Zynga And Online Gambling: Not An Option

May. 3.12 | About: Zynga (ZNGA)

I often read articles that keep mentioning that online gambling could be the Zynga (NASDAQ:ZNGA) salvation. It won't happen and can't happen and seems to be a marketing ploy. Perhaps in 10 years after all of the State and Federal laws change, online gambling might happen for Zynga.

If online gambling could happen, every casino on the Las Vegas strip would have made it available through their websites many years ago. The hype seems to center around Wynn resort and Casino (NASDAQ:WYNN) and Zynga's poker game. Zynga and Wynn entertained the idea, a few blog posts were made about the rumors and now the topic appears in many online articles.

I believe they entertained the topic because it would generate free advertising. People like to spread rumors and Zynga is a hot topic so why not release a few blog posts and let it snowball.

I want to make very clear that I am not a lawyer. I am going to tell you what I know and believe to be true and accurate; once again I am not a lawyer.

  • online gambling is not specifically illegal according to the U.S. constitution or Federal laws. However, it is also not specifically legal either.
  • Many states have laws that specifically prohibit gambling of any kind and if you are caught you could go to jail or prison and pay hefty fines.
  • It is against federal law for websites to take sports bets over the Internet.
  • It is against federal law for banks to handle online gambling transactions.
  • It is against federal law to accept bets on a server located in the U.S.

If anyone were to be granted the ability to provide online gambling in the USA it would be the Indian tribe casinos. Tribes are considered sovereign entities by the United States and fall under federal jurisdiction. Unless I am mistaken, Mark Pincus is Jewish and not an American Indian. He and Zynga stand ZERO chance of offering online gambling. Period.

I am writing this article in response to an article I read today on The Motley Fool. I like their articles and writers but do not agree with this statement:

There are two potentially game-changing positive catalysts for Zynga in the foreseeable future: its own platform and legalized online gambling. Starting its own platform will help it distance itself from Facebook, and if legalized online gambling becomes a reality, Zynga already has a big presence in play-money poker that it can leverage into the real deal.

In further response to the above quoted paragraph:

Zynga has started it's own website (zynga.com) but has not distanced itself from Facebook (NASDAQ:FB) at all. The only way you can connect to play the games is if you login using your Facebook account. I think that is more of a marriage than a separation.

So in conclusion there really are no game-changing positive catalysts for Zynga short of creating an in-house game that becomes a hit; something they have failed to do in more than a year.

I wish people would quit spreading this rumor about Zynga and online gambling. It really just makes people sound kind of stupid when they repeat it.

Most Zynga players are children. It does not take a genius to figure this out. Take a look around your house. So you and your spouse play a Zynga game but so do your 4 children all under the age of 13. Would you allow them to play Zynga games if they were associated with a casino? Even if you would, the federal government will not.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.