Gaming companies react to new law

Published October 15, 2006

LONDON - British online gaming companies began cashing in the chips of their U.S. operations Friday as President Bush signed a bill aimed at restricting Internet gambling in the United States.

Sportingbet PLC and Leisure & Gaming PLC both sold their U.S. operations for a token $1 while World Gaming PLC directors resigned, leaving the company in the hands of administrators.

Attached to a port-security bill signed by President Bush on Friday was the Unlawful Internet Gambling Enforcement Act, which prohibits online gamblers from using credit cards, checks and electronic fund transfers to place and settle bets. The law puts enforcement on the shoulders of banks and other U.S. financial institutions, some of which fought the legislation.

The measure's supporters include the NFL as well as conservative and antigambling groups. Some banking groups lobbied against it.

While proponents decried the effects of gambling on society, opponents pointed to the enormous popularity of Internet gambling - as many as 23-million Americans wagered an estimated $6-billion online last year - and compared the new law to the Prohibition amendment of 1919, which led to the rise of illegal speakeasies and organized crime.

"We're going to have Prohibition, and what happened then?" said champion poker player Annie Duke, a former University of Pennsylvania doctoral candidate who began playing professionally in 1994. "We had people running around with tommy guns and drinking moonshine because they weren't given a safe product."

Analysts said the U.S. legislation is cleaving the industry in two. On one side are the London companies that are pulling out of the United States. On the other are private offshore companies located in the Caribbean that are still doing business with U.S. customers through third parties.

Looming over the decisions by the London companies was the arrest of two executives while traveling through the United States. Peter Dicks, the former chairman of Sportingbet, was detained in New York but released after New York Gov. George Pataki declined to sign a warrant extraditing him to Louisiana, where he was wanted on charges of illegal online gambling. Former BetOnSports PLC chief executive David Carruthers remains under house arrest in the St. Louis area awaiting trial on federal charges based on the 1961 Wire Act.