Online Gambling Firms See Shares Plunge

Shares of online gaming firms have plunged after the US Congress passed a bill cracking down on internet gambling, threatening their business.

Shares in Partygaming were down 58% at close of London trade, while shares in 888 Holdings tumbled by 26%.

Sportingbet shares dropped by 64% while Empire Online shares slid by 25%.

Several firms have said they could stop taking bets from US customers if the bill is signed into law by President George W Bush in the next two weeks.

The law, part of a sustained clampdown on online gaming in the US, would make it illegal for banks and credit card firms to process online gaming payments from the US.

Companies in the online gambling arena have faced a turbulent year as the threat of a US legal crackdown has depressed share prices.

Bosses from two firms, Sportingbet and Betonsports, were arrested on illegal gambling charges.

Most analysts expected there would not be enough time for Congress to pass a specific law against online gambling before next month's mid-term elections.

But lawmakers took the industry by surprise when an "Unlawful Internet Gambling Enforcement Act" was eventually attached to an unrelated bill aimed at improving port security.

President Bush is thought unlikely to veto a bill which a senior Republican said was needed to regulate a "shadow industry".

Partygaming, 75% of whose revenues derive from the US, said the development was a "significant setback" for it and the whole industry.

One of the other firms affected said the move had come as a surprise.

"It has a specific criminal offence for taking these funds which is something completely new," Gigi Levy, chief operating officer of 888 Holdings said.

"It is quite clear that the bill as is has a very clear implication on the legality of our activities in the US."

Mr Levy said his company was less dependent on the US market than it had been a year ago, having promoted itself in other countries.

"I can understand investors will feel a bit of panic," he said, while adding that he was "quite confident" that the firm would recover.

Gaming firms which have floated their shares over the past 18 months warned investors that their prospects could be affected by legal uncertainties in the US.

Analysts were divided over the extent of the likely damage to the online gaming business and its global ambitions.

One described it as "major shock" to the industry while another said it would remove the uncertainty hanging over the sector.

"I think there is still a lot of non-US business there and it is not as if these companies are going to disappear," said Richard Carter, an analyst at Numis Securities.