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(Online gaming article updated with Se. Harry Reid's latest announcement.)

NEW YORK (

TheStreet

) -- The legalization of online gaming will be in focus in 2011.

Sen. Harry Reid reiterated his commitment to legalizing online poker Thursday evening, but said he won't tie the legislation into the extension of the Bush-era tax cut bill.

"The legislation I am working on would get our collective heads out of the sand and create a strict regulatory environment to protect U.S. consumers, prevent underage gambling, and respect the decisions of States that don't allow gambling," Reid said. "Experienced regulators already trusted by millions of Americans will maintain oversight and reputable operators with proven track records will provide a secure gaming environment for Americans. Finally, the revenue and jobs from this multibillion dollar industry will stay where it belongs -- here in America."

But Sen. Reid's window for getting a bill through is closing, as lame duck session winds down. It will become significantly harder to get a bill passed once Republicans take more seats in the Senate and take control of the House next year.

Se. Reid is reportedly seeking restrict online gaming licenses to only casinos and racetrack operators, which includes Indian casino owners and equipment manufactures, that have been in business for at least five years.

In 2006, Congress banned online gambling, with legislation that prohibits banks and credit card companies from making payments to gambling Web sites.

"The odds of passing the bill may be difficult in a 'Lame Duck Session,' but a quick compromise amongst lawmakers may not be completely out of the question," Sterne Agee analyst David Bain, wrote in a note.

>>3 Reasons Not to Bet on Casino Stocks in 2011

With the legalization of online gaming a very real possibility, investors should consider placing bets on stocks that could benefit from a bill.

While it's is likely that most casino operators from

Las Vegas Sands

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and

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Wynn Resorts

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, to

Penn National Gaming

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and

Boyd Gaming

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, will at least entertain entering the online gaming market given its low barriers to entry,

MGM Resorts

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and

Caesar's Entertainment

, formerly Harrah's Entertainment, are expected to be the biggest beneficiaries of an online poker bill.

MGM staunchly backed Sen. Reid in his reelection, donating $192,000 to his campaign and publicly supporting the Senator. Amid the election, CEO Jim Murren said that if Se. Reid lost the election an Internet Gaming Bill "would have been DOA for a decade."

If a bill is passed, MGM will be able to tap into its database of about 60 million customers and capitalize on its well recognized and trusted brand name, says Sterne Agee analyst David Bain.

"The passage of legislation over the next several weeks could be a positive catalyst for

MGM shares," J.P. Morgan analyst Joseph Greff, wrote in a note. "Furthermore, we do not think investors are giving MGM any credit for the potential opportunity, and believe it provides only upside at this point."

Caesar's has outwardly stated its intention to further monetize its World Series of Poker brand, which would be possible through online gaming. This year, the World Series of Poker featured more than 7,300 players who paid a $10,000 entry fee.

"Poker is mostly known in casinos, especially in Las Vegas, as a loss leader," Bain wrote in a note. "Thus, the bill should not work to cannibalize more profitable land-based gaming positions like slots, blackjack and craps. Conversely, the legalization of online poker could potentially build new gamers and customers and be a conduit for land-based promotional offerings."

Slot machine makers and technology suppliers could emerge as eventual joint-venture partners for marketing and other initiatives, but Bain believes suppliers offer more in unique slot content and features, which isn't especially relevant for online poker.

While online gambling is currently illegal in the U.S., it is estimated that the domestic online poker market was $1.5 billion in 2008, Greff noted. He expects if online poker is legalized, the market could reach between $3.5 billion and $5 billion by 2015.

--Written by Jeanine Poggi in New York.

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