Zynga Takes First Step Into U.S. Gambling In Nevada
By Yannick LeJacq | December 7, 2012 6:21 AM EST
Struggling social gaming company Zynga (Nasdaq: ZNGA) has officially begun the tenuous legal process of entering the market for online gambling in the United States.
The Associated Press reports that the San Francisco-based game developer has filed a request with state regulators in Nevada to introduce mobile and social games that allow players to gamble with real money. Previously, the company has steered clear of these muddy regulatory waters by using a virtual currency model for popular titles like “Zynga Poker” -- allowing users to gamble, but only with fake currency they must purchase through the application.
Now, Zynga said in an statement late Wednesday, the company is searching for an "application for a preliminary finding of suitability" from the Nevada Gaming Control Board as part of its plan to enter the "real-money gaming,” or online gambling markets.
This news comes just two months after Zynga announced that it was partnering with the U.K. online gambling firm Bwin.Party (LON: BPTY) “to offer real money online Poker and Casino games in the UK market.” Previously in September, the company enlisted veteran online gambling executive Maytal Ginzburg Olsha as its new COO to lead its entry into online gambling.
Earlier this year, Nevada became the first U.S. state to license online gambling, provided that they were online poker games played between people within the state. Bwin.Party is already partnered with some of Nevada’s largest gambling companies including MGM Resorts International (NYSE: MGM), according to the Wall Street Journal. While the two companies have been granted licenses by state regulators, they have yet to launch any products in Nevada.
"As we've said previously, the broader U.S. market is an opportunity that's further out on the horizon based on legislative developments, but we are preparing for a regulated market," Zynga Chief Revenue Officer Barry Cottle said in a statement sent to the WSJ.
The move into online gambling, like its attempt to develop “midcore” games, is part of a larger attempt that the social game developer is making to establish more stable revenue streams for its products than its popular games like “FarmVille” have been able to offer despite their sizeable user bases. The company, which first went public last December for $10 a share, tumbled at the stock market following a weak second quarter earnings report and was not able to fully recover in the third quarter.
Last week, the company officially announced that it would be loosening its close ties with social media giant Facebook (Nasdaq: FB), a near-exclusive relationship that first lead the game developer to prominence on the social network.
Zynga noted that the application process with Nevada regulators should take 12 to 18 months. Following a successful application, it could then apply for an in-state gambling license, which would take another two to three months to clear.
Zynga's stock rose 6.5 percent to $2.47 per share in midday trading Thursday.
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