Pokerstars' Bid to Buy Casino Could Signal Gambling Gold Rush

Online Gambling Moving Into Casino Business

"Pokerstars is indicative of this: that online giants aren't going to sit back and let U.S. (casino) companies eat their lunch. They built their industry and I don't think they're going to passively sit back and allow it to be acquired," Brennan said.

The American Gaming Association, the casino industry's main lobby, filed a brief opposing Pokerstars' application to buy and operate the New Jersey casino.

Frank Fahrenkopf, president and CEO of AGA, declined to comment on the brief, but insisted that the AGA supported the future of online gaming and would like to see the industry federally regulated.

He insisted that legalization of online gambling won't cut into the profits of casinos.

"We did some studies a few years ago and looked at the question of whether or not online poker would cannibalize our brick and mortar businesses, and we came to the conclusion that it would probably not be a cannibalization but a new profit center," Fahrenkopf said. "A lot of the people online tend to be young men, with a higher education and a little higher income than the average player, and these people historically have not gone to casinos."

In the race to serve both online and in-person gaming audiences, the odds favor the online gaming operators, according to Brennan. The casinos are typically enormous hotels that have struggled, especially in Atlantic City, in past years as casinos have cropped up in neighboring states.

"A lot of these online gaming companies have cash on hand, whereas you look at the biggest and best of the brick and mortar companies and they're challenged. They're saddled with debt. They don't have a lot of cash on hand," Brennan said.

Still, as the companies adapt to the changing marketplace, both the brick-and-mortar shops and the web-based businesses could benefit, he said.

"Brick and mortar casinos are not just going to drop off the face of the earth. People are not playing at the same stakes online as they are in casinos. It's much smaller stakes," Brennan said. "The world leading poker companies, over 90 percent of users are playing at a penny or a dollar per hand. You can't sit down at table in Atlantic City or Las Vegas for those kind of table stakes. It seems like a fantastic opportunity to start grooming those players to take a visit to Atlantic City or Vegas."

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