In a couple of ways, Argosy Gaming (NYSE:AGY) is the poster child of new jurisdiction gaming. From the wealth to be had to the ominous "sin tax" cloud hanging over the industry, the riverboat casino operator exemplified both sides of the story in its latest earnings report.

On one hand, Argosy represents the impressive amount of investor wealth to be had in this industry. In Lawrenceburg, Ind., Argosy has the most dominant boat in riverboat gaming. By the end of this quarter, it had approximately $400 million in annual revenues and 60% market share of the Cincinnati market. The completed acquisition of the property, along with Argosy's cheap price tag, prompted Paul Larson to highlight the stock twice, in the TMF Industry Focus 2000 at under $14 a share, and Industry Focus 2001 at $16.25.

On the other hand, while third-quarter revenues grew 2.7% to $242.9 million, EBITDA declined 5.5% to $63.1 million. Argosy was the company most hurt by the pair of insidious tax hikes in Illinois and another smaller one in Indiana.

You see, by April 2002, Argosy's stock had reached $40 a share on optimism surrounding its recently acquired boat on the Illinois side of the $2 billion Chicagoland market. Thinking that Illinois was going to increase the position limit (the amount of people who can be playing at any one time in a casino) from 1200 to 2000, Argosy was ready to invest $80 million in a new barge to replace its existing boats and compete with Mandalay's (NYSE:MBG) Grand Victoria, and new barges from Harrah's Entertainment (NYSE:HET), and Penn National's (NASDAQ:PENN) Hollywood Casino.

But instead of raising the position limit, Illinois elected to raise the tax rate in June 2002, topping out at 50% of all revenues over $200 million and increasing admission tax from $2 to $3 per guest.

Because of the higher taxes, Argosy, with $250 million in annual revenues at the property, decided to invest only $40 million in the property. In addition, it rearranged its product mix to get the most efficiency out of each dollar of revenue rather than maximize revenues.

And just as Argosy opened its new barge, a second tax hike effective July 2003 raised the top rate to 70% of revenue over $250 million and the admission tax to $5. In response, Argosy -- along with Harrah's and Hollywood -- cut operating hours, cut jobs, replaced table games with slot machines, and even started charging patrons $5 just to get on the boat.

So instead of the glory of Lawrenceburg, Argosy has seen no return on its Chicago investment while it chases its patrons to Indiana-side casinos in the market to avoid taxes.

And instead of $40, the stock rests at $23.50 today.

Jeff Hwang can be reached at