October 4, 2006

More on the Reprecussions of the US ban on Online Gambling

Its been a couple of days now since the bomb was dropped on US online gambling. There are all sorts of stories floating about that indicate that the whole online gambling industry is reeling. One of the most telling bits we found was this from Gambling Planet

Internet gambling companies face a wave of consolidation in the wake of the US clampdown on online gaming, which could see American casinos and gambling businesses swooping for bargains in the sector, the heads of two of the biggest online gambling sites said on Monday.

Mitch Garber, chief executive of PartyGaming, and Gigi Levy, who takes over as chief of 888 Holdings this year, made their predictions as the sector felt the impact of the bill passed in the Senate on Friday making it illegal for banks and credit card companies to process online gaming payments from the US.

Investors wiped $7bn off the market value of what at the start of trading was an industry worth $12bn, as heavyweight internet gambling companies said they would suspend indefinitely their US operations.

Now thats a massive chunk of revenue gone. We have to believe that this money will not just vanish, but rather it will go underground. There will be a much seedier and less trustworthy structure that will fill in the vacuum left behind by these big pullouts.

As you can see in this NYTimes peice, the reason all of these mergers and acquisitions are possible, is because that law sent stocks falling and falling and falling for any companies involved with online gambling.

In addition MSNBC even has a story that indicated that there may be loopholes that render the act innefective in the end anyway!

Unlike the version that passed the House earlier this year, the approved legislation does not explicitly outlaw betting on online casino-style games, such as poker and blackjack. The bill does bar financial institutions from accepting "illegal" bets, leaving the question unanswered as to whether some forms of online gambling are permitted. To date, sports betting is one of the only forms of gambling explicitly outlawed in the act.

What a mess!

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Posted by Russell Miner at October 4, 2006 9:20 AM
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