October 2, 2006

No More Online Gambling in the US?


Well, it looks like the nuclear option has hit. Online gambling will no longer be legal in the US. It is a sad day for gaming Americans. This new law, "the Unlawful Internet Gambling Enforcement Act of 2006", will have sever impacts on the gaming companies here in the US, and abroad, as all that revenue will either vanish, or go underground.

First off, it all went down under the guise of ammendments to a port security bill, and of course it happens just as congress is heading home for final campaigning for the mid terms. Slimy.

Yahoo News Had this report today:

Online gambling firms faced their biggest-ever crisis on Monday after U.S. Congress passed legislation to end Internet gaming there, threatening jobs and wiping 3.5 billion pounds ($6.5 billion) off company values.

Britain's PartyGaming Plc, operator of leading Internet poker site PartyPoker.com, and rivals Sportingbet and 888 Plc said they would likely pull out of the United States, their biggest source of revenue.

"This development is a significant setback for our company, our shareholders, our players and our industry," PartyGaming Chief Executive Mitch Garber said.

The House of Representatives and Senate unexpectedly approved a bill early on Saturday that would make it illegal for banks and credit-card companies to make payments to online gambling sites.

Read on for more from around the News Wires.

Casino City Times is reporting that already some companies are not taking US funds.

CryptoLogic Inc. (TSX: CRY)(NASDAQ: CRYP)(LSE: CRP), a leading software developer to the global Internet gaming industry, announced that effective immediately licensees of WagerLogic Limited, the company's licensing subsidiary, will not take wagers from U.S.-based players. This is a result of new legislation expected to be signed today by President Bush that prohibits financial transaction processing in the U.S. online gaming market. The company has spent five years preparing for this eventuality by shifting its revenue base to fast-growing European markets, and is positioned for long-term profitability and growth.

"Since 2001, CryptoLogic has been shifting its business to Europe, and our record revenue and earnings in 2005 and 2006 to date flow from our success in the markets that embrace Internet gaming," said Lewis Rose, CryptoLogic's President and CEO. "While the new U.S. developments will be a challenge for the whole industry, our company's diversification, strong balance sheet, thriving European customers and potential new business in emerging markets enable us to face the future with confidence."

With more than 70% of its licensees' revenue now coming from outside the U.S., CryptoLogic is one of the industry's most geographically diversified businesses. The company also enjoys a very strong balance sheet. At June 30, 2006, CryptoLogic had $126 million in cash, $91.7 million in net working capital and no long term debt. Based on historical results, the annualized impact on revenue of today's decision would have been approximately $30 million for the full year 2006, with an estimated effect on earnings of approximately 80% of that amount. In its remaining business, the company continues to maintain its corporate objective of growing revenue by 20%. Continued, strong organic growth, the launch of Playboy's non-U.S. facing Internet casino and Internet poker sites and potential signings of new licensees will help CryptoLogic in this goal.

On the evening of Friday, September 29, the U.S. Congress adopted the Unlawful Internet Gambling Enforcement Act of 2006, which prohibits financial transactions processing for certain types of Internet gaming. Certain types of gaming are exempt, including horse racing, state lotteries and intratribal transactions. The legislation addresses previous uncertainties in the law governing non-sports Internet gaming in the U.S.

And if you have any assets in any online casinos now, you may be stuck without them.

Gambling Planet has this story this afternoon:

Internet gambling firm 888 Holdings Plc is expected to freeze indefinitely business from U.S. customers on Monday after Washington moved to tighten its online gambling laws, the Financial Times said.

The company is thought to be preparing to issue a statement to the London Stock Exchange acknowledging that congressional approval of the U.S. bill last Friday would have a "material" negative impact on its trade, the newspaper reported, citing unnamed people close to 888.

A company spokesman was not immediately available for comment.

Rival gambling firm Sportingbet Plc was also believed to be preparing a statement for the stock exchange but is expected to wait to consider the actual effect on business, the FT reported.

The bill, a compromise between earlier versions passed by the House of Representatives and Senate, would make it illegal for banks and credit card companies to make payments to online gambling sites.

We're no lawers, but it seems to us that if you have anything in any online casino accounts, you'd better cash out now if you can, otherwise it may remain lost to you (if its not too late already).

A sad day indeed.

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Posted by Russell Miner at October 2, 2006 2:46 PM
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