On September 30, 2006, US Congress unexpectedly approved a bill that would make it illegal for banks and credit-card companies to make payments to online gambling sites.
After US Congress passed laws to shut down Internet gambling, which would wipe out US revenue and more than USD 7 billion of market value, shares of PartyGaming Plc, 888 Holdings Plc, Sportingbet Plc and other companies plummeted.
September 30 can be considered a US crackdown on online gaming, as this was the day when legislation to prevent credit-card companies from collecting payments for bets was approved.
Yesterday PartyGaming Plc and 888 Holdings Plc announced plans to halt business with US residents. Because of the new legislation the companies that were trying to get into the US market have to back out.
The USA considers gambling on the Internet, which has become a $12 billion-a-year business, to be illegal.
Gibraltar-based, PartyGaming Plc is the world’s biggest Internet poker company that last year more than 80% of its sales got from the USA. The company is going to continue pushing into markets outside the United States where poker and casinos have not been made illegal. Actually, poker and casinos have not been made illegal in the USA either, but it is impossible to collect payments there. Basically, the payment system for Internet gambling has been shut down.
888 Holdings Plc is going to work with the rest of the world, most of which is quite sensible in terms of regulation.
President Bush is expected to sign the legislation into law during the next two weeks. Most analysts do not doubt that he will definitely approve it.
Because of this legislation, the shares of the leading companies in this industry are plunging.
Shares of PartyGaming slid 59% to 43.5 pence in London, and reached a record low of 40.25 pence.
The world’s largest online casino, 888, slid 48% to 76 pence.
Sportingbet tumbled 69% to 58 pence.
The shares of World Gaming Plc slid 76%.
Empire Online Ltd. (including online gambling brand Club Dice) fell 25%, to 50 pence.
Leisure & Gaming Plc (including brand VIPsports) lost 64% 13.75 pence.
Bwin Interactive Entertainment AG slid 25% to 15.60 euros.
A UK provider of money transfers for Internet gaming companies, NETeller Plc, fell 61% to 140 pence.
A Toronto-based maker of software for gambling Web sites, Excapsa Software Inc., slid 66% to 15 pence.
A British Virgin Islands-based Playtech Ltd. that develops gaming software tumbled 52% to 120 pence.
Analyst Paul Leyland at Arbuthnot Securities expressed his opinion that Playtech is relatively well positioned. According to his suggestion, Playtech is the only company for which redeployment is easy.