The Digital Skeptic: Don't Bet on Zynga's Gambling Ambitions

Tickers in this article: ZNGA

NEW YORK ( TheStreet) -- Keith Whyte figures that social gaming giants such as Zynga (ZNGA) are going to have some, uh ... issues entering the world of traditional for-pay gambling.

"The line between social gaming and online gambling is a big step," Whyte explained to me in one of several long conversations we've had about gambling -- or gaming as it's called in the industry. "It's not what the traditional Zynga user is going to be used to seeing."

Whyte knows a thing or two about the challenges for-pay gaming presents. He is the executive director of the National Council on Problem Gambling , a Washington, D.C., trade and social action group. Sponsored mostly by gaming industry giants, the council conducts outreach, offers gaming addiction support and studies industry trends.

Whyte was doing some serious barnstorming in anticipation of the recent National Problem Gambling Awareness Week. He is the in-demand speaker for industry giants including MGM (MGM) , Caesars (CZR) , Wynn (WYNN) and others through the challenges posed by the evolution of gaming technology, from our puritan founders' love/hate relationship with risk, to betting telegraph wires that were the foundation of organized crime, to the dawn of online gaming -- legal and illegal.

"This industry is facing this same dramatic shift it saw back with the invention of the live pocket lipstick camera for televised poker tournaments," Whyte said. By showing an audience the players' cards, he said, formerly boring Texas hold 'em tournaments became must-see TV.

The game-changing event that Whyte is talking about is the "Web 2.0-ization" of online gambling. As investors have been buzzing about, social gaming services such as Zynga are expected to move into full-on, for-money online gambling.

A very nice Zynga spokewoman, Kelly Pakula Kunz, declined to comment. But it doesn't take too much digging to see how central so-called real-money gaming -- or RMG -- is to a company like Zynga.When I clicked on its recent SEC filings I found the term RMG 29 times, including a bolded reference as a strategic goal.

The company is expected to begin real-money gambling with a U.K. partner called Bwin.party later this year. That will continue the transition to domestic gaming operator it began in December, when it applied for a Preliminary Finding of Suitability from the Nevada Gaming Control Board.

"Only casinos in Nevada can have a license to operate an iGaming website, but Zynga can be a supplier," Jennifer Webb, a regulatory and legislative manager for Washington, D.C. gaming analysis firm Gambling Compliance said via email. "So similar to what they are doing in the U.K., Zynga would need to partner with a Nevada company. Zynga would also need to partner in New Jersey, should they be interested in entering the market there."