I always assumed it to represent all the lost productivity from people spending time and money in casinos.
Agreed. But -15% production is big, and +10% gold doesn't make up for it. I had an idea; what if Casino used the Employs 1 Citizens mechanic instead of the hammer penalty? Then you (or your city governor) could decide where to take the hit. We could then increase the gold bonus as necessary so that building the Casino is a bonus, not a penalty.