10/10/2006 11:00PM

Bill torpedoes gaming websites

Email

The landmark anti-gambling legislation that passed in the twilight hour of the recent congressional session without any hearings (as a surreptitious late rider to the Safe Port Act of 2006) is having a major negative impact on poker-playing websites throughout the world.

The bill, which was applauded ecstatically by the National Thoroughbred Racing Association for its exclusion of account wagering on horses from its chief prohibitions, is causing executives of the best and most reputable poker sites on the Internet to consider shutting down play involving American citizens. This despite the bill's main focus, to prohibit money transfers by American banks to poker sites. While play on those sites by Americans already had achieved illegal status in several states for several years, there had been no history of enforcement.

The fact that President Bush did not jump out of bed to immediately sign this bill is no indication, however, that it will not be signed shortly, even though many of the affected American banks have protested that they will have difficulty reporting anything but large transactions to these websites.

Nor is the provision giving banks 270 days to comply any consolation to poker players or the websites the U.S. government is trying to shut down.

Executives of several poker sites already have been scared into retreat by the arrests of two high-profile Internet gambling company board members when they were between planes at JFK and Dallas-Fort Worth airports prior to the bill's passage.

Stock prices for online gambling sites that have sold shares on public stock exchanges in foreign countries have plummeted, leaving many investors extremely skittish about the future of this industry, which has boomed to the sky through wall-to-wall televised poker and the easy access of a home computer.

According to an Oct. 9 report by Jonathan R. Laing in the financial weekly newspaper Barron's, PartyGaming, owner of partypoker.com, took a 58 percent hit to its share price on the London Stock Exchange on Oct 2. Laing further reported that PartyGaming executives have declared that "they will refuse all U.S. players access once the bill actually goes into effect."

In essence these executives are admitting they will give up 70 percent of their existing business in U.S.-based annual revenue (an estimated $400 million), rather than risk U.S. sanctions against them.

Likewise, an executive at pokerstars.com hinted strongly in an e-mail reply to my query that PokerStars management and its legal advisers are seriously considering a similar shutdown on all U.S. action.

PokerStars support manager "Doug" assured me that "all player funds are kept in a segregated account at a leading European bank." But Laing's report in Barron's said that is not the case with PartyGaming, and predicted that "a run on these websites' reserve accounts also could shut them down."

On still another front, an executive at a medium-sized wagering website confided to me without willing to be quoted that the board of directors has authorized severe cuts in employees while contemplating a complete shutdown of activities. This week, this same executive told me that its marketing staff has been ordered "to curtail scheduled promotional efforts for 2007."

In his note to me, "Doug" at PokerStars added another sobering comment:

"I suggest you contact Neteller," he said. "The bill also affects them."

Neteller is an Internet bank based on the Isle of Man that has been a reliable resource used by poker players to send and receive funds to assorted merchants, including most poker sites.

Neteller has so far refused to comment, but its stock took a 60 percent hit last week.

All this makes me wonder what the racing industry thinks is so great about a law that could be turned around on it when a member of Congress sees an opportunity to enact a midnight bill to promote ultra-conservative values of "no more gambling in these United States." At least no more gambling than hundreds of licensed Indian casinos, a few dozen state-sponsored lotteries, legal card clubs in liberal-leaning states such as Minnesota and California, and legal offshore wagering in dozens of countries around the world that do not see a bogeyman in poker playing by computer.

It also makes me wonder why wagering by computer on sporting events, poker, or any other pursuit is different from day trading by computer, in which normal human beings - just as those who play poker - gamble millions every day on the movements of stocks by the hour.

Wouldn't it be a far more productive thing for Congress to regulate this industry for U.S. tax purposes, rather than criminalize all who are interested in Internet gaming?

Fortunately, the problem will pass me by. I'm moving to Vegas next month, where millions of Americans come to visit and gamble as they wish, even plenty of congressmen who voted for this bill without conducting a single legislative hearing.

The anti-gambling bill was sponsored by Republican Rep. James Leach of Iowa and Republican Sen. John Kyl of Arizona. You may find a copy of it on page 213 .

Steve Davidowitz plays as "StevenLD" on various Internet poker sites and is the author of the handicapping book "Betting Thoroughbreds."