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Zynga Jumps on Online Gambling Approval

NEW YORK ( TheStreet) -- Zynga (ZNGA - Get Report), the social gaming company, moved sharply higher after Nevada made history, becoming the first state in the nation to approve online gambling.

Nevada Gov. Brian Sandoval signed legislation yesterday allowing gambling online, after the Nevada State Senate and Assembly approved the bill. Approval comes after New Jersey Gov. Chris Christie vetoed a similar bill, but said he might sign an amended version next week.

"This is an historic day for the great state of Nevada," Sandoval was quoted as saying. "Today I sign into law the framework that will usher in the next frontier of gaming in Nevada."

Zynga, which provides the popular Zynga Texas Hold 'Em and Slots apps, has looked to online gambling as a way to expand its revenue base beyond advertising and in-game purchases.

The idea of online gambling as a way for states to raise revenue gained traction in 2011, when the Supreme Court reversed a decision related to the Wire Act of 1961. The Wire Act prohibited wagering on telecommunications systems crossing state or national borders. The decision, which concerned selling lottery tickets, paved the way for online gambling as well.

"It is something we're exploring," Zynga's then Treasurer and Vice President of Finance Mike Gupta said in an interview last year. "We think it's an interesting adjacency to what we do in our core business."

At the time, Zynga did not have any firm partners, but Gupta said Zynga had been talking to a number of industry folks. "I think ultimately who we partner with will be somewhat driven by how the legislation gets written and what's required, so stay tuned." Gupta has since left Zynga to become CFO of Twitter.

One potential partner that has been named publicly is Caesars Entertainment (CZR - Get Report), though nothing has been publicly announced.

Shares of Zynga moved higher, tacking on 6.08% to $3.14 on the news.

--Written by Chris Ciaccia in New York

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