Online gaming in crisis after U.S. ban is passed

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By Pete Harrison
October 2, 2006

Online gaming firms faced their biggest-ever crisis on Monday after U.S. Congress unexpectedly passed legislation to ban online gaming there, threatening jobs and hitting stocks by as much as 70 percent.

Britain's PartyGaming Plc, operator of leading online poker site PartyPoker.com, and rivals Sportingbet and 888 Plc said they would likely pull out of the United States and warned on future profits.

PartyGaming's shares fell 59 percent by 0725 GMT, while Sportingbet lost 64 percent, 888 was down 45 percent and gaming software provider Playtech fell 55 percent. Austria's bwin.com Interactive Entertainment fell as much as 22 percent in the first few minutes of trading.

U.S. Congress unexpectedly approved a bill early on Saturday that would make it illegal for banks and credit-card companies to make payments to online gambling sites.

The House of Representatives and Senate approved the measure and sent it to President George W. Bush to sign into law. Most analysts think his approval is certain.

"We believe that this will have a very material impact on the long-term prospects of online gambling, and in particular poker," said analyst Julian Easthope at UBS. "This will lead to a rapid decline in the use of online poker sites."

PartyGaming generates about 78 percent of its revenue from the United States, while Sportingbet gets about 62 percent there.

PartyGaming said in a statement: "If the President signs the act into law, the company will suspend all real money gaming business with U.S. residents, and such suspension will continue indefinitely.

"Any such suspension would also result in the group's financial performance falling significantly short of consensus forecasts for 2006 and 2007," it added.

PartyGaming's smaller rival Sportingbet said the likely ban would hit trading, and said it had scrapped a planned merger with World Gaming as a result of the passing of the legislation.

888 Plc said the move would hit its results, but stressed it remained a profitable and viable business.

Any ban would also hit payment-processors like Neteller Plc and Optimal Group's FireOne subsidiary.

Neteller Plc said the legislation would have a "material adverse effect" on its U.S.-facing business.

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