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Japan has been the next great gambling market for about a decade now, and casino operators are jockeying their way to win a concession there. Companies like Wynn Resorts (NASDAQ:WYNN), Las Vegas Sands (NYSE:LVS), Melco Resorts (NASDAQ:MLCO), and MGM Resorts (NYSE:MGM) have said they're willing to spend as much as $10 billion to build a resort in the country just based on projections of a multibillion-dollar gambling market. 

But as Japanese regulators begin to finalize the rules that will regulate the casino industry, some in the financial community are concerned that the cost may be higher than most operators expected. And there are details investors should be a little worried about. 

Japan ups the price of admission

The rules governing Japan's casino bids aren't yet finalized, but some are already raising concerns. Fitch Ratings, who helps rate the debt of companies in the industry, has said that a 10-year license renewal process consideration may make it tough to invest the billions needed to build Japan's vision of a gambling haven. That's not a long license to generate a return on a very large investment, and casino operators likely want more assurance they'll have a long-term business. 

In Macao, initial concessions were 20 years, and Singapore granted exclusivity before other casinos would be allowed of 10 years, which was ultimately extended. 

Worse yet, even the $10 billion investment mark may underestimate what the price tag will be. Fitch also said the infrastructure, amenities, and other features required by the government could raise the price tag as high as $15 billion. That's a lot to invest, no matter the company. 

The upside for casino operators

For as much as a casino will cost, the opportunity to be one of three concessionaires is tremendous. Fitch estimates that gambling revenue could be $10 billion annually, topping the $6.6 billion the entire Las Vegas Strip generates. 

It's likely that a casino in Japan could generate well over $1 billion of EBITDA (a proxy for cash flow) annually, and given the price tag, that's the least investors should expect. 

MGM sets itself apart

As analysts try to figure out what the upside is of gambling in Japan, companies are jockeying for position. MGM Resorts, who was an early leader in the Osaka bid, seems to be pulling away from the competition there. Las Vegas Sands and Melco Resorts said they would focus on Tokyo and Yokohama, the two largest cities in Japan. 

That leaves MGM, Wynn Resorts (NASDAQ:WYNN), Galaxy Entertainment, and Genting Singapore in the running in Osaka. The competition is paring down, but given MGM's long-term focus on Osaka, I think it has a good chance of winning the right to build there. Now it's a matter of if that's a wise decision given the financial cost. 

In Tokyo and Yokohama, there's less of a frontrunner. The biggest casino companies in the world are all putting their best foot forward, but until the formal selection process is complete, we don't know who will win a bid there or what the cost is. 

A high-risk game

Casinos are used to having odds in their favor, but in Japan, there are a lot of unknowns. Companies are guessing on the market size, and they're grappling with the cost Japan will impose on winning a concession. There should be a little concern that the cost won't be worth the investment, especially if a multidecade concession doesn't come with the price of admission.