Monday, October 09, 2006

A number of gambling industry executives have suggested that they will
exploit exemption clauses contained within the Unlawful Internet Gambling
Enforcement Act of 2006 - keeping open their principal US facing websites,
but retuning them towards skill based games. One has even gone as far as to
suggest that his company will seek to offer online poker within state
boundaries. The Unlawful Internet Gambling Enforcement Act of 2006 makes
unlawful the receipt by a gambling business of proceeds or monies in
connection with unlawful internet gambling. It represents the first piece of
Federal legislation to explicitly deal with online gambling, and it makes
clear the US government's intention to stop the flow of funds from Americans
to online gaming operators through criminal sanction. The Act explicity
states that; "No provision of this subchapter shall be construed as
altering, limiting, or extending any Federal or state law or Tribal-State
compact prohibiting , permitting, or regulating gambling within the United
States." This means that the Department of Justice's position that online
gambling; "contravenes three statutes, the Wire Act, the Travel Act and the
Illegal Gambling Businesses Act" stands. It also means that many gambling
industry executives still have outstanding arrest warrants issued against
them. In its short history the world's largest online poker company
PartyGaming had a number of run ins with the US authorities. These should
have left the executives of the company in no doubt that said authorities
viewed their activities in the US as being unlawful. In April 2004 the
company was informed by Discovery Communications that US marshals had seized
over $2 million of money it had paid Discovery for television advertisements
to promote PartyPoker.com. Court documents at the time revealed that
Discovery had been made aware that by broadcasting such advertisements it
could be party to an illegal activity.

In its IPO Prospectus, PartyGaming stated that it had received an e-mail in
January 2005 purporting to be from the office of the Louisiana
Attorney-General, requesting that the company desist from offering its
services in the US state. The company said that it had "no knowledge of the
legitimacy of the e-mail or its author" and that it would dispute
jurisdiction if a legal challenge were to be launched against it.

Kris Wartelle a spokesperson for the office of Louisiana's Attorney General
recently told the Financial times that it was possible that the email was
indeed legitimate;

"It is possible that our consumer protection division could have sent a
cease and desist letter following a request from the police gaming
enforcement division."

On the 26 June 2005, the Sunday Times reported that the US Justice
Department would consider arresting executives of PartyGaming should they
return to the US; "We could arrest and prosecute these people if they come
back to the country."

The Times of London recently reported that Louisiana had a total of more
than 50 warrants outstanding against executives from internet gambling
companies that have clients who live within the states boundaries;

"It is believed that those targeted by the warrants include other
Sportingbet directors, including Nigel Payne, the chief executive, and board
members of companies including PartyGaming and 888 Holdings."

It is now widely believed that when the Unlawful Internet Gambling
Enforcement Act of 2006 is signed into law, all but the most cavalier of
online operators will stop accepting bets from US citizens.

The notion that a number of the leading companies, may then decide to hang
around in the US, exploiting opt out clauses in the Act, simply beggars
belief.

Until the climate changes, the best advice would be to give the US a wide
bearth once and for all. To do otherwise would be to antagonise the US
authorities, and to further increase the risk of arrest. And that is
something that beleagured ordinary investors can live without.