Firms say U.S. anti-gaming bills doomed to fail
By Pete Harrison and Paritosh Bansal
LONDON (Reuters) - Attempts in the United States to ban the multi-billion dollar online gaming industry from its virtual shores are doomed to fail, London-based gaming executives and analysts say.
Rep. Bob Goodlatte is the latest U.S. opponent to Internet gambling, which is estimated to generate about $12 billion (6 billion pound) a year globally through 2,300 sites.
His bill seeks to bar gambling businesses from accepting payment by credit card, cheque, wire or Internet, and will next be heard on Thursday.
"Are they likely to succeed? I think not," said David Carruthers, Chief Executive of BETonSPORTS, which is listed in London, based in Costa Rica and takes most of its bets from the U.S.
Carruthers said the United States was likely to become fully open and regulated within five years.
"That view is based on the pure economic reality, and the emergence of regulation across the globe," he said. "The United Kingdom and other jurisdictions are setting the pace, and you can not ban this activity."
"There are far too many people participating, and the U.S. tax authorities are not going to pass up this opportunity of generating revenue," he added.
Goodlatte has tried and failed before, but this time his bill could be boosted by the absence of disgraced Washington lobbyist Jack Abramoff, who represented gambling interests.
Abramoff is currently at the centre of a U.S. influence-peddling probe.
Experts said they did not expect to see a resolution in the near future, although in the long term, one expert said a compromise was likely.
"I would not be surprised if there were some compromise passed within the next two Congresses," said Harold Krent, dean of the Chicago-Kent College of Law. "But I would not expect any kind of compromise passed in the near future."
Despite the widespread conviction in the UK that Goodlatte and other opponents to online gaming will fail, companies like 888 and PartyGaming are trying hard to diversify away from the U.S.
PartyGaming has doubled its customer recruitment outside the U.S. and expects to operate its sites in 15 languages by the end of the year, but is still about 80 percent exposed to the U.S.
888's exposure has fallen to 55 percent.
Analyst Richard Carter at London's Numis Securities said Goodlatte's bill was likely to meet resistance from the financial institutions that would have to police any such legislation.
Analysts also say "carve outs" for horse racing will hinder the bill's progress.
"Previous attempts to outlaw online gaming have been bedevilled by wheeling and dealing over exemptions for vested interests in other gambling sectors," Carter said in a research note.
The bill also appears to contravene a World Trade Organisation ruling that the United States should not discriminate between domestic and overseas bookmakers.
The case is being pushed hard by the tiny Caribbean island of Antigua, which has few natural resources and a dwindling tourist industry and is trying to build up its Internet industry to employ its 67,000 inhabitants.
However, analysts say the debate might prove irrelevant as there are so few congressional days in which the bill could be heard before U.S. elections in November.
"We continue to view the possibility of any bills getting through both the House and the Senate during this term of Congress as very slim," said Carter.
Charles Wilson at Bridgewell Securities said that while the anti-gambling campaigners were unlikely to succeed, they had regularly caused problems for related share prices.
"I don't think they can be ignored, because the noise that surrounds them is impacting the shares," he said.
By Pete Harrison and Paritosh Bansal
LONDON (Reuters) - Attempts in the United States to ban the multi-billion dollar online gaming industry from its virtual shores are doomed to fail, London-based gaming executives and analysts say.
Rep. Bob Goodlatte is the latest U.S. opponent to Internet gambling, which is estimated to generate about $12 billion (6 billion pound) a year globally through 2,300 sites.
His bill seeks to bar gambling businesses from accepting payment by credit card, cheque, wire or Internet, and will next be heard on Thursday.
"Are they likely to succeed? I think not," said David Carruthers, Chief Executive of BETonSPORTS, which is listed in London, based in Costa Rica and takes most of its bets from the U.S.
Carruthers said the United States was likely to become fully open and regulated within five years.
"That view is based on the pure economic reality, and the emergence of regulation across the globe," he said. "The United Kingdom and other jurisdictions are setting the pace, and you can not ban this activity."
"There are far too many people participating, and the U.S. tax authorities are not going to pass up this opportunity of generating revenue," he added.
Goodlatte has tried and failed before, but this time his bill could be boosted by the absence of disgraced Washington lobbyist Jack Abramoff, who represented gambling interests.
Abramoff is currently at the centre of a U.S. influence-peddling probe.
Experts said they did not expect to see a resolution in the near future, although in the long term, one expert said a compromise was likely.
"I would not be surprised if there were some compromise passed within the next two Congresses," said Harold Krent, dean of the Chicago-Kent College of Law. "But I would not expect any kind of compromise passed in the near future."
Despite the widespread conviction in the UK that Goodlatte and other opponents to online gaming will fail, companies like 888 and PartyGaming are trying hard to diversify away from the U.S.
PartyGaming has doubled its customer recruitment outside the U.S. and expects to operate its sites in 15 languages by the end of the year, but is still about 80 percent exposed to the U.S.
888's exposure has fallen to 55 percent.
Analyst Richard Carter at London's Numis Securities said Goodlatte's bill was likely to meet resistance from the financial institutions that would have to police any such legislation.
Analysts also say "carve outs" for horse racing will hinder the bill's progress.
"Previous attempts to outlaw online gaming have been bedevilled by wheeling and dealing over exemptions for vested interests in other gambling sectors," Carter said in a research note.
The bill also appears to contravene a World Trade Organisation ruling that the United States should not discriminate between domestic and overseas bookmakers.
The case is being pushed hard by the tiny Caribbean island of Antigua, which has few natural resources and a dwindling tourist industry and is trying to build up its Internet industry to employ its 67,000 inhabitants.
However, analysts say the debate might prove irrelevant as there are so few congressional days in which the bill could be heard before U.S. elections in November.
"We continue to view the possibility of any bills getting through both the House and the Senate during this term of Congress as very slim," said Carter.
Charles Wilson at Bridgewell Securities said that while the anti-gambling campaigners were unlikely to succeed, they had regularly caused problems for related share prices.
"I don't think they can be ignored, because the noise that surrounds them is impacting the shares," he said.
