Shares in online gambling companies listed in London lost more than half their value at one point today after a dramatic move by US authorities to ban Internet betting.
The market was taken by surprise when the US Congress unexpectedly rushed through the Unlawful Internet Gambling Enforcement Act on Saturday. US President George W Bush was this week expected to sign the bill into law, thereby making it illegal for finance companies to collect credit-card payments from customers using Internet gaming sites.
Irish bookmaker Paddy Power, which also has online gaming operations, does not accept play from the US so this legislation has no direct impact on the group. But it could mean that Paddy Power will now find itself operating in a more crowded market facing increased competition as it plans its European expansion.
The online gaming business last year generated around $15 billion globally, but faces deep opposition from US lawmakers. The bill follows the arrests in the US this year of the bosses of two foreign online companies over alleged illegal Internet gambling.
PartyGaming shed as much as 62% of its value in morning deals on the London FTSE, while its smaller peers Sportingbet dived 73% and 888 Holdings slid 50% on the second tier FTSE 250. Shares in PartyGaming closed down 57.94% this evening.
PartyGaming, the Gibraltar-based owner of the world's biggest online poker business, and 888 Holdings, also based in the British territory, said they would suspend their business with US residents once the act was passed.
PartyGaming, 888 and Sportingbet currently earn the majority of their revenues in the US. PartyGaming is the worst exposed, with 62% of its revenue delivered by US-based customers.
'This development is a significant setback for our company, our shareholders, our players and our industry,' PartyGaming CEO Mitch Garber said in a statement to the London Stock Exchange. 888 Holdings said suspension of its US activities would have 'a material adverse impact on results for this year and beyond'.
Sportingbet said it was disappointed by the decision in Congress, adding that it would have 'a material impact' on trading.
Congress' backing for the gambling law came following the recent US arrests of BetonSports chief executive David Carruthers and Sportingbet chairman Peter Dicks over alleged illegal Internet gambling on sport. Dicks has since resigned his post.
Currently the US Department of Justice insists Internet gambling violates 1961 legislation called the Wire Act, which was aimed at organised crime and outlaws the use of phone lines to place bets across state lines.
* Shares in Paddy Power closed 25 cent lower at €14.55 in Dublin this evening.
