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TheStreet Open House

Facebook and Zynga Increase Online Gambling Bet

Stocks in this article: FBZNGABYDMGMCACQ

NEW YORK (TheStreet) -- You may not know it but inside the U.K. Facebook (FB) is in the online gambling business. Facebook added real money gambling a little over a year ago. Up until recently it was limited to bingo and online slots but now, through a partnership with Zynga (ZNGA), Facebook users in the U.K. can play online poker for real money.

None of the games are available in the U.S. yet. Legal hurdles including the Unlawful Internet Gambling Enforcement Act of 2006 have, until recently, kept almost all forms of online gambling outside of lottery ticket sales underground and offshore. After the U.S. Department of Justice clarified (essentially reversed) its stance on Internet gaming, states started testing the waters with intrastate licenses.

Delaware, Nevada and New Jersey have passed legislation to allow some forms of commercial online gambling. Because the licenses are for intrastate only, all the players have to be physically located within their respective state borders to play. Geo location software is used to determine the players' location.

Surprisingly, Nevada, as open as it is for physical gambling and casinos, is highly restrictive in the virtual world and only allows for online poker with real money. New Jersey, on the other hand, allows greater diversity of types of games and is off to a slow, albeit better start.

The two main players in New Jersey are Borgata Hotel Casino owned by Boyd Gaming (BYD) and MGM Resorts (MGM), and Caesars Interactive (CACQ). Borgata Hotel Casino uses the same software vendor bwin.party Digital Entertainment to provide the poker platform as Zynga in the U.K. Because bwin.party is licensed in New Jersey and working with Zynga -- and by proxy Facebook -- there's little reason to believe the trio will be delayed from entering other markets including the United States.

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