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British Online Gambling Firms Quit U.S.

October 14, 2006|From the Associated Press

LONDON — Britain-based 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 and Leisure & Gaming both sold their U.S. operations for a token $1, and World Gaming directors resigned, leaving the company in the hands of administrators.

Congress caught the gaming industry by surprise late last month when it included a provision in a bill aimed at improving port security that would make it illegal for banks and credit card companies to settle payments to online gambling sites.

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

U.S. residents account for about half the estimated $15.5 billion in "net win," or revenue after jackpots are paid, that operators of betting sites are expected to generate this year, according to the betting research unit at Nottingham Business School. The total amount bet online is substantially higher, it said.

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

Looming over the decisions by the London-based companies were the arrests of two executives who were traveling through the U.S. Peter Dicks, 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 Chief Executive David Carruthers remains under house arrest in the St. Louis area awaiting trial on federal charges based on the 1961 Wire Act.

Since then, PartyGaming, the world's largest gambling company, said it had suspended all real money gaming activities in the U.S. Empire Online said it would focus on gaming outside the U.S., and 888 Holdings said it was considering its options.

On Friday, Sportingbet offloaded $13.2 million of debt by selling its U.S. sports-betting, casino and poker operations to Antigua-based Jazette Enterprises Ltd. The company said the sale saved it $14 million in costs it would have had to pay to close the operations. The businesses have a total 500 employees.

Sportingbet said it would keep its European sports, casino and poker businesses, Australian sports business and the non-U.S. business of Paradise Poker.

Sportingbet will retain the Internet addresses and intellectual property of wallstreet.com, aces.com and sportingbetUSA.com but won't use them for any U.S. gaming purpose. Jazette has agreed not to take bets from non-U.S. residents for two years and not to take bets from customers outside the Americas for three years.

Leisure & Gaming sold all of the shares of its wholly owned subsidiaries -- VIP Management Services, Bon Bini Investments, EH Gaming Ventures, ECom ServCorp and Nine Holdings -- to Stockdale Investment, a newly incorporated company established by Alistair Assheton, former CEO of the company.

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