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Contributors: Douglas McIntyre Jon C. Ogg

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Monday, October 02, 2006

Implications of Internet Gambling Bans

Congress has gone one step further into online gambling bans. Over the weekend they passed legislation that would make it illegal for banks and credit card firms to process payments to Internet gambling companies. The Internet gambling provisions were voted in through Congress after the provisions were piggy-backed on to an unrelated bill to secure US ports, and that had actually been expected to be trimmed from the bill because of some inclusions. The law is still going to require Presidential signing, but Bush is expected to sign this with no problems.

The legislation directs the Federal Reserve and Department of Justice to issue regulations within 9 months for US banks to establish policies and procedures for blocking transactions. It is not surprising that the American Gaming Association, which represents casinos based in Las Vegas and elsewhere in the US, had asked Congress to fund a commission that would study whether online gambling can be regulated and taxed in the US. The AGA's hope is a study may eventually let major casino operators such as MGM Mirage, Harrah's, and others enter the online business.

The Poker Players Alliance, an organisation consisting of 50,000 members, said: "This last-minute deal reeks of political gamesmanship. The American people should be outraged that Congress has hijacked a vital security bill with a poker prohibition that nearly threefourths of the country opposes."

Cryptologic (CRYP) is trading down 28%, or down over $6.00, around $15.70 pre-market.

Optimal Robotics (OPMR) is also trading down 37%, or down over $4.00, at $7.40 pre-market after saying its FireOne unit would be adversely impacted from this.

This law is going to impact many public and private companies in the US, UK, and other countries such as Costa Rica. ParyGaming Plc, Sportingbet Plc, and 888 Holdings all saw their shares plummet in UK trading. PartyGaming shares slid or 56 percent alone and Sportingbet tumbled as much as 73 percent of its value. An Austrian-listed company Bwin Interactive Entertainment AG slid 27 percent in Vienna. (UBET) operates a legal and licensed wagering system for horse racing, and we are still waiting to for a press release from the company to make sure that they are not impacted adversely by this law passage.

Shares of Gigamedia (GIGM) are also trading down over 16% at $9.30 in pre-market trading. This is a Taiwan-based company that has ties to online gaming and runs a MahJong site.

Here was an article from earlier in September we ran.

Jon C. Ogg
October 2, 2006

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