New gaming facilities could place Ohio among the top 10 commercial gaming jurisdictions in the U.S. next year, Moody's Investors Service says in a report, "Ohio Scores Early Win From Its Bet on Casinos."

Revenues from gaming are expected to be in the range of $1.2 billion to $1.5 billion in 2013 as more facilities closer to home draw Ohioans to the slots and table games.

"Three casinos and a racino have opened in Ohio since May this year, introducing a large new gaming jurisdiction to the Midwest," says analyst and author of the report John Zhao. Within the next two years, he adds, the state could have up to four land-based casinos and seven racetracks with video lottery terminals. Ohio has allowed casino gambling since last spring.

"Casinos in neighboring states that were previously the nearest destination for gamblers from Ohio stand to lose a significant amount of cross-border traffic," Zhao notes. Riverboat casino operators in eastern Indiana are particularly exposed, as they draw heavily from Ohio and face considerable competition in their home state, he says, while operators in West Virginia will lose customers to new facilities in Cleveland and Columbus at the same time they face strong competition from Pittsburgh.

Among the companies that are most exposed are MTR Gaming Group Inc., which operates in West Virginia and western Pennsylvania. While it has benefited from its new Scioto Downs racino in Columbus, that now faces competition from Penn National Gaming Inc.'s new casino in that city, while other operators are expected to open two new racinos in Cleveland.

Pinnacle Entertainment Inc. is exposed through its riverboat casino in Indiana, but its planned racino near Cincinnati should help soften the impact.

"The early movers will be the big winners," Zhao says. "Early entrants ROC Finance LLC and Penn National stand to gain the most from the surge of new gaming revenue in Ohio as they build both casinos and racinos in the state's largest cities." And the biggest risk for those companies is cannibalization and competition from more new gambling facilities.

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