Social gaming giant Zynga has filed a preliminary application in Nevada seeking approval to operate real-money online gambling in the U.S. marketplace.
Zynga will now be scrutinized by the Nevada Gaming Control Board to determine the company’s suitability to offer its services in the nation’s first online poker regime. That scrutiny will undoubtedly find that Zynga shares have fallen a massive 75% since its initial public offering one year ago. However, company officials have said that real-money gambling is exactly what Zynga needs to turn around its faltering value.
Up to this point, the company has relied on the social gaming craze in which players purchase virtual chips with no actual monetary value to advance in their chosen online games. But the popularity of games such as “Farmville” has seemingly worn off, taking down Zynga share prices in the process. Thus, the company has focused its attention on real-money gambling of late, and applying in Nevada is a step in that direction.
We anticipate that the process will take approximately 12 to 18 months to complete, said Zynga Chief Revenue Officer Barry Cottle.
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.
Nevada and Delaware are the only states that have legalized online gambling so far, but other states such as New Jersey have been considering it. Nevada’s regulations are for poker-only at this stage, while Delaware plans to allow a broader expanse of casino games. The lame-duck Congress may see the introduction of an online gambling bill on the federal level that would allow online poker but strengthen current laws against other modes of Internet gambling. But the approval of that bill prior to year’s end looks like a huge longshot due to lack of Republican support.
Zynga and many other gaming company’s are hoping that online gambling legislation eventually takes hold in the U.S., which would open up a whole new marketplace that has up to now been unregulated.
Zynga has tried to trim costs and laid off a number of employees during its recent financial struggles. At the same time, the social gaming company made its first move to become a real-money gaming company in October by partnering with bwin.party to offer real-money poker and casino games in the United Kingdom in early 2013. Its no doubt that Nevada gaming officials will look to the success of that venture prior to determining Zynga’s suitability for the marketplace in the Silver State.