By the time the casino manager arrived on the scene, it was already nearly a riot.

On one side, a middle-aged woman, her arms and legs locked around a slot machine, had turned the smoky halls of Argentina's most important house of gaming into a wrestling ring. She was screaming about fraud and theft, egging on a crowd of weekend gamblers to hurl other, more ribald drunken insults at the casino staff. 

On the other side, a nervous group of floor supervisors stood stoically, trying to convince the woman, Victoria Baena, that the jackpot declared on her 10-cent bet was wildly unrealistic.

It was a software glitch, they pleaded, thousands of times more than any of slots in the casino were set to give out. Wouldn't she settle for the more reasonable payout they were offering, of 2,500 Argentine pesos (slightly less than $830 at the time)?

But Baena was having none of it.

Pointing to the red-and-white LCD display in front of her, she kept repeating she wanted her prize money -- 35,663,093.02 Argentine pesos (almost $12 million at the time), not a centavo more, not a centavo less.

That scene, in October of 2006, was the beginning of a case that dragged on for six years (in the end Baena settled for a lower amount than she was asking for). Yet, the incident -- fed by televised images of the offending slot machine being carted off the casino floor, teary interviews with Baena begging for the full payoff, and Argentineans' gut sense that the deck is always stacked in the casinos' favor -- never lost the public's rapt attention.

That's because Argentineans are passionate about gambling and the places where they put down their money hoping for a fat return. Many slot machine halls are open 24 hours a day and usually packed to the brim, even in the middle of the night.

So much so that the clean-up crews don't always get to sanitize the seats properly between player and player, said an Argentine gambling regulator.

There are literally dozens of land- and water-based casinos, betting shops, bingo centers, lotteries and horse tracks throughout the country for inveterate gamblers and would-be high rollers. Billions of dollars are spent each year on gambling in the country, a lot of it by poor and middle-class locals.

The Baena case had barely died down before the actions of another middle-aged woman (or at least rumors of her intent to take action) have tapped into the intense devotion that Argentineans have for gambling. Unfortunately for the casinos, it is not clear that the house will win this time.

That's because the figure causing the latest headache for Argentina's gaming industry is the country's President Cristina Fernández de Kirchner, who, according to recent media accounts and interviews with various government officials, is planning to nationalize the country's private gaming assets.

As word of this possibility spreads, Argentineans of all stripes are expressing their opinions, often forcefully, about whether this step would be good or bad for the average gambler. But it seems to hold nothing but trouble for Argentina's economy. Coming on the heels of Fernández's recent surprising takeover of energy giant YPF from the Spanish company Repsol, the reports are fraying investor nerves globally, causing a huge dip in confidence in Argentina and driving away foreign direct investment at a time the country is least able to afford it.

These rumors are feeding investor perception that the Argentinean government is unpredictable and their decisions are not always reasonable, said Manuel Bastian Herold, a Munich-based credit analyst for Italian bank UniCredit.

The Czar

Since the 1990s, when gambling became a profit-making industry in Argentina, the game -- so to speak -- has been dominated by four players. While all of them have a wide array of holdings, three of these operators have by and large steered clear of each other.

For example, Cirsa S.A., a Spanish firm that landed in the country in 1999, runs a series of casino boats anchored just meters away from the Casa Rosada, the presidential palace. Codere S.A., another Spanish firm, has a near-monopoly of 14 bingo halls in the suburban province of Buenos Aires, which surrounds the nation's capital but is a distinct legal entity with its own state government. Meanwhile, the Tabanellis, an old-guard aristocratic family behind a gaming juggernaut The Boldt Group, concentrate on online gambling, as well as providing support services -- printing, technology, and payments processing -- to state lotteries.

But this tidy ecosystem changed when Cristóbal López came to town.

Cristóbal López does not yield a centimeter of terrain. Never. Speaking with him is an exhausting task. Every word seems to lead to a clash. So begins a journalist's description of a rare interview with López from a March 2011 issue of Buenos Aires newspaper La Nación.

López's combativeness -- in the interview he called the reporter's paper contaminated and without merit -- is an object of fascination in the Argentine business media. To some, he exhibits the ornery cockiness of a brilliant self-made multi-billionaire. To others, he is just a crony capitalist who has become one of Argentina's richest men by being a behind-the-scenes pit bull for two consecutive presidents.

One of the top 20 largest magnates in the country, López has gone from being a provincial CEO in charge of a trucking company to a baron of business with holdings in oil wells, a recycling firm, real estate, hotels, racehorse husbandry, olive farms, a candy manufacturer, several newspapers and a television network.

López admits his friendship with Néstor Kirchner, the former president and deceased spouse of the current president, gave him a leg up in life. Their relationship goes back decades, but was made more public in 1998, when the country was in the midst of an economic crisis and Kirchner was governor of the rural province of Santa Cruz.

On behalf of Kirchner, who was trying to shore up support among local voters, López hired hundreds of unemployed and put them on the payroll in no-show jobs. Later, when Kirchner was running for president and was found to be unlawfully using the province's official jet to campaign, López reportedly provided Kirchner with planes of his own.

Before long, López used his friendship with Kirchner to muscle into the gaming industry. For starters, the president helped his friend get a franchise to operate a slot-machine hall within an existing Buenos Aires racetrack. And soon after, Kirchner apparently gave López the means to pivot into a partnership with Cirsa.

In late 2006, Kirchner sent López to arbitrate a dispute between Cirsa and the striking casino workers' union. Arriving in Argentina to negotiate,  Cirsa's top executives were arrested at the airport after their luggage was X-rayed by customs agents. The executives had said that they were carrying some Christmas presents, but their baggage was found to contain Caspian Sea caviar, $90-a-pound ham, French champagne and €500,000 in cash.

Many people believed that López instructed the executives to bring these items as bribes, then double-crossed them by tipping off the border police in order to increase his own leverage during later negotiations. To help get them off, López struck a deal with Cirsa to partner in a casino boat in the capital.

After López's agreement with Cirsa, he kept pushing steadily into other gambling operator's areas of influence, setting up a bingo hall in what used to be Codere's monopoly and creating an electronic gambling firm to compete with Boldt.

While these moves are being watched suspiciously, up to now the casino operators have kept quiet about their concerns, in large part because in Argentina there's plenty of gambling money to go around. For example, in 2011 Codere collected €376.9 (about $490), on an average daily basis, from every one of the 5,164 slot machines it operated in the country. That's over four times the $112.32 per day that the average slot machine in Las Vegas collected the same year, according to the Center for Gaming Research at the University of Nevada in Las Vegas. Other gambling operations in Argentina have had similar results.

The overall Argentinean economy has not fared quite so well recently under Fernández, who was first elected president in 2007 and reelected last year. Under term limits, she is barred from running for a third time in the 2015 election. After expanding by 8.9 percent in 2011, the Argentine economy growth has been virtually flat this year, according to most analyst reports. Moreover, a government effort to artificially peg the peso to a high range against the dollar has stoked inflation, which has translated into labor unrest and big losses in productivity as well as much higher loan costs for most businesses.

A Woman Scorned

If, sometime later this year, casino operators in Argentina learn that everything they own in the country has been put under government control, they could point to February 6 as the moment their troubles began. That day, Laura Muñoz, the wife of a Belgian businessman who had outbid gambling firm Boldt to acquire a printing press in 2010, denounced her estranged husband during a local radio program, asserting that he was a front for the Argentine government, especially Amado Boudou, the current vice-president and Fernández's right-hand man.

Boudou and Fernández tried to turn Muñoz' charges around by saying that the allegations against Boudou were secretly sponsored by Boldt, who hopes to reclaim the printing operation and bring down the current regime. In so doing, Boudou and Fernández spent the past few months demonizing the gambling industry in Argentina and pushing government regulators to tighten monitoring of the casinos. Everything is contaminated by politics, said a person at a federal gambling regulatory agency.

Some locals say that Fernández plans to announce a takeover of gambling assets only in federally controlled areas of Buenos Aires to stop the casinos from having to pay billions of dollars in back taxes to the city of Buenos Aires, as a court recently ordered. Although this ruling is being appealed, Fernández doesn't want this tax money to get in the hands of her political foe Mauricio Macri, the mayor of the city of Buenos Aires, who could use the cash to upgrade conditions, curry favor and win votes in the region. A similar logic is behind a rumor suggesting she will specifically target bingo halls, which will disproportionately hurt Codere and their current political protector, Daniel Scioli, the governor of Buenos Aires and a Fernández opponent.

Others believe that Fernández will only target foreign operators, clearing the slate for her late husband's pal Cristobal López to expand his control. But that assumes that the two are still friends. We do not know if the relationship is the same as it was with her husband, and that complicates the landscape, an executive at one of the gambling operators conceded.

But whatever way Fernández decides to play it, nationalizing gambling to essentially clean out the unsavory characters would fit her strategy of wrapping herself in the flag to stymie criticism of her economic stewardship, Fernández foes argue. In recent months, Fernández has used the assertion that she is protecting Argentina to justify restricting imports, break trade agreements and impose tighter capital controls. And in seizing control of YPF, the Argentine company controlled by the largest Spanish oil company, Repsol, Fernández portrayed the move as punishing Repsol for giving too little back to Argentina for the resources it tapped.

As hush-hush as Fernández has been on the issue of whether she plans to take over gaming, there are plenty of theories on both sides - including one that points out that the rumors cannot be trusted, because Clarín, an opposition newspaper, was the first to report the story. This idea holds that Clarín essentially made up the story to paint Fernández into a corner: if she doesn't nationalize gambling, she'd be failing to address an ongoing problem in Argentina that she has said needs to be more regulated; if she does claim gaming's assets, she could be accused of unfairly punishing private industry to get back at her opponents.

Asked about this scenario, Walter Martello, a state legislator for the province of Buenos Aires who has closely followed issues gaming issues said simply: The news media are also a power here.

Fleeing Investors

Whatever the rationale for the nationalization hubbub, the rumor itself persists. And it's being taken seriously by global investors. Since nationalization was first mentioned as a possibility, both Codere and Cirsa's bonds have sold off sharply. Codere's debt fared particularly badly: bonds maturing in 2015 that yielded 14 percent in early June are currently quoted at nearly 22 percent.

Codere especially wants to kill this rumor because it's got so much cash tied up [in Argentina], said Raymond Stotlemyer, a London-based fixed income analyst for French bank Crédit Agricole.  

Noting that other South America governments have assured foreign investors after Argentine's YPF gambit that nationalizing companies was not on their agendas, Stotlemyer added that the Argentine government should have really come out and said so also. If they nationalize one more thing, private investment will fly out of the whole continent.

Capital is already leaving Argentina. About $1.61 billion left the country in the first quarter of 2012, an exodus that was less than the $3.3 billion that fled in the prior quarter, but which likely would have been much worse if capital flight control measures had not been tightened at the end of 2011.

Indeed, attempting to curb that flight, Fernández's government has instituted strict U.S. dollar conversion and withdrawal limits, a flashback to a decade ago when similar capital control measures led to a massive devaluation of the currency, wiping out over 75 percent of the country's savings. These moves have led to the proliferation of underground banks, so-called 'cellars,' in which a U.S. dollar can be bought for 6 pesos, about 33 percent more than the official exchange rate.

The Argentine government has started tightening the screws and it's gotten ridiculous, said Juan Federico Fischer, a managing partner at the law firm of Fischer & Schickendantz, in neighboring Uruguay. You're starting to see people fed up with Argentina.

Fischer said that much of the money that in the past would have been invested in Buenos Aires has instead fled to safer, more politically stable environments in the region, like Uruguay, where privatization is not in the cards. This is especially true for Spanish investors who know the region well, Fischer noted.

Walter Martello, an opposition politician who is a member of the Buenos Aires state legislature and has written a book about the history of the gaming industry in Argentina, is a keen observer of gambling in Argentina and even he is befuddled by the nationalization rumors. While he has supported nationalization in the past, he says that it must be addressed logically and carefully in a way that puts asset forfeiture on the table only as a cudgel to establish a workable system, one that takes into account contractual rights while also recouping for the state a reasonable level of collections.

As for whether such a diligent and sensible approach is possible in the current political and economic environment in Argentina, Martello has five words for it:

I wouldn't bet on it.