Online Gaming Is on Its Way


The day online poker players have been waiting for is coming closer to reality. Last week, Bally Technologies (NYS: BYI) and International Game Technology (NYS: IGT) were granted the first online gaming licenses in the U.S., paving the way for online games online.

Before you start rounding up cash to put into an online poker game you may have to wait a while. The license allows the companies to provide systems and services to casino operators, not yet to offer games online.

Bally will use the license to offer its iGaming platform to casinos and IGT plans to push its poker product to operators. According to Bloomberg, two dozen companies have applied for online gaming licenses, so the market for these products should be significant. MGM Resorts (NYS: MGM) and Caesars Entertainment (NAS: CZR) look to be two of the dominant players, and the Gaming Control Board thinks online betting may hit Nevada in late 2012 or early 2013.

In a move I find ironic, Las Vegas Sands (NYS: LVS) is likely to at the very least be late to this party. Sheldon Adelson is against the legalization of online gaming and appears to still be holding out. That could change if the market grows as big as expected, a level that H2 Gambling Capital expects could reach $13.4 billion in five years. Adelson has been a leader into new markets, and I think he'll be forced to get into this one, even if he is late to the party.

Forcing the Fed's hand
This is the first move that will force the hand of federal legislators in the near future. The Justice Department said that betting on things other than sports contests was not illegal, paving the way for the recent licenses.

But so far, Nevada is standing alone. Washington, D.C., and Iowa have struck down online gaming laws while New Jersey is yet to have a final vote. These were supposed to be leaders in the online gaming movement along with Nevada.

There's a long way to go, but for MGM, Caesars, Bally, and IGT, this single step forward is a positive. Online gaming could be a huge boon for the industry, and I think before long, the federal government will be forced to legalize it in some way, shape, or form.

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