Gambling bill smuggled in through ports act

A long-awaited law making online gambling illegal in the US was passed by the Senate on Friday night. The bill will become law when signed by the US President.

The bill had already passed through the House of Representatives but was not thought likely to be approved by the Senate. The Republican party, which currently has a majority in both houses, attempted last week to have the legislation attached to a defence-related bill which was certain to pass.

That attempt was rebuffed, but late on Friday the party managed to attach the new legislation to another unrelated bill, one which strengthens port security. Democrats accused Republicans of forcing through the law quickly in order to garner support ahead of congressional elections on 7th November.

The news has had a major impact on online gaming companies, many of them British. 888 Plc and PartyGaming have said that they will cease all operations in the US for the foreseeable future. Other companies, such as PartyGaming and PartyPoker, said that they are likely to pull out of the US.

"Whilst suspension of US activities will have a material adverse impact on results for this year and beyond, the company has significant cash resources which are more than adequate to continue its operations and further develop its business," said the 888 statement.

Shares in online gambling companies plummeted on the news. PartyGaming's shares fell by 59% in value over the weekend while 888's fell by 48%.

The law makes it illegal for credit card companies to process payments for online gambling relating to US residents. Called the Safe Port Act, it contains a number of provisions known as the Unlawful Internet Gambling Enforcement Act.

"After taking extensive legal advice, the Board of PartyGaming Plc has concluded that the new legislation, if signed into law, will make it practically impossible to provide US residents with access to its real money poker and other real money gaming sites," said a statement from PartyGaming. "As a result of this development, the Board of PartyGaming has determined that if the President signs the Act into law, the Company will suspend all real money gaming business with US residents, and such suspension will continue indefinitely, subject to clarification of the interpretation and enforcement of US law and the impact on financial institutions of this and other related legislation."

The US is a vital market for these companies. PartyGaming generates around 78% of its earnings from business in the US, while Sportingbet generas 62% of revenue from the US.

The gambling industry was expecting a clampdown on sports betting, some in the industry have been surprised that the law included all gaming, including casino games.

"While US horse race betting, state lotteries, fantasy contests and certain other online gaming activities have been exclusively protected under the new law, we are disappointed that the popularity and skill of poker in particular have not also been specifically protected," said Mitch Garber, chief executive of PartyGaming. "The Board respects the laws of the US Government, and will continue to analyse their applicability, but also continues to believe that a regulatory framework for online gaming, including poker and casino gaming is the only sustainable long term solution."

Meanwhile Peter Dicks, the former chairman of Sportingbet arrested in New York on behalf of Louisiana, will not stand trial. The New York governor George Pataki has denied Louisiana the right to extradite Dicks from New York to Louisiana.