(FORTUNE Magazine) – Better watch your wallet: One-armed bandits could be coming to your town, if they aren't there already. Slot machines, as well as other casino games, are springing up all over the country. Since Iowa first gave berth to riverboat casinos in 1989, five other states have okayed the idea and about a dozen more are mulling it over. With Indians running lucrative casinos in 15 states and lobbying hard to open tables in a handful more, it seems to be only a matter of time before nearly every state deals itself in. Says industry consultant Eugene Christiansen: ''Casino gambling is the last grossly undersupplied consumer product in the U.S. There's no end in sight to the expansion.'' Wall Street certainly thinks so. Investors have been in a kind of gambler's delirium, laying down big bets on every gaming company in sight. Stocks of the industry's five major companies have leaped 70% so far this year, beating out some 100 industry groups tracked by Dow Jones. Nearly a dozen casino-related IPOs, such as Argosy Gaming, which runs an Illinois riverboat, have been gobbled up in 1993. More companies are poised to go public in the coming months. Why not? Last year Americans lost $30 billion on legal betting, including $11 billion on lotteries, says Gaming & Wagering Business magazine. This was a threefold increase over 1982. In these times of tight state budgets, you can see why legislators might vote for this type of fund raiser. Only Utah and Hawaii outlaw gambling altogether. What the rest permit ranges from bingo to roulette, and provides licensing fees plus taxes that range from 6 1/4% of revenues in Nevada to 20% in Illinois. Indian casinos generally operate tax-free but pay the states a fee. Not everyone is amused. ''The country is flying blind,'' says William N. Thompson, a professor of public administration at the University of Nevada, Las Vegas, who studies gambling policy. ''State legislators think this is free money,'' says Thompson, ''but it's not free. It's just taken from other parts of the local economy.'' Up until recently, small industry startups have dominated the expansion of gambling outside of Las Vegas and Atlantic City. But, says Richard J. Byrne of Merrill Lynch, the big boys have seen the light. For instance, Promus Cos., which runs the Harrah's chain, is developing an enormous gambling hall in New Orleans. Bally Manufacturing is opening a ''Western-style'' saloon on the docks of Tunica, Mississippi, making what was once the nation's poorest county home to three floating casinos. Meantime, Indian reservations are raking it in. Foxwoods, run by the Mashantucket Pequot tribe of Connecticut, will pull down some $500 million in gaming revenue this year, more than the Taj Mahal in Atlantic City. An even surer sign of success: Frank Sinatra is up for a five-night gig this November.

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