Fear and loathing in Barcelona

17 October 2006

Fear of indictments and extradition to the U.S. to face criminal charges over online gambling are driving many online casinos out of the U.S. market.

More than 350 sites have stopped accepting American bets since Bush signed the Unlawful Internet Gambling Enforcement Act into law Friday.

PartyGaming, whose initial public offering on the London Stock Exchange earned the company a valuation of $9 billion, believes the new legislation has sufficiently closed gaps in U.S. online gambling law to the extent that responsible public companies are no longer able to operate.

"I think it is a very serious criminal law and we're taking it very seriously," said PartyGaming's CEO Mitch Garber at the European I-Gaming Congress in Barcelona last week.

Garber explained that online gambling companies have always been able to maintain that a wager takes place wherever the gaming company's computer servers are located, which in the case of PartyGaming would be in Gibraltar. Garber says the new law takes away gaming companies' ability to argue that.

"I think it's brave for private companies not to think they won't be next to be indicted, arrested or pursued," he added.

British attorney Mark Spragg said violating the new law would amount to "extradition on demand."

Most of PartyGaming's publicy-traded rivals, including Sportingbet, Leisure & Gaming and 888 have stopped taking action from American players.

But private gaming companies like PokerStars are looking at this as an opportunity to gain American players.

"PokerStars has received extensive expert advice from within and outside the U.S. which concluded that these provisions do not alter the U.S. legal situation with respect to online poker," said the company in a statement. "Furthermore it is important to emphasize that the act does not in any way prohibit you from playing online poker.

"Therefore, our business continues as before - open to players worldwide including the US. You may play on our site as you did prior to the Act."

But Garber thinks private companies will eventually run into trouble.

"Some people think players will just run to the other side (private companies) -- (but) they won't," Garber said. "Payments will be difficult. For a few weeks it may seem like Christmas, but I think Christmas will end fairly quickly."


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