3 Online Gambling Stocks With Upside

WINDERMERE, Fla. (Stockpickr) -- Some major news could be about to break for the casino and gaming sector.

There's a move in Nevada to legalize online gambling. Assembly Bill 258 calls on Nevada gambling regulators to legalize Internet poker, which would allow a reputable gaming company with two years of established business in another state to open up for business in Nevada. The new law would also apply to existing Nevada casinos.

According to Jeremy Aguero of Applied Analysis, online poker is one of the fastest-growing industries in the world, with 8.6 million users and 2010 revenue surpassing $5 billion. Currently, no U.S. state allows for online gambling. If this bill passes, it could lead to other states following Nevada to join in on the trend to capture the huge tax revenue.

Some observers see this as a bad thing for brick-and-mortar casinos, but I think that view is misguided. In the end, a decision to legalize online gambling is going to do nothing but drive growth and profits for the Nevada casinos that join the party.

For one thing, the major casinos can leverage their brand names by setting up their own online gambling operations. Players might find it more attractive to go online and gamble with the powerhouses of the industry. Also, the best-of-breed casinos will enter a new growth market by going online. This will be sure to increase their revenues and earnings. The major casinos will also benefit from the halo effect since they'll now be able to market their brick-and-mortar operations to online users.

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Imagine an online player sitting at a computer gambling and then all of a sudden being served up special hotel and trip deals right into their inbox or via online ads. The smart casinos are going to figure out ways to not just keep their customers gambling online, but also to draw them into the glitz and glamour of Las Vegas. Mark my words; this will be a casino marketer's dream.

If you think the Las Vegas-based casino companies are sleeping on this opportunity, than you're wrong. Before the bill has even been voted on, two major casinos have already formed partnerships this week with online gambling firms.

On Thursday, Nevada regulators approved a marketing agreement between the world's largest casino operator, Caesars Entertainment, and 888 Holdings PLC, an Israeli company that offers online poker, sports betting and casino games in Europe. The only publicly traded way to play Caesars is with private equity firm Blackstone Group(BX), which owns a minority stake in the casino.

The other major casino is featured below, as one of several casino and gaming stocks that could benefit from the passing of the bill in a big way.