Social gaming giant Zynga seeks suitability from Nevada regulators

7 December 2012

Social gaming giant Zynga Inc. filed an application for a preliminary finding of suitability with Nevada gaming regulators earlier this week as the San Francisco-based company looks to break into real money online gambling.

The company, which makes free-play social games such as Words with Friends, FarmVille and Mafia Wars, has been hinting at finding a way to jump into the potential U.S. regulated online gaming industry. The company operates the free-play Zynga Poker.

Zynga Chief Revenue Officer Barry Cottle said in a statement that his company is looking beyond Nevada. Zynga recently signed a partnership agreement with European online gaming giant to provide games that can be played for real money online by the company's customers in the United Kingdom. The first games are expected to launch next year.

"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," Cottle said.

Nevada, which has regulations in place for online poker, has licensed some 16 casino operators and equipment providers for interactive gaming licenses. The first real money websites, catering to players who are physically within the state's borders, are expected to launch early next year.

A finding of suitability is a step below full-fledged licensing by Nevada.

Under the state's interactive gaming regulations, a company must have a traditional land-based casino to operate a real money poker website. However, that doesn't preclude Zynga from partnering with casino operators to provide technology or website content while becoming licensed to share in the gaming revenues.

"This filing continues our strategic effort to enter regulated gaming markets in a prudent way," said Cottle, who added that the Nevada suitability process could take up to 18 months.

The announcement boosted Zynga shares Thursday. The company's stock price closed at $2.49, up 17 cents, or 7.11 percent, on the Nasdaq Global Select Market. The company's stock price has declined 77 percent since its initial public offering in 2011.

Several online gaming companies have sought different approvals from Nevada gaming regulators.

In July, Paddy Power Plc, which is considered the top legal bookmaker in the United Kingdom, Canada and Australia, was granted a preliminary finding of suitability. and 888 Holdings Plc are both seeking full licensing by Nevada gaming authorities. The companies have partnership agreements with casino operators.

Caesars Entertainment Corp. and 888, which was found suitable in 2011, operate online gaming in legal European markets and want to bring a similar business model to Nevada. MGM Resorts International and Boyd Gaming Corp. have agreements in place with to operate online poker websites in Nevada.

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