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Online Gambling Companies hit by Fundamentalist Law !!!

Companies / Strategic News Oct 02, 2006 - 07:00 PM

Today online gambling stocks took a big tumble ! As the senate passed a law on Friday effectively banning online gambling sites. PartyGaming alone saw over £2 billion slashed from its market value as its shares more than halved, crashing 60p to 46p. It was by far the biggest faller in the FTSE 100 index. There were equally large losses in the rest of the sector. Sportingbet, which also said it has abandoned its planned merger with rival firm World Gaming, saw its shares collapse by 63%, from 118.25p to 68p. Shares in 888 tumbled by 34% to 97p.

In an interview with Bloomberg News, Mitch Garber, chief executive officer of PartyGaming considered the implications of the U.S. funding ban on online gambling.

"This development is a significant setback for our company, our shareholders, our players and our industry," he said. "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."

The Unlawful Internet Gambling Enforcement Act throws up a financial barrier around the US to stop Americans from gambling online and was added to unrelated legislation for US port security for an unexpected successful passage.

Other online gaming companies also issued statements in the light of the weekend's events. Empire Online said it had immediately begun a review of the likely impact on its current business activities. "Presently it is difficult to assess the exact effect of this legislation, which could have a material impact on future earnings."

Officials from PokerStars have told industry media the major Israeli-owned online poker company is considering the suspension of its activities in the US market, although no decision has yet been made.

Bodog.com CEO Calvin Ayre issued a statement to Gambling911.com late Sunday night: "Bodog is a broad based digital entertainment company that has long ago ceased to be dependent on any one revenue channel. Bodog will continue to monitor things as they unfold but is not expected to make any changes until our study is completed."

Senator Frist and the bill's author, Jon Kyl, are Presbyterians with a strong anti-gambling streak to their morality, in a country whose religious right has been given increasing voice through the current Republican leadership. Senator Kyl has described online gambling as a unique threat, where "players can gamble 24 hours a day from the comfort of their home; children may play without sufficient age verification; betting with a credit card can undercut a player's perception of the value of cash, leading to possible addiction and, in turn, to bankruptcy, crime, and suicide; and there is no enforcement commission, such as those that exist in Las Vegas or Atlantic City, to protect consumers from excessive losses or fraud." A triumphant Senator Frist said at the weekend that the new act would tackle a mushrooming scourge, "a serious addiction that undermines the family, dashes dreams, and frays the fabric of society".

What about the future ?
Internet gambling companies could face a wave of consolidation in the wake of the US clampdown, which could see American casinos and gambling businesses swooping for bargains in the sector, as the companies would still have strong cash-flows.

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