Just like it works nowadays in Vegas.
Yes, chips are legal tender. BUT they are only legal in the casino that you got them from. If I took a chip from the Sands in Vegas home, then came back years later, that chip is still worth the same amount of money as when I left. Which is why if they are getting rid of old chips, they have to be destroyed completely. And why counterfeiting chips is just as bad as counterfeiting money.