Black Monday for Internet Gaming

[gmoney1]

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Gmoney

From Ascend Gaming Headlines


BLACK MONDAY FOR INTERNET GAMBLING


The hammering the online sector has been taking from the U.S. government
reached a crescendo on Monday when Internet gambling stocks crashed to the
tune of about US$7 billion on news that Congress has forbid financial
institutions in the United States from processing gambling transactions
over the Web.

Attached to a port security bill, the "Safe Port Act," which was
politically impossible to oppose, the prohibition codifies a ban passed as
separate legislation in the House of Representatives back in July. It is
expected to reach President Bush's desk to be signed into law with the
port bill in the next couple of weeks.

A disaster for the online industry, certainly in the short term, the bill
was a stunning victory for Republican lawmakers, who trumpeted it as a key
plank in the party's expansive national moral agenda. The GOP faces
congressional elections in November it must win to maintain its dominance
of the legislative branch.

Senate Majority Leader Bill Frist labeled gambling "a serious addiction
that undermines the family, dashes dreams and frays the fabric of
society."

"The bottom line is simple: internet gambling is illegal," said the
Tennessee Republican, whose support was crucial to maneuvering the bill
through the upper house in the waning days of September as lawmakers
hurried to recess for the fall campaigning season. "Although we can't
monitor every online gambler or regulate offshore gambling," he said, "we
can police the financial institutions that disregard our laws."

Depending on how it is enforced, the ban, which prohibits the use of
credit cards, electronic funds transfers, checks and other financial
instruments in Internet gambling transactions, effectively closes down the
sector's largest single market - good for at least half of the $12 billion
in online revenues worldwide - and the mainstay of publicly traded giants
like Party Gaming, Sportingbet and 888 Holdings, all of whose shares
plummeted in a massive sell-off on the London Stock Exchange.

"The new legislation ... will make it practically impossible to provide
U.S. residents with access to real money poker and other real money gaming
sites," Party said in a statement issued Monday. CEO Mitch Garber called
the bill a "significant setback for our company, our shareholders, our
players and our industry." The Gibraltar-based leader in online poker said
it will "suspend" its U.S. business if the bill is signed into law.

Party (PRTY.L), which had traded as high as 158 pence per share over the
last year, hit a historic low of 40.25 on Monday and closed at 46.5, a
drop of 56 percent.

Sportingbet (SBT.L) bottomed at 49.75p before rallying to 66p, a drop of
64 percent. The stock had traded as high as 452p over the last year.

Headquartered in London and currently generating 62 percent of its
revenues from Americans, mostly through bookmaking and its Paradise Poker
portal, Sportingbet is taking a wait-and-see stance it said will depend
largely on how its "non-U.S. international banking partners" interpret the
bill.

888 Holdings, based in Gibraltar, held a conference call with analysts on
Monday to announce the suspension of its U.S. business once the bill
becomes law. "The board [of directors] will continue to seek clarification
of the overall U.S. legal position to determine whether and to what
extent, if any, resumption of participation by U.S. customers is
feasible," the company said in a statement. The stock (888.L) clawed its
way back on Monday to 108.25p, a decline of 26 percent, from a low of
73.25p. The shares once had traded at 262.75p.

Austria's Bwin, which had two top executives detained in France last month
in a probe into illegal Internet gambling and has run into similar
problems in Germany, fell 24 percent.

Major supporting companies also were hit hard. UK-based payment processor
NETeller (NLR.L) fell to 140, shedding 215p. Software giant Playtech
(PTEC.L) fell more than 41 percent to 145.75p.

There has been an outcry over the fact that the ban exempts U.S.-based
horse racing, state-sponsored lotteries and tribal gambling, and the
Caribbean nation of Antigua and Barbuda, a major offshore gambling locale,
continues to push for enforcement of a WTO ruling that Washington's
anti-Internet stand violates free trade agreements.

Elsewhere, though, the mood across the sector, once so dismissive and even
contemptuous of U.S. gambling policy, now appears to be one of
resignation.

"We will step up a gear in terms of looking at the rest of the world,"
said 888 Chief Executive John Anderson. "It's a devastating loss."

The turning point came over the summer, days after the House passed its
ban, when then-BetonSports Chief Executive David Carruthers, a British
citizen and one of the most vocal opponents of U.S. Internet gambling
policy, was arrested in Dallas by agents of the FBI and the U.S. Internal
Revenue Service and charged with illegal gambling, racketeering and tax
evasion. Carruthers spent two weeks in jail before his release on $1
million bond and is forbidden from leaving the U.S. pending a trial on the
charges. BetonSports was slapped with a temporary restraining order by a
federal judge and forced to close its U.S. business, which accounted for
more than 80 percent of its revenues. The company's once high-flying stock
has been suspended from trading since mid-July.

The second blow came early in September when former Sportingbet Chairman
Peter Dicks, also a British citizen, was arrested at Kennedy Airport in
New York on a warrant issued by the state of Louisiana, which specifically
prohibits Internet gambling. Dicks was permitted to return to the UK to
fight Louisiana's determination to extradite him to the state to face
charges. It has been reported that several online executives have been
targeted in sealed warrants the state issued back in May.

Dicks' arrest was followed by Anderson's announcement that he is resigning
as head of 888 at the end of this year. Online platform provider World
Gaming has since lost its chairman, James Grossman, a U.S. citizen, and a
director, Clare Roberts, a Caribbean resident, both of whom resigned.

The bill faces complex enforcement issues, however. Banks and financial
institutions have 270 days after the bill becomes law to establish
procedures and processes to identify and block gambling transactions,
which will involve special coding and potentially can be evaded through
third-party payment providers, overseas banks or possibly through direct
deposits to offshore gambling portals.

"The bill most definitely isn't air tight," said Edward Kane, a consultant
to the World Bank. "For a start, it doesn't impose the liability on the
gambler or the recipient, just the financial institution."

U.S. banks will have little choice but to cooperate with U.S. Treasury and
federal banking authorities on enforcement, but the influential
Independent Community Bankers of America, a trade group representing 95
percent of the country's banks, said it will push for changes to the
legislation.

- From Staff Reports

[ChubNut]

If I ever have the opportunity I will be voting for whoever is opposing Billdo Frist!!!!!!!!!!!!! These "moral policemen" make me sick to my stomach!