U.S. President signs anti-online gambling bill into law
14.10.2006Following on from our news flash on this watershed event for the online gambling industry, the anti-online gambling measure attached to the primary US port security bill was signed into US law at mid-morning this week on an appropriate enough date of Friday 13th.
Amid all the political rhetoric and backslapping at the signing ceremony on the Safe Port Act, attended by the main facilitator of the gambling measure, Sen. Bill Frist, there was no comment on the online gambling attachment, a point not missed by the press.
Subsequent mainstreet media reportage has been significant and generally pessimistic, largely predicting the end of the industry from a US perspective.
The passing of the Unlawful Internet Gambling Enforcement Act as a last-minute adjunct to the Safe Port Act sparked a stream of announcements by London-listed operators confirming the sale or closure of their US- facing operations, while World Gaming collapsed into administration.
Sportingbet and Leisure & Gaming both announced the sale of their US-facing operations for nominal sums, while Excapsa Software confirmed the disposal of all its operating assets for $130 million (GBP 70 million) and its intention to return the cash to investors and cancel its AIM quote (see previous InfoPowa reports).
Excapsa sold its wholly owned subsidiaries Game Theory Holdings and Excapsa Services. They have been sold to Malta-based Blast Off Limited, a privately owned licensee of the Excapsa network. The consideration is to be spread over a period of five and a half years.
Sportingbet, which derives almost two thirds of its business from America, announced the sale of Sportsbook.com, its US-facing sports betting and casino business, to Jazette Enterprises, a new offshore vehicle set up with Sportsbook management.
To avoid any accusation that it is profiting from an illegal business, Sportingbet has sold out for just $1, although it has also offloaded GBP 13.2 million of liabilities and saved on redundancy and closure costs of about $14 million. It has closed its Paradise Poker business to US residents (see previous InfoPowa reports).
Sportingbet is expected to make losses of more than GBP 300 million in the current financial year after it is forced to write off a string of now almost worthless US acquisitions following a clampdown on unlicensed internet betting transactions by American legislators. The group's Paradise Poker business, the third largest poker site in the US, yesterday closed to US customers with immediate effect - wiping out about two-thirds of divisional revenues at a stroke.
Andy McIver, the chief executive-designate, said that he was "saddened to have to dispose of such a fantastic business", but was confident that Sportingbet could rebuild its position by developing its European and Australian sports and casino businesses and the non-US business of Paradise Poker.
PartyGaming, the world's biggest internet gambling operator, confirmed that it has suspended all "real money activities to customers located in the US with immediate effect", but would still make its free-to-play websites available to Americans.
Leisure & Gaming said yesterday that it had agreed to sell its US websites to Alistair Assheton, its former chief executive, for only $1, thus saving about $6 million in closure costs. Although it asked for trading in its shares to be suspended, it will continue running its UK and European operations and said that it believed it was "in a position to meet its outstanding commitments to creditors".
By contrast, World Gaming, which a few weeks ago was near to clinching a GBP 56.6 million takeover by Sportingbet, announced the appointment of administrators from UHY Hacker Young as a result of the US ban.
Empire Online said that it had terminated its US operations, accounting for 65 percent of its revenues, with immediate effect, but expected to achieve positive earnings in 2007. It still intends to pay its recently announced interim dividend, and has a large warchest from the sale of Empire Poker to Party Gaming some months ago.
Empire said that it planned to develop its non-US operations while "leveraging its expertise in online marketing to other sectors in which it has not previously been involved".
One internet gambling executive described the US ban as "corporate terrorism", adding that it would merely drive the business underground. He said: "The reason why everyone has stopped today is fear - fear that, in the total absence of support from the UK Government, who have been breathtakingly silent on this issue, directors ran the very real risk of being extradited on trumped-up money-laundering charges."
"Today is a dark day for the great American game of poker," said Michael Bolcerek, president of the Poker Players Alliance, a grassroots advocacy organisation of more than 110 000 poker enthusiasts. "Twenty-three million Americans who play the game online will effectively be denied the ability to enjoy this popular form of entertainment, even in the privacy of their own homes."
Bolcerek added, "Congress had a real opportunity to create good public policy by licensing, regulating and taxing Internet poker. Yet, they chose prohibition. This decision will prove to be detrimental in the long-run and leaves more than $4 billion in annual tax revenue on the table."
PokerStars announced it would continue operating as it considered that the US anti-online gaming legislation did not apply to online poker, as it is a game of skill. In a statement, PokerStars said the Unlawful Internet Gambling Enforcement Act's provisions did "not alter the US legal situation with respect to online poker. Our business continues as before, open to players worldwide including the US. It is important to emphasise that the act does not in any way prohibit you from playing online poker. PokerStars believes that poker is a game of skill".
