Gambling News by Gambling Headquarters

The online gambling industry, facing billions in losses because of a new U.S. law, is scrambling for ways to keep Americans in its game. President Bush signed legislation in mid-October that bars U.S. banks and financial firms from sending credit card payments or other funds to sites involved in online gambling, which is mostly illegal in the United States. The high-flying industry now finds itself in the position of a gambler who has bet big on a full house, only to see his opponent turn over a straight flush. Americans supply half of the industry's nearly $13 billion in annual revenue. With the new law threatening to cut off that flow of cash, the market value of online companies, most of which trade on the London Stock Exchange, have plummeted. Sportingbet, which operates Paradise Poker, pulled out of the U.S. market after the law was enacted and has seen its stock price fall to about one-tenth of its level last spring. British betting-shop chain Ladbrokes, meanwhile, is in talks to merge with 888 Holdings, which operates the popular Pacific Poker site. The British government has jumped into action, convening a conference this month aimed at rescuing the lucrative industry by imposing strict code of principles. Its proposal aims at ensuring the games are fair and that screens are in place to protect compulsive gamblers and children. "The industry has been very hard hit by the U.S. ban," said Tessa Jowell, Britain's culture minister. "The Internet is a global marketplace, and that's why we need action at the global level."

However, the United States declined to join the dozens of countries at the conference.

In the United States, where the popularity of Texas Hold em has driven the online gambling craze, poker players are working to have their game exempted as a game of skill, not chance, as U.S. officials write the regulations for the new law.

Michael Bolcerek, president of the Poker Players Alliance, an advocacy group in Washington with more than 120,000 members, said his group will have better odds with the Democrats gaining power in Congress.

The law already grants exemptions for betting on horse racing, intrastate lotteries, and fantasy sports play.

Some predict the new law could spark growth in other areas of legal gambling.

"Under the new law, U.S. states have the right to regulate Internet gambling on an intrastate basis," said Mark Balestra, vice president of publishing for the River City Group, a St. Louis-based publisher focusing on the gaming and gambling industries.

"Most likely, this will lead to state lotteries going online," he said. Others see the possibility of bingo moving onto the Internet.

However, the online gambling industry's best hope might be weak enforcement of the new law.

"Given the language of the act, it is clear that U.S. banks and other U.S. financial transaction providers cannot send funds to those involved in illegal Internet gambling," said Joseph Lewczak, a partner at the law firm of Davis & Gilbert in New York.

If the new law is used to block the transfer of any funds from a U.S. bank to a foreign account used in connection with online gambling, "online gambling in the United States will surely dry up," Lewczak said. "Only those who physically take cash overseas and open an overseas account may have the ability to participate."

However, he said, there may be a loophole "by virtue of the fact that the U.S. agencies involved with enforcement may not be able to, or just won't, pursue foreign entities involved in transferring money to the gambling sites."

One leading online money transfer business - Neteller, which is based on the Isle of Man - plans to accept financial transactions made by U.S. residents during the 270-day period in which U.S. officials are writing rules for the new law.

Neteller officials say they will continue to review the law, which they claim isn't clear when it comes to the obligations of financial transaction providers.

In the end, it may be impossible to keep American players away from the estimated 2,000 Internet sites that take bets for sports and poker.

"People will continue to gamble online because people absolutely love it," said Bolcerek of the Poker Players Alliance.

"Prohibitions are known for not being effective, and this prohibition will just send the game underground," he said. "It will cause Web sites to pop up in unregulated jurisdictions offering the game of poker to U.S. citizens."