When Steve Wynn stepped down as CEO and chairman of Wynn Resorts, Limited (NASDAQ:WYNN) on Feb. 6, it may have seemed that the drama for the company was over. But that's far from the case given how entangled Steve Wynn is in the company's fate

The latest news is that Steve Wynn will drop a legal challenge that sought to enforce his control over Wynn Resorts shares owned by his ex-wife, Elaine Wynn, equaling roughly a 9% stake in the company. If a judge approves, giving up his claim to those shares means Steve Wynn controls only about 12% of the company and will have little ability to block changes or a sale of the entire company if the board of directors sees fit

Wynn Palace from the front.

Image source: Wynn Resorts.

Steve Wynn's lengthy legal battle

Steve Wynn has been haunted for nearly two decades by the hostile takeover of his former company, Mirage Resorts, by MGM Resorts (NYSE: MGM). Before the acquisition was completed, Steve Wynn had bought the Desert Inn, which would ultimately become the site of Wynn Las Vegas. Elaine Wynn was an integral part of the project and was a co-founder of Wynn Resorts and a board member until recently. 

Elaine and Steve Wynn divorced in 2009. The two of them and Kazuo Okada had an agreement giving Steve Wynn control of the shares owned by all, but Elaine and Steve Wynn have been in court over the agreement for several years.  

When Okada's shares were redeemed by Wynn Resorts after Okada was determined to be "unsuitable" as a partner, board member, and gaming license holder (something I detailed here), Steve Wynn lost some of his control of the company. When Elaine Wynn challenged their agreement in a desire to sell some of her shares, she was kicked off the board, and a lengthy legal battle between the former couple ensued.

With Steve Wynn dropping his challenge of Elaine Wynn's desire to have control over her shares, she will be free to sell shares and Steve Wynn loses more control of his company. Instead of voting rights of about 40% of shares, as he had a few years ago, he'll control votes accounting for less than 12% of shares outstanding. 

The company said in an SEC filing that Steve Wynn has said "he has no immediate plans to sell shares that he owns and that if he elects to sell any such shares over time, he will seek to conduct such sales in an orderly fashion."

Regulators are circling

One reason Wynn may be taking steps to end his iron-fisted control of Wynn Resorts is that it could be good for the value of his stake in the company. We know that Massachusetts regulators have opened an inquiry following sexual misconduct allegations against Steve Wynn and now Nevada regulators are circling. The Nevada Gaming Control Board was reportedly inundated with reports about Steve Wynn, and so it launched a new online system to let people make reports to the board. 

Ultimately, regulators hold a lot of power in the gaming industry and they can force those holding gaming licenses out. Steve Wynn himself must hold a gaming license in Nevada given his large stake in Wynn Resorts, so regulators have taken a keen interest in this case, even if he's out as CEO. Reducing his power at the company may be a way to try to appease regulators before they take away what power he has left. 

Wynn Resorts is still in flux

We don't know where Wynn Resorts as a company is going without Steve Wynn at the helm. It has three of the most profitable resorts in the world in Wynn Las Vegas, Wynn Macau, and Wynn Palace (also in Macau), but it no longer has a major shareholder at the helm. And with Steve Wynn's power shrinking, the company could be bought out by a competitor, taken private by private equity firms flush with cash, or just continue on as a public company. Whatever happens, Steve Wynn won't have the last say, something we couldn't have foreseen just a few years ago. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.