[LINK] SMH: 'US bans offshore online gambling'

Roger Clarke Roger.Clarke at xamax.com.au
Tue Oct 3 10:20:49 AEST 2006

US bans offshore online gambling
[Misleading headline:  it's about banning the processing in the US of 
US residents' transactions with offshore online gambling operators]
The Sydney Morning Herald
Business Section Lead Story
Date: October 3 2006

Colin Kruger

THE US Government stunned the online gambling industry over the 
weekend by passing laws that effectively ban the services from their 
biggest market.

The $US6 billion ($8 billion) industry went into meltdown over the 
news, with shares in UK-listed PartyGaming, 888 Holdings and 
SportingBet - which has operations in Australia - plummeting in early 
London trading overnight.

Also in the line of fire is Betcorp, which is listed on the 
Australian Stock Exchange and, like the UK-listed companies, counts 
on US customers for most of its business.

The US Senate, which was expected to block the legislation, sneaked 
the bill through early Saturday morning US time, following some 
last-minute manoeuvring ahead of the Senate break for mid-term 

*The bill outlaws the processing of bets for online gaming companies, 
effectively preventing US banks and credit card companies from doing 
business with the operators. It could be signed into law by President 
Bush as early as this week.
The bill excludes US-based online betting on services like horse 
racing and lotteries and has no impact on American casinos and other 
gambling operations.

The US Government has been in a tussle with the industry for more 
than a decade, dating back to when foreign operators accepted bets 
from US citizens over the phone from offshore operations in the 

These online sports betting, poker and casino operators have been 
drawn to the London Stock Exchange, where investors have profited 
from the explosive growth in US internet wagers, despite their 
questionable legal status.

That is expected to change. According to UK reports, 888 Holdings, 
PartyGaming, and SportingBet are expected to halt their US-facing 
Shares in PartyGaming slid 64.5p, or 59 per cent, to 43.5p in early 
London trading. SportingBet shares were down 69 per cent to 58p and 
888 Holdings 48 per cent to 76p.

The latest move is not entirely surprising given the hard line 
already being taken by US authorities. SportingBet's former chairman, 
Peter Dicks, was arrested last month on a warrant issued by Louisiana 
State Police, but was released by a New York court recently. Mr Dicks 
faced being extradited to the state on charges that include gambling 
by computer, a charge that could land him a year in jail.

In July, the then chief executive of BetonSports, David Carruthers, 
was arrested in Texas, sending internet gambling stocks plunging.

Mr Carruthers, who has since been sacked by BetonSports, has pleaded 
not guilty to racketeering and tax evasion.

Australian-listed Betcorp, which generates most of its business from 
US sports betting, announced last month that it would discontinue its 
phone service to US customers after, as it said, taking legal advice. 
The company's stock has more than halved since the troubles began in 
July, closing at its lowest levels in more than two years yesterday 
at $1.88.

Betcorp will leave the Australian Stock Exchange this month to 
concentrate on its British listing. Executives were not available for 
comment yesterday.

Betcorp was one of the first online companies to be targeted for 
allegedly contravening US laws.

with Agencies

[There's little doubt that there's a lot of criminal activity 
involved in the gambling industry.  But there's also little doubt 
that these moves by the nominally economic rationalist US 
Administration are motivated almost entirely by protectionism.]

Roger Clarke                  http://www.anu.edu.au/people/Roger.Clarke/
Xamax Consultancy Pty Ltd      78 Sidaway St, Chapman ACT 2611 AUSTRALIA
                    Tel: +61 2 6288 1472, and 6288 6916
mailto:Roger.Clarke at xamax.com.au                http://www.xamax.com.au/

Visiting Professor in Info Science & Eng  Australian National University
Visiting Professor in the eCommerce Program      University of Hong Kong
Visiting Professor in the Cyberspace Law & Policy Centre      Uni of NSW

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