PartyGaming, Sportingbet, 888.com Shares Watched Closely Thursday

Heading into Thursday, all the big name publicly traded online gambling shares were being watched carefully in the wake of what is almost guaranteed to be a positive message delivered by Congressman Barney Frank on Thursday. 

PartyGaming and Sportingbet have been rebounding nicely since millions of dollars were wiped off their value following the passage of the Unlawful Internet Gambling Enforcement Act last October in the United States.  888.com suffered a bit of a setback this week with the announcement that Ladbrokes would not be pursuing an acquisition of the company.

Barney Frank - who is repealing the UIGEA - will be offering a new bill during a scheduled press conference at 10 am ET Thursday.

While passing the bill will be difficult, there is a big financial incentive for Democratic leaders to pass it, according to Jonathan E. Kaplan and Jessica Holzer of TheHill.com

The chairman of the Financial Services Committee is looking to raise tens of billions of dollars with his new bill, which could be used to pay for expensive tax, healthcare, or other domestic legislation Democrats want to move this year.

“It’s a terrible idea and there are a large number of people who think it is a terrible idea,” Frank said yesterday. “I don’t know how it ends. The worst that happens is that enough anti-gambling busybodies will be less inclined to interfere in people’s lives.”

Gambling lobbying groups were more than pleased by Frank’s announcement.

“We’re incredibly excited. I’m very interested in what the final version will look like,” Michael Bolcerek, president of the Poker Players Alliance, said. “But from what we understand, it will do the right thing for poker players and at the same time protect the public interest.”

Most publicly traded online gambling firms departed the US market, including the largest online poker site, PartyPoker.com, immediately following the passage of UIGEA last October.  It is too soon to determine if any of these companies would consider re-entering the market prior to any UIGEA repeal. 

In 2000, Frank said, “It is important that people be able to do what the Republican Party wants them to do on the Internet. If the Republican Party has no objection, then they can do it. But if the Republican Party thinks there are pictures they should not look at, or perhaps booze they should not buy, or bets they should not make, then freedom for the Internet goes away.”

Because the law significantly affects the financial services industry, Wall Street is closely monitoring the Frank bill, according to TheHill.com.

One source said that leadership officials in the House are on board with Frank’s plan, though Frank said he did not seek clearance from them.

Online gambling has become a billion dollar industry over the past few years.  It has long been thought that legalizing online gambling would help bring millions more dollars to the US economy through taxation.

Republicans, who spent six years attempting to pass the Internet bill, are mobilizing against Frank’s effort.

“We’re going to fight it,” said Rep. Bob Goodlatte (R-Va.), a leading proponent of the crackdown on Internet gambling. “I’d be surprised if the new leadership would want to bring back an issue that took six years, because of one Jack Abramoff, to resolve.”

Many have questioned why Goodlatte and Jon Kyl of Arizona are so adamant about the UIGEA when it does little to protect underage individuals from gambling online.  The bill exempted online horse racing. 

TheHill.com points out that several members of leadership voted for the House bill last July, including Speaker Nancy Pelosi (D-Calif.) and Majority Whip James Clyburn (D-S.C.). Meanwhile, Majority Leader Steny Hoyer (D-Md.) voted no, as did Ways and Means Chairman Charles Rangel (D-N.Y.).

Another architect of anti-online gambling legislation, Jim Leach (R) of Iowa, was voted out of office in a shocking loss following an aggressive campaign by the online poker community against him. 

An online petition drive supporting Barney Frank's efforts has already netted over 1600 signatures in a two day period as of press time April 26.

Lobbyists for banks and credit card companies that would have shouldered much of the burden of enforcing the gaming crackdown, reacted favorably to Frank’s announcement.

“We’d be very pleased to see that law repealed simply because it would remove a potential burden on the financial system and especially on community bankers,” said Steve Verdier, the senior vice president for congressional affairs at the Independent Community Bankers of America.

“We also understand it will be a little bit of a road to get a repeal,” he added.

The UIGEA bans credit cards from being used for online gambling websites.  Banks were ordered to monitor such transactions.  The irony is that credit cards have become the most reliable method of depositing funds online for gambling since the UIGEA was passed due to the fact that offshore companies have become more reliant on "less reputable" payment processors located in other countries.  A downside of this has been that many of these processors cannot handle big business volume as effectively as those that previously processed for US customers.

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Christopher Costigan, Gambling911.com

Originally published April 25, 2007 11:02 pm ET