Thursday, February 16, 2006
Online gaming shares plunge on prospect of new US law

The share value of many public listed online gaming companies fell sharply this week after the announcement that a new prohibition law would be tabled in the House of Representatives.

Although online gaming is already illegal in the US, with the exception of pari-mutual wagering on horseracing, the largest online gaming companies draw most of their customers from the US. A new law would increase the pressure on these foreign companies to withdraw from the US market and would facilitate their prosecution. The law would for example make it illegal to use internet, credit card and other forms of remote payment for gaming purposes.

Proposals for laws on banning online gaming have been made in the past, but have never been successful. The legal basis for the prohibition of online gaming remains therefore with the Wire Act, which prohibits gambling through means of telecommunications. The renewed attempt for a specific ban is believed to have more chances of passing this time because of the recent lobbying scandal involving bribery by online gaming companies.

The companies that mostly suffered drops in share value included market leader PartyGaming, 888 and Sportingbet.