UPDATE 2-Ohio turns to racetrack slots to balance budget

* Deal addresses $3.2 billion budget gap

* Shares of MTR Gaming gain more than 50 percent

* Other companies could also benefit (Adds details, other stock impact)

LOS ANGELES, July 10 (Reuters) - Ohio Governor Ted Strickland and state lawmakers reached an agreement on Friday to help fill a $3.2 billion gap in the state's budget by allowing racetracks to install slot machines.

Shares of racetrack operator MTR Gaming Group Inc (MNTG.O), which had risen on earlier reports that Strickland was considering issuing an executive order authorizing the slots, ended the day with a gain of more than 50 percent.

"Under the bipartisan agreement, I will issue a directive instructing Ohio's lottery director to expeditiously take all necessary actions to implement video lottery terminals at Ohio racetracks," Strickland said in a statement.

He has said the plan to legalize video slots at the state's seven racetracks would raise about $933 million over the course of Ohio's two-year budget.

The final budget agreement "is not only balanced, but invests in education without raising taxes on Ohioans," Strickland said.

Ohio voters have repeatedly rejected efforts to allow casino gambling in the state -- most recently last year.

Shares of MTR Gaming, which operates a horse track in Columbus, Ohio, rose $1.17 to close at $3.48 on Nasdaq.

Other companies potentially benefiting from the expansion of gambling in Ohio include slot machine makers Bally Technologies Inc (BYI.N), WMS Industries (WMS.N) and International Game Technology (IGT.N).

Shares of Bally rose 3.5 percent, while WMS rose 4.2 percent and IGT rose 2.1 percent -- all on the New York Stock Exchange.

Casino operator Penn National Gaming Inc (PENN.O) would be able to add slots to its racetrack in Toledo, Ohio but would face increased competition for its largest riverboat in Lawrenceburg, Indiana, Brean Murray Carret analyst Ryan Worst said in a research report last month.

He also said Pinnacle Entertainment Inc (PNK.N) would be hurt by increased competition for its Belterra riverboat in Indiana.

Shares of Penn fell 1.9 percent on Nasdaq, while Pinnacle's shares ended the day on the NYSE with a gain of 0.5 percent. (Reporting by Deena Beasley; Editing by Tim Dobbyn)