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Casino Times
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News
03 August 2005
PartyGaming Steals A March On US
Casinos
It
seems bizarre but one of the biggest companies on the
European side of the Atlantic is banned from operating on
the American side.
Party
Gaming, the
internet
poker company that
floated on the London
Stock Exchange
this week, is believed to have a worth greater than many
blue chip companies - but US law-makers are adamant that it
breaks the law.
Online gambling is banned
in America, so PartyGaming
which was set up by an American is based in Gibraltar with
no assets in the US.
Its prospectus concedes:
"In many countries, including the United States, the group's
activities are considered to be illegal by the relevant
authorities."
But, it adds the crucial
clause: "Partygaming and its directors rely on the apparent
unwillingness or inability of regulators generally to bring
actions against businesses with no physical presence in the
country concerned."
In other words, even if
Partygaming were illegal, what could the authorities
do?
Not that Americans are
exactly shunning the website.
It's estimated that nine
out of every 10 of its dollars last year came from the
US.
At $600m those revenues
are hefty and generated a profit of $350m in
2004.
When the dotcom bubble
burst five years ago, not everything was destroyed - online
gambling quietly thrived. And
then noisily thrived.
Partygaming was founded by
Californian lawyer Ruth Parasol, who is now based in
Gibraltar.
She teamed up with an
Indian software engineer who designed a programme that would
allow thousands of people anywhere in the world to
simultaneously take part in internet poker games.
Their timing was
impeccable.
Partypoker
exploded as a game in 2002, driven partly by television
coverage of big money contests with cameras under a glass
table so viewers could see the players' cards.
It was a compulsive,
vicarious pleasure that hooked multitudes of prospective
customers.
Every estimate now
predicts that growth will be phenomenal, perhaps from an
annual billion dollars spent globally today to 10 times that
amount in five years.
Much will turn on the law
in its biggest market, the United States.
The Interstate Wireline
Act was passed nearly 50 years ago in an effort to stop
organised crime rigging gambling.
Under it, "wire
communication" of bets was outlawed on "sporting events or
contests".
But poker clearly isn't a
"sporting event" so is it a "contest" as defined by the
law?
American lawyers are
divided.
In 2001, a judge in
Louisiana ruled that the act "does not prohibit internet
gambling on a game of chance", a ruling that was sustained
by a higher court.
Other states take a
different view.
The Attorney General of
New York, Eliot Spitzer, pursued finance houses that allowed
their services be used to pay for online gambling - so firms
based in New York have now blocked the use of their credit
cards for online gambling.
So state law varies while
the Justice Department maintains that federal law is
unambiguously opposed to on-line gambling.
On top of that, the
World
Trade Organisation
may have something to say about it.
In the past it has ruled
that American attempts to criminalise some companies
offering online gambling from the Caribbean broke rules of
fair trade.
And some American
companies based in Las
Vegas may now be
worried that they cannot get involved in what is a very
lucrative expansion of their business from real casinos to
virtual ones.
They have assets in the US
which the authorities could come after if they break
American law, so they are tied to real bricks-and-mortar
casinos on terra firma rather than imaginary ones in
cyberspace.
Which leaves the owners of
Partygaming laughing all the way to the bank - whatever
American legislators might think.
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