Senior underworld figure Charlie Abutbul was arrested by police on Sunday on suspicion of possession of firearms and gambling.
The arrest follows a police raid on the Royal casino in Netanya which is owned by Abutbul, and which uncovered a handgun, Channel 2 said.
Abutbul's attorneys said their client has denied all suspicions against him during questioning with detectives from the Serious and International Crimes elite police unit.
In July, Abutbul's nephew, organized crime boss Francois Abutbul, was shot dead by an assassin on a motorcycle at a gas station on Route 2 near Netanya.
The homicide is being investigated by the Serious and International Crimes unit.