"It Appears That the Status of US Regulations is Overtly Affecting the Boom in Online Poker"

Among the flood of announcements by online gambling companies that they propose to float their businesses on the London Stock Exchange, legal officials in the United States have begun accelerating their labors to put an end to illegal internet gambling in the U.S.

Formally, the U.S. considers approximately all forms of Internet gambling illegal and accordingly prosecutes companies caught up in the online gambling industry. The foundation of the U.S. ban on online gambling is the 1960’s era Wire Act. This act formally precludes the use of phone lines for placing wagers, but the World Trade Organization recently challenged the legality of the law. Lawyers on behalf of Antigua, a tiny island nation that has developed a booming business by hosting online gambling businesses, brought a formal complaint to the WTO, stating that the U.S. ban on online gambling violated free trade agreements. This, they argued, is because the U.S. while, at the same time, banning all other forms of Internet gambling, allows online horseracing betting by U.S. operatives. Ultimately, the WTO made a somewhat ambiguous ruling on the case that allowed both countries to claim a victory. In the meantime, however, elucidation is lacking regarding U.S. policy and what the U.S. Government can actually do about online gambling. This lack of explanation and the fear that U.S. regulators are going to augment their efforts to clamp down on online gambling could have unfavorable effects on the online gambling companies. Gregor Freely of Altiums Capital is reported as saying that undoubtedly there is a regulatory risk attached to this type of company and that investors need to be aware of that. But this risk, he continues, has already been priced into PartlyGaming’s valuation, regarding its upcoming projected flotation on the London Stock Exchange. A company with the sort of growth record and potential that PartlyGaming boasts, he argues, could easily float at more than twenty times earnings. He also points out that it is only being valued at around ten to twelve times its earnings, and that this is because of the risk of the uncertain legal situation in the U.S. Freely does not believe that the U.S. would actually attempt to prosecute overseas poker companies.

PartlyGaming is the world’s largest Internet poker company. It is planning a ten billion dollar stock market flotation later this month, and the uncertainty that is being caused as a result of U.S. actions is proving to be problematic to potential investors. In fact, in spite of the fact of the questions of legality regarding online gambling in the United States, the majority of PartlyGaming’s customers are American. Actually, only five percent of its players are coming from the UK. The same is apparently true for the online gambling company, SportingBets, PartlyGaming’s main competitor in the UK. Both PartlyGaming and SportingBets argue that they are doing nothing illegal. SportingBets maintains that, since it operates within the UK it is not breaking any laws. PartyGaming argues that the Wire Act can be applied only to sports betting and not to poker.