The expansion is on hold until a Delaware chancery court rules on a year-old legal dispute among the SugarHouse owners.
This Thursday, a trial begins in a Wilmington courtroom before Vice Chancellor Donald F. Parsons Jr.
The core issue is how much say the local investors should get in big decisions, such as the scope and price of the proposed expansion.
Representatives for both sides declined to comment.
Local investors, led by Philadelphia lawyer Richard A. Sprague and auto magnate Robert M. Potamkin, argue that they should have a deciding vote.
They say it's in their contract with partnerships tied to Neil G. Bluhm, the Chicago billionaire who built and operates SugarHouse, and his associate Greg Carlin, chief executive officer of SugarHouse.
The Chicago partners frame this as a fight over money. From their point of view, the locals are trying to strong-arm them into halving a 25 percent dividend they are earning on their equity investment of $80 million.
They had asked for a summary judgment on the matter, but Parsons denied that request on June 13 in favor of a trial.
Court documents reveal a high-stakes tug-of-war over the city's first casino, the look and size of which has greatly changed since the group won a license in 2006.
Originally, SugarHouse was going to build a $725 million project with 3,000 slot machines.
But the economic downturn, plus political and neighborhood opposition to the project, forced the owners to downsize their plans.
State regulators agreed in 2009 to let them build the project in two phases.
The first phase, which cost $395 million, opened on Sept. 23, 2010. Today, SugarHouse has 1,602 slots and 54 table games.
Although that is dwarfed by nearby Parx in Bensalem, with 3,487 slots and 182 table games, SugarHouse draws the most revenue per table of any of the state's 11 casinos, according to monthly revenue figures from the Pennsylvania Gaming Control Board.
Phase Two, which was unveiled in the spring of 2011, would have increased the gaming area from 51,000 to 90,000 square feet. SugarHouse would add a poker room, between 600 and 800 slot machines, and 35 to 40 table games.
The combined price or the two phases of construction would be $537 million - far less than what was budgeted in 2006.
And here's where it gets tricky.
Local investors say that should trigger a special clause allowing for a "supermajority" vote on the proposed expansion.
City officials and gaming regulators are waiting to see what happens next.
"We hope they work out their internal issues," said Alan Greenberger, the city's deputy mayor for economic development.
Even if the legal matter is settled, the expansion still would need further approval before construction could begin.
The Army Corps of Engineers would have to sign off on one aspect of the project that would involve moving a combined sewer outflow pipe.
And the gaming board would have to approve the final details of any expansion, which has already gotten a green light from City Council and the city Planning Commission.
If the plan is substantially different from what was discussed in 2009, when the gaming board first approved a two-phase development, regulators may have to hold another round of public sessions, said Doug Harbach, a spokesman for the gaming board.
But there is no penalty for a delay, he added. When the gaming board approved the revised expansion plan in 2009, it was understood that SugarHouse would proceed "as market conditions allowed," Harbach said.
Contact Jennifer Lin at 215-854-5659 or email@example.com, or follow on Twitter @j_linq.