increase in utilities and other maintenance costs of $0.6 million during 2008 related to expanded 24/7 operations.

A discussion of Mountaineer's key operations follows.

Gaming Operations. Revenues from gaming operations during 2008 increased by $24.1 million, or 10.5%, to $253.4 million compared to 2007, and gross profit increased by $6.2 million, or 6.9%.

The increase in gaming revenues was directly attributable to the introduction of poker and table gaming in the fourth quarter of 2007. Poker and table games generated $7.3 million and $41.5 million of revenues, respectively, during 2008. However, during the same period, Mountaineer's revenue from slots decreased by $22.2 million, or 9.8%, to $204.6 million.

During the year ended December 31, 2008, Mountaineer's average daily net win per slot machine decreased to $175 compared to $194 during 2007. As of December 31, 2008, Mountaineer operated 3,184 slot machines compared to 3,224 at December 31, 2007. The following is a summary of slot gross wagers, less winning patron payouts for the years ended December 31:

                                                 2008           2007
                                                   (in thousands)
            Total gross wagers               $  2,245,726   $  2,480,719
            Less winning patron payouts        (2,041,079 )   (2,253,847 )

            Gaming revenues (slot net win)   $    204,647   $    226,872

Mountaineer opened 37 poker tables on October 19, 2007 (which increased to 40 tables in 2008), and opened 50 table games on December 20, 2007 (which increased to 55 tables in 2008). The poker tables are located in the facility's Grandstand, and the table games are located in the Speakeasy Gaming Saloon (connected to our hotel) as well as the Grandstand. There are no statutory limits on the size of wagers or number of games and statutory gaming taxes are assessed at the rate of 35% of revenues, in addition to an annual licensing fee of $1.5 million for the first year of operations (for the period July 1, 2007 through June 30, 2008) and $2.5 million thereafter. With the commencement of table gaming, Mountaineer expanded its hours of operation to twenty-four hours per day, seven days per week.

During the year ended December 31, 2008, Mountaineer's total poker rake (the fee or commission taken by the operator of a poker game based on a percentage of the amount wagered on each hand) was $7.3 million with an average daily poker rake per table of $507. With respect to table gaming, the total table net win amounted to $41.5 million with a table drop (the total dollar value of gaming chips purchased) of $225.1 million, resulting in a hold percentage of 18.4%. The average daily net win per table was $2,104.

Management attributes the decrease in slot revenue primarily to the continuing impact on our market from gaming operations in Pennsylvania, with which Mountaineer shares some customer base in Ohio and Pennsylvania. In addition to the opening of Presque Isle Downs, The Meadows Racetrack & Casino, a harness racetrack in Washington, Pennsylvania, opened its temporary slot casino with 1,825 machines in June 2007. The Meadows, which is approximately 40 miles southeast of Mountaineer, is expected to open its permanent casino with over 3,000 slot machines and various food and beverage outlets in April 2009.

We believe table games at Mountaineer will continue to enhance its competitive position by drawing new customers and driving increased play from our existing customers, which may contribute to Mountaineer's gaming revenue growth. Furthermore, table gaming at Mountaineer will also help distinguish our product from slot machines in local bars and clubs and slot machine operations in Pennsylvania. However, gaming operations at Mountaineer during 2009 may continue to be impacted by the adverse changes in the U.S. economy and by the planned openings of The Meadows permanent casino in April 2009 and the Rivers Casino in downtown Pittsburgh, Pennsylvania, approximately a one-hour drive from Mountaineer, which is expected to open in August 2009 with 3,000 slot machines and five food and beverage outlets.

Overall, the increase in revenues from gaming operations during 2008 resulted in increased gaming taxes and assessments in the amount of $4.7 million to $135.0 million compared to 2007. Additionally, gaming compensation and benefits costs increased by $11.9 million during 2008 compared to 2007 principally as a result of the addition of poker and table games staffing and expanded 24/7 operations; and Mountaineer incurred incremental equipment lease expense of $0.6 million during the year related to leases of various table games and related equipment.

Parimutuel Commissions. Parimutuel commissions is a predetermined percentage of the total amount wagered (wagering handle), with a higher commission earned on a more exotic wager, such as a trifecta, than on a single horse wager, such as a win, place or show. In parimutuel wagering, patrons bet against each other rather than against the operator of the facility or with pre-set odds. The total wagering handle is composed of the amounts wagered by each individual according to the wagering activity. The total amounts wagered form a pool of funds, from which winnings are paid based on odds determined solely by the wagering activity. The racetrack acts as a stakeholder for the wagering patrons and deducts a "take-out" or gross commission from the amounts wagered, from which the racetrack pays state and county taxes and racing purses. Mountaineer's parimutuel commission rates are fixed as a percentage of the total wagering handle or total amounts wagered. Parimutuel commissions for

Mountaineer, detailing gross handles less patron payouts and deductions, for the years ended December 31 were as follows:

                                                        2008        2007
                                                         (in thousands)
          Import simulcast racing parimutuel handle   $  16,997   $  18,028
          Live racing parimutuel handle                   8,057       9,383
          Less patrons' winning tickets                 (19,774 )   (21,636 )

                                                          5,280       5,775
          Revenues-export simulcast                      11,316      12,066

                                                         16,596      17,841
          Less:
          State and county parimutuel tax                  (440 )      (452 )
          Purses and Horsemen's Association              (7,343 )    (7,937 )

          Revenues-parimutuel commissions             $   8,813   $   9,452

Overall, Mountaineer's parimutuel commissions decreased by 6.8% during 2008 compared to 2007, which is consistent with the national average decline in wagering of 7.16% during 2008, as reported by the National Thoroughbred Racing Association and Equibase Company. In addition, Mountaineer's decrease in live and import simulcast racing handle can be attributable to eight fewer racing days during 2008 compared to 2007 as a result of more severe winter weather conditions in early 2008. The decline in on-track wagering and the decrease in the number of racing days contributed to the decrease in export simulcast racing handle.

Live racing and import simulcast may continue to be impacted by the conversion of some live racing patrons to export simulcast patrons (whether through traditional off track wagering facilities or growth in the utilization of telephone and/or Internet wagering) and increased competition from Pennsylvania's racetracks. Mountaineer currently simulcasts its live races to over 1,000 sites.

Food, beverage and lodging operations. Revenues from food, beverage and lodging operations during 2008 were $25.3 million, which increased by $4.6 million, or 22.2%, compared to 2007, and gross profit from these operations increased by $1.9 million, or 34.9%. The increase in revenues and gross profit resulted primarily from increased patron traffic resulting from the opening of table games and expanded 24/7 operations.

The average daily room rate for the Grande Hotel increased to $78.93 during 2008 from $62.44 during 2007, but the average occupancy rate decreased to 74.7% from 76.4% during the same periods, respectively. The increases in daily room rates primarily reflect the effects of table gaming which enabled us to realize increased room rates without significantly reducing our hotel occupancy.

Other operations. Other operating revenues for 2008 were primarily derived from special events at The Harv and Convention Center; from the operations of the Spa, Fitness Center, retail outlets and golf course; from the sale of programs, admission fees, and lottery tickets; and from check cashing and ATM services. Mountaineer earned other revenues of $8.1 million for 2008 and $6.2 million for 2007. The increase in revenues was primarily due to:

º •
º an increase in retail sales and spa service revenue in the aggregate amount of $0.7 million primarily from increased patron traffic resulting from the opening of table games; and

º •
º the receipt of a $0.6 million settlement of a claims dispute related to our former self-insured employee health insurance plan.

Presque Isle Downs' Operating Results:

Presque Isle Downs commenced slot machine gaming operations on February 28, 2007, and live thoroughbred horse racing with parimutuel wagering on September 1, 2007. During 2008, net revenues increased by $26.9 million, or 18.0%, primarily due to a $23.0 million increase in slots revenue. Net revenues earned from parimutuel commissions increased by $2.0 million and net revenues earned from food and beverage operations increased by $2.1 million. The property's operating margin (inclusive of $3.0 million of project opening costs in 2007) increased slightly to 10.2% during 2008 compared to 8.8% during 2007.

Significant factors contributing to Presque Isle Downs' 2008 operating results were:

º •
º an increase in gross profit from gaming operations (as discussed above);

º •
º the absence of project opening costs in 2008, which were $3.0 million during the first half of 2007; and

º •
º a decrease in marketing promotions and advertising costs of $1.2 million in 2008; offset by

º •
º an increase in depreciation expense of $3.4 million in 2008;

º •
º a loss on disposal of certain equipment components of the property's surveillance system in the amount of $1.5 million; and

º •
º an increase in the operating losses incurred from parimutuel commissions operations of $0.6 million during 2008.

Gaming Operations. Revenues from gaming operations during 2008 increased by $23.0 million, or 16.8%, to $164.6 million compared to 2007, and gross profit increased by $8.8 million, or 18.2%. During 2008, Presque Isle Downs' average daily net win per slot machine decreased to $224 compared to $231 during 2007. The 2007 average daily net win per slot machine reflects the enthusiasm surrounding the opening and initial months of operations. The difference in revenues from gaming operations is also attributable in part to the fact that Presque Isle Downs was not open for a full year in 2007. During 2008 and 2007, Presque Isle Downs operated 2,000 slot machines, including automated table gaming devices.

However, gaming operations at Presque Isle Downs during 2009 may be impacted by the adverse changes in the U.S. economy and by the planned openings of The Meadows permanent casino in April 2009 and the Rivers Casino in downtown Pittsburgh, Pennsylvania, approximately a two-hour drive from Presque Isle Downs, which is expected to open in August 2009 with 3,000 slot machines and five food and beverage outlets.

Overall, the increase in revenues from gaming operations during 2008 resulted in increased gaming taxes and assessments in the amount of $13.5 million to $99.6 million compared to 2007. Additionally, Presque Isle . . .