The state's Gaming Control Board in Harrisburg approved a licence for PITG Gaming Majestic Star of Detroit over Isle of Capri and a third bidder, Forest City Enterprises.
"Obviously, we are very disappointed that the Isle of Capri was not awarded the slots licence," Penguins CEO Ken Sawyer said in a statement, which began by congratulating the winning bid.
The licence was critical to the club's survival in Pittsburgh as Isle of Capri had promised to spend US$290 million to build the Penguins an arena. The Penguins need a new rink to replace the 45-year-old Mellon Arena, the oldest facility in the NHL.
"Had Isle of Capri been selected, it would have ensured the long-term future of the Penguins in Pittsburgh and would have delivered a $1-billion development opportunity to the Lower Hill and Uptown," Sawyer said. "At this point, our franchise enters a period of uncertainty, with our lease at Mellon Arena set to expire this summer. We will re-evaluate all of our options before deciding on a course of action and making further comment."
The decision comes less than a week after a deal to sell the team to Canadian billionaire Jim Balsillie fell through.
NHL commissioner Gary Bettman painted a gloomy picture for Penguins fans.
"The decision by the gaming commission was terrible news for the Penguins, their fans and the NHL," Bettman said in a statement. "The future of this franchise in Pittsburgh is uncertain and the Penguins now will have to explore all other options, including possible relocation. The NHL will support the Penguins in their endeavours."
PITG Gaming Majestic Star said previously it would contribute some money for a new arena over 30 years under a so-called "Plan B" being proposed by city and county officials that would include public funds. But that plan also calls for the Penguins to help pay for the rink and neither team owner Mario Lemieux or Bettman are believed to be fond of that plan.
"I am committed to what we said we were going to do," Don H. Barden, the head of PITG Gaming, said after winning the bid. "We're going to fund $7.5 million a year for 30 years towards financing a new multipurpose arena."
He said he will meeting soon with Allegheny County executive Dan Onorato and Pittsburgh mayor Luke Ravenstahl to get the process moving.
"It will be the largest of our operations and we're going to put a lot of attention on this project," Barden said. "We're going to get it going right away."
It's been a bad week for the Penguins, whose sale to Balsillie fell through last Friday after he pulled the plug, uncomfortable with the NHL's list of conditions in the final sale agreement.
Balsillie, the co-chief executive officer of BlackBerry maker Research In Motion Ltd (TSX:RIM), says he's still interested in trying to purchase the team.
Balsillie didn't immediately return a phone call to his Waterloo, Ont., home from The Canadian Press.
Toronto brewery owner Frank D'Angelo officially declared his interest in the Penguins on Monday. And he said he's willing to build and pay for his own arena in Pittsburgh and commit to keeping the team there.
D'Angelo, whose bid for a CFL franchise in Ottawa was recently turned down, says he and billionaire partner Barry Sherman are teaming up to make an offer.
Dallas Mavericks owner Mark Cuban, a Pittsburgh native, is also believed to have contacted the league although it's not clear how serious he is about making a bid.