The news, in case you missed it, came last Friday when a company called 888 confirmed it will begin operating online poker games as soon as May alongside established casinos like Treasure Island and Caesars. The move comes in response to the federal government’s decision in 2011 that online gambling is no longer illegal if states explicitly permit it; Nevada, New Jersey and Delaware have so far passed laws to allow it.

So why is the 888 news not a big deal? According to a source who works in the gambling industry, 888′s opportunity comes with two major strings attached: it is limited to players physically in the state of Nevada and it only covers poker. The second condition is important because poker depends on player liquidity, which means it is less lucrative for the house than games like roulette or slots.

The source, who did not want to be identified, added that the online gambling industry is focusing instead on developments in New Jersey which has a much larger population (8.8M versus 2.7M in Nevada) and where the state law permits all casino floor games, not just poker.

In the bigger picture, even New Jersey is unlikely to be a game changer given that online gaming companies still have to cater to players on a state by state basis.

“It’s like taking the stock exchange and dividing it by 50. You have to ring fence players, and then account for whether the legal age is 18 or 21,” said the source, adding that the industry is crossing their fingers for a big state to come on board. “If Texas or California falls, that would be a more interesting thing.”

The online gaming industry, which was chased out of the United States in 2006, is also hoping for a bigger breakthrough in the form of new federal legislation that would establish unified rules and protocols across the country.

The outcome is important because potentially hundreds of millions of dollars are at stake for online gaming giants like Bwin that currently operate in Britain and elsewhere, and for fading social gaming sites like Zynga that are desperate for a new revenue stream. Finally, casino centers like Atlantic City are desperate to get a piece of the online action to make up for business they’ve lost to other states and venues.

(Image by  Doug Stevensvia Shutterstock)

According to CEO Brandon Ramsey, a former engineer at Yahoo and Zynga, Fanhood is aimed at the millions of Americans who make casual sports bets with friends for fun and bragging rights. He claims the site, which relies on Facebook’s platform, has 50,000 active users who can use virtual currency tokens to bet on everything from the Superbowl to NHL hockey games.

“It’s the same kind of psychology as taking $5 from a friend,” said Ramsey, claiming that Fanhood’s message boards and ongoing tallies of bet outcomes will keep users coming back. He adds virtual currency sales can sustain Fanhood because, unlike social games like Farmville, it doesn’t need fresh content — the sports matches supply that.

While Fanhood may succeed with virtual betting and sports chatter (much like the thriving fantasy sports industry), a big payoff would come through real money betting — a New York Times report pegged online betting as worth between $6 and $100 billion. But, for sports, this is a longshot at best.

Like Zynga Poker, Fanhood is only legal because players can’t cash out. If they could, these sites would be violating federal laws that forbid online betting unless states permit it.

In recent months, the prospects for social gaming companies have brightened as Nevada, New Jersey and Delaware have legalized online gambling. The process, however, is far from smooth sailing. Companies still must navigate established casino interests and, in the case of poker, assemble a critical mass of players (you can only gamble across state lines if all states involved permit it).

The legal challenge is even bigger when it comes to sports betting. According to Jim Gatto, a lawyer who specializes in gambling issues, the federal government deliberately excluded sports when they loosened online gambling rules in 2011. The reason, he said, is that sports depend on human action for the result — meaning there is an incentive to fix the results when there’s money on the outcome (history, including the NBA, shows he’s right).

This means Fanhood and other social sports betting sites will have to be content with virtual currency for the foreseeable future. There is also a chance too, of course, that a casino or other large gambling company will acquire them in the hopes of luring casual sports betters to a gambling site.

(Image by Jerry Sharp via Shutterstock)

Nevada’s governor signed the law on Thursday with bipartisan support and described it as a “new frontier” for the gambling industry. The law came about after the federal government in late 2011 decided to change its policy and permit online gambling to take place in states that explicitly permit it.

The new policy is significant in light of research that predicts online gambling will be worth $100 billion worldwide on mobile devices alone by 2017. This potential market has attracted the established casino industry as well as tech companies that are vying to make gambling games or process back-end betting operations.

The new U.S. gambling rules are also a potential lifeline to social game maker Zynga which has seen its titles like Farmville and Mafia Wars stutter. And since being cast adrift by Facebook last year, Zynga has seen its shares fall around 80 percent.

The Nevada law, however, is unlikely to change Zynga’s fortunes anytime soon as it only applies to internet users in the state. The law is also primarily intended not to help social gaming sites but to ensure that Vegas casinos have a first-mover advantage in providing operational support when — and if — other states follow suit. As the Las Vegas Review-Journal reports, the Nevada law is written to keep out companies that already have existing player data. The story in question refers to “illegal operations” and those who “operated online gaming with U.S. patrons” — it’s unclear if this refers to organizations like Full Tilt Poker who broke the law in the past or to any company with gaming data.

The upshot is that the U.S. will, at best, have a patchwork of states in the foreseeable future where online gambling is permitted. If big states sit it out, it will not be easy for companies to guarantee that online poker tables are full. It also means operational headaches and potential criminal penalties for the game makers which must ensure, for example, that a player in Colorado doesn’t slip into a Nevada-based poker game.

The bottom line is that full-scale online gambling is still far on the horizon as the U.S. regulatory process shakes out. In the meantime, the winners and losers among Zynga and other tech companies like Big Fish are likely to be determined in the U.K. and elsewhere.

This story was updated at 12pm PT to clarify how the law may favor Nevada companies.

(Image by Beto Chagas via Shutterstock)

It also unveiled the unit’s first game, the literary-themed Living Classics, which debuted on Facebook Monday. 

“Amazon Game Studios is exactly what it sounds like: a new team at Amazon that’s focused on creating innovative, fun and well-crafted games,” a company announcement states.

The statement adds: “Why is Amazon making social games, you ask? Good question! We know that many Amazon customers enjoy playing games — including free-to-play social games — and thanks to Amazon’s know-how, we believe we can deliver a great, accessible gaming experience that gamers and our customers can play any time.”

Amazon’s creation of the San Francisco-based social-gaming unit comes as the social gaming market’s key incumbent, Zynga, has experienced investor revolt. Zynga shares finished trading on the Nasdaq Monday at $2.94, falling from a high of $14.69 a share in March. [Editor note: an earlier version of this story briefly listed the share price high as $4.69. We regret the error]

Also read: Zynga on its mobile plans – “We are working on it”

The jury remains out as to whether developing games subject to the whims of a social media giant like Facebook is a viable business model (Zynga’s over-reliance on exposure through Facebook is a big source of its present woes). Then again, Seattle-based Amazon has a more diversified business strategy than Zynga. Producing social games will serve Amazon’s Kindle tablet efforts, for example, in the same way that self-publishing affordable e-books achieves that goal.

As for Living Classics, the game revolves around three foxes who get lost wandering around illustrations tied to children’s book classics like Alice in Wonderland, The Wizard of Oz and King Arthur. Players seek to re-unite the fox family by identifying “moving objects.” And they can, of course, visit with friends and share rewards earned during game play.

Here’s a trailer for the game:

The Zynga Serve Reward program will also eventually involve turning Zynga titles into offers platforms, allowing brands to insert deals into games that can be saved to a Serve account and redeemed using Serve cards. The purchases of specific offers will unlock more virtual currency in Zynga games, potentially creating a virtuous cycle for both American Express and Zynga.

The timing of the branded offers is still yet to be determined. But for now, users can start to earn Farm Cash money in Farmville by registering for the Zynga Serve Rewards program and getting a co-branded prepaid card in the mail. Users can also earn in-game money by connecting a funding source to their card and activating it. Only the first five purchases of $25 or more on the rewards card will earn virtual currency.

Other Zynga titles including CastleVille and CityVille will also soon be integrated into the Zynga Serve Reward program. Users will be able to track their rewards through an in-game dashboard and also through their Serve mobile app.

Dan Schulman, President of Enterprise Growth for American Express, told me in an interview that this is the first rewards partnership for Serve and the deepest Zynga has allowed a partner into one of its games.  He said the partnership allows Zynga and American Express to give social gamers a richer experience and it allows Zynga to become a starting point for offers, with American Express Serve helping close the loop on redemptions.

“We’re seeing a tremendous amount of customers in our target market spending time on these (social gaming) platforms. If we can integrate and make their lives easier and customize things like offers and deals and move money back and forth in a social way, that’s tremendously powerful,” Schulman said.

This is another example of how American Express is trying to be aggressive using social media to keep its business relevant to users. It’s been working with Twitter, Foursquare and Facebook to distribute offers that can be saved to their American Express card. And it’s growing its presence on Facebook, including a Serve Facebook app that allows friends to pay each other.

I think the partnership makes a lot of sense, and could give American Express another way to reach younger users. And for Zynga, it’s another way to drive more usage and it builds on other recent offline rewards promotions. In March, for example, Zynga partnered with Frito Lay to put codes in specially marked bags of chips that would unlock certain virtual goods inside games. If it can expand on this relationship with American Express, it can show how it can make more money off its more than 65 million users.

Tylted: Social and casual games company Tylted has made several additions to its management team: Steven Van Blarcom as EVP, Stellah De Ville as creative director, David Waldman in the strategic business development role, Wonny Lee as director of marketing, and Christian Montoya as producer. The new hires are part of a major expansion that includes the opening of a new corporate headquarters in Manhattan’s Silicon Alley.

Van Blarcom previously held executive positions at Source Media, AOL Time Warner and Clear Channel. De Ville most recently helped develop the iHeartRadio app. Waldman comes from entertainment studios like Madwood Studios, Worldwide Biggies and A&E Television Networks International. Lee previously was game monetization manager at Gameloft, and Montoya was VP of product for OMGPOP.

XING AG: Thomas Vollmoeller will be joining XING AG’s board of directors effective August 15. He will take on the role as CEO in January 2013, when current CEO Stefan Groß-Selbeck’s contract expires. Currently, Vollmoeller is acting CEO of the Swiss-based company Valora Holding AG. He joined the Valora Group in 2008.

Future Publishing: The publisher does a reorg of its entertainment group: Don Ditri becomes head of commercial development for entertainment, focusing on business development and forming partnerships. He’ll relinquish publishing responsibilities for CVG and GamesRadar UK. Clair Porteous is now head of digital development for entertainment, focusing on the games space and relinquishing publishing responsibilities for the film group. Lee Nutter continues as publisher of the Nintendo titles and Richard Keith continues as publisher for PCGamer, Edge and the Xbox brands.

mDialog: Jeff Clark has been appointed chief revenue officer of the video stream solutions provider. In this role, he will open the U.S. headquarters in San Francisco, as well as expand the customer base. No stranger to the media and technology sectors, Clark was most recently VP and GM of CBS Interactive’s entertainment division.

Telegraph Media Group: Julian Shambles has been promoted to digital product director from digital operations director. He first joined Telegraph in 2006 as head of online operations. Prior to this, he was managing director at Rightmove.co.uk.

In a series of lawsuits filed in San Diego federal court, Gametek LLC asked a judge to rule that the gaming companies are infringing US Patent No. 7076445. As is typical, the lawsuit uses complicated jargon to describe the patent:

The various claims of the ’445 patent cover, inter alia, a method of managing a game comprising displaying a plurality of game objects, determining if the user has sufficient consideration to purchase a game object, presenting an offer to purchase the game object dependent upon parameters comprising the tracked activity of the user and the indication that the user has sufficient consideration, permitting the user to purchase the game object without interrupting the game, supplying the purchased game object to the user without interrupting the game, and incorporating the game object into the game

.

In plain English, though, the patent would seem to cover the common practice of using virtual currency to obtain items in a game. A patent application was filed in 2000 and the patent itself was granted in 2006.

Last year, the patent was assigned to Theados Corporation, a Maryland firm serving video game developers and building “the world’s first revenue operating system.” The firm in turn transferred the patent to a California shell company called Gametek LLC which is acting as a vehicle for the lawsuits.

The lawsuits list a who’s who of the social gaming world, including Six Waves, Crowdstar, Rock You, Electronic Arts (NSDQ: ERTS) and Funzio.

The nature of the lawsuit reflects an ongoing trend in which non-practicing entities, known pejoratively as “patent trolls,” make a business of acquiring patents and suing companies engaged in real businesses.

While Congress passed patent reform legislation last year that was intended to mitigate the patent troll problem, the new law largely affects only newly granted patents. In the meantime, there has been an uptick of troll suits as billionaire funds invest in the lawsuits. The Wall Street Journal (NSDQ: NWS) reported earlier this year that some of the country’s top patent lawyers are quitting their firms to become trolls.

A sample complaint from Gametek is below.

Gametek Uses Social Gaming Industry