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MGM assessing costs of operating online poker in Nevada

By Sue Zeidler

LOS ANGELES (Reuters) - MGM Resorts International CFO Dan D'Arrigo said the company was still deciding whether or not to launch an Internet poker website in Nevada and the state may be too small to provide a lucrative online market on a standalone basis.

"We have to make an assessment on the cost to operate that space. We haven't ruled it out, but we haven't given it a green light either," said D'Arrigo in an interview on Thursday. "We're not going to be the first or a pioneer from the state's perspective."

Nevada, which legalized online poker in February, this week became the first state to go live as Station Casinos launched the first offering known as UltimatePoker.com.

New Jersey and Delaware have also legalized online gambling and are scrambling with plans to go live as well.

While MGM is pursuing the regulatory and licensing process in both New Jersey and Nevada, D'Arrigo and others believe either federal legislation or state compacts are needed to attract more gamblers and drive up liquidity to create a robust market that will eventually generate billions of dollars in revenue for companies and local governments.

Big casino operators would prefer federal standards or state compacts as they would offer larger, more uniform markets which would lure more gamblers and create better liquidity. State by state legislation could lead to a patchwork of regulations and different tax rates.

Some analysts project Nevada's online gambling market will yield only $50 million to $250 million in annual revenues. The larger and more populated New Jersey is pegged to generate $500 million to $1 billion yearly.

"Our preference is for something to be done at the federal level. We're focused on these state by state initiatives, but it makes (operating) more challenging and more complicated. The opportunities are different in each state," he said.

"Hopefully states will compact with one another and that will create liquidity and critical mass," he said.

On a conference call earlier, MGM officials said online gambling will ultimately be a very profitable business for the gaming industry if done correctly at the state level.

MGM reported a surprise profit for the first quarter, boosted by a rebound in Las Vegas and continued strength in the Chinese gambling region of Macau.

The casino giant earned $6.5 million, or one cent per share, compared with a loss of $217.3 million or 44 cents per share a year earlier. Analysts on average had forecast the company to report a loss of 10 cents a share, according to Thomson Reuters I/B/E/S.

MGM and Boyd Gaming have partnered with Web poker firms like Bwin.party to provide software and other services to their online gaming efforts across the U.S., including in both New Jersey and Nevada.

MGM and Boyd are co-owners of the Borgata Hotel and Casino in Atlantic City, which would provide both companies a way into the New Jersey online gambling market, which is restricting access to companies who have land-based operations.

MGM's D'Arrigo believes that if there are state compacts, Nevada could emerge a leader in the industry due to its long history of gambling regulation and proximity to huge states like California, which is contemplating online gambling.

(Reporting By Susan Zeidler; editing by Andrew Hay)

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