In a word, stupid.
The $12 billion online gambling industry could turn into a house of cards now that the Congress has passed a law banning the use of credit cards, checks and electronic fund transfers for Internet gaming, industry experts warn.
President Bush is expected to sign the Unlawful Internet Gambling Enforcement Act, which makes it illegal for banks, credit card companies and online payment systems to process payment to online gambling companies.
Senate Republican leader Bill Frist of Tennessee tacked the bill on to the popular Safe Port Act bill on Saturday, before Congress went into recess for November’s elections.
The surprise passage of the law threw the online gambling industry into a tailspin Monday. Shares of publicly traded companies PartyGaming, Sportingbet and 888 Holdings tumbled in heavy trading on the London Stock Exchange, wiping out nearly $8 billion in market value. PartyGaming, the world’s largest online-gambling company, said it will stop taking bets from 920,000 active U.S. customers as soon as Bush signs the proposed law. Sportingbet said it is calling off its bid for World Gaming.
Shares in the publicly traded PartyGaming plunged 60% to 81 cents on the British market and 888 Holdings said it is suspending online betting operations in the USA. Its shares tanked 48% to $1.42 on the British market.
Sportingbet, which gleans more than half its business in the USA, said the bill’s impact is unclear. Sportingbet shares slumped 67% to $1.12 on the British market.
“This develop is a significant setback for our company, our shareholders, our players and our industry,” said Mitch Garber, PartyGaming’s CEO.
The federal government has been cracking down on Internet betting on sports, poker and other casino games that it considers illegal under the 1961 Wire Act. Considering that American bettors generate 50%-60% of industrywide revenue, many operators will be forced to either cash in their chips and go out of business or sell or merge with another provider, experts say.
Roughly half the estimated 500 companies operating 2,300 gambling websites across the Caribbean, Central America and Europe could be wiped out, predicts Sue Schneider, publisher of Interactive Gaming News. The survivors will have to make do on sharply reduced revenue, while seeking ways around the U.S. ban and building up their business in Asia.
After the bill is signed, U.S. Attorney General Alberto Gonzales will have 270 days to determine how the law will be enforced.
Most credit card companies already ban customers from paying gaming sites as the result of a settlement between New York Attorney General Eliot Spitzer and several major credit card issuers a few years ago.
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Unfortunately for players, the companies eliminated in the shakeout are more likely to be publicly traded operators that answer to regulators in Britain than privately held firms more likely disappear into the ether of the Web, warns Linda Goldstein, a partner with Manatt, Phelps & Phillips.
“The upshot is the legislation will drive away larger, more reputable gaming operators, leaving consumers with less reliable options,” says Ken Dreifach, an Internet lawyer who once worked for Spitzer. That could expose consumers to more fraudulent operators, he says.
Some gambling advocates are opting to continue fighting the good fight.
Michael Bolcerek, president of the Poker Players Alliance, says he’ll seek congressional support for a legislative exception for online poker, similar to the carve-outs for fantasy sports, horse racing and state lotteries in the proposed law. Bolcerek argues poker is a uniquely American sport, enjoyed by 23 million Americans.
“We believe poker is a skill game that should be separated from other forms of gambling,” he says.
Yeah, good luck with that in the face of a federal government that is only seeking to protect its citizens from themselves. In his own words, Frist makes it abundantly clear that this is his driving motivation behind the legislation.
Gambling is a serious addiction that undermines the family, dashes dreams, and frays the fabric of society. Congress has grappled with this issue for 10 years, and during that time we’ve watched this shadow industry explode.
This is not the Gipper’s GOP, and neither is it the GOP that was spearheaded by Newt Gingrich and his 1994 Contract with America. No, this is the GOP that often sickens me with its big-government ways. Ah, but for a viable, genuinely conservative alternative that would work more resolutely on protecting me from expansionist and murderous radical Islamists than protecting me from going all-in with a low pair. Unfortunately, that certainly ain’t the Democrats.