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Feds Bring the Hammer Down on Online Poker

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Online gaming has been a hot topic in Nevada, Washington, D.C., and here at The Motley Fool for the last few months. Recent agreements between casino companies and online gaming houses have given some fleeting hope that online gaming could be moving toward regulation at the state or federal level. After Friday's crackdown, we can forget about that for the time being.

Full Tilt Poker and PokerStars, that latter of which has an alliance with Wynn Resorts (Nasdaq: WYNN  ) , were among the sites shut down by the FBI on Friday afternoon to U.S. players. The sites have been operating in a legal gray area for years, but the Feds made a final ruling last week, and now we're probably in for a long, drawn out legal battle.

This comes just when there seemed to be momentum for regulation of online poker. The federal government is in need of new tax dollars, the casino industry is now looking at online poker as a revenue booster, and new industry alliances were made specifically to get regulation passed. This is a bit of a disappointment for Wynn and smaller gaming companies like Boyd Gaming (NYSE: BYD  ) , but MGM Resorts (NYSE: MGM  ) needed online gaming the most. It has some of the strongest brands and one of the worst balance sheets, so online poker would have boosted results that will likely struggle this quarter.

Now we have to wait to see what happens with these sites and federal lawmakers. I can't see this as a good sign for online poker, but it's uncharted territory.

Meanwhile in Macau
The gaming news out of the U.S. may have been depressing lately, but Asia has maintained its winning ways. And the first quarter should be another strong quarter for Macau casino operators. Gaming revenues were up 6.2% from last quarter and 42.6% year over year. Las Vegas Sands (NYSE: LVS  ) and Melco Crown (Nasdaq: MPEL  ) , which both have a presence on the Cotai Strip, should be among the winners when they release results.

Macau and Singapore are still the best ways to play the gaming sector right now. With U.S. casinos struggling and online poker up in the air, they're the only way this Fool is betting on casinos.

Fool contributor Travis Hoium owns shares of Melco Crown. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

Melco Crown Entertainment is a Motley Fool Global Gains selection. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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  • Report this Comment On April 18, 2011, at 4:22 PM, spokanimal wrote:

    Re: your comment: "Macau and Singapore are still the best ways to play the gaming sector right now"...

    ... there is only one company with a presence in both cities: Las Vegas Sands.

    Further, with Sand's cotai sites 5&6 starting to open in just 8 months, this massive (6,800 new total hotel rooms; more than all that exist there currently) resort could allow the company to capture as much as 25% of Macau gaming by mid-2012.

    One reason for that is that Sand's Venetian/plaza complex is currently under-utilized due to it's unique features (15k seat arena and huge mall/convention facility) which are yet to be fully supported by overall Cotai development that has only just begun. Once Galaxy Cotai and Sand's sites 5&6 are fully open, hotel capacity on the cotai strip will be tripple what it is today and all of the operating resorts on Cotai will be adjacent to it's epicenter, the Venetian.


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