Online Gambling Giants Relegated on UK Stock Exchange

2006 October 16, Jonny Vincent

Online gambling companies PartyGaming and 888 have both been demoted on prestigious FTSE stock indexes in the UK, following the unexpected passing through the Senate of a US bill which aims to make it illegal for US banking institutions to process transactions to online gambling companies.

President Bush signed the bill into law on Friday, and publicly-listed companies PartyGaming and 888 immediately blocked wagering from US residents. When the bill was unexpectedly passed through the US Senate after it was attached to the unrelated Ports Security Bill, shares of publicly traded online gambling companies nose-dived.

PartyGaming has lost around 75% of its value following the news, with 888 losing around 50% of its value. As a result, PartyGaming dropped off the FTSE 100 list into the FTSE 250 Index. As a result, 888 was relegated from the FTSE 250 onto the FTSE Small Cap Index.

Many online gambling companies will continue to provide betting services to US residents, as the new law does not make online gambling illegal – it simply aims to make it more difficult to fund player accounts.

Moral reasons were cited by proponents of the bill, but it is largely believed that the US government was worried that much of the online gambling industry was based overseas, and wanted to restrict the flow of US funds over their border. Industry analysts expect the new law will largely be ineffective, as US banking institutions may strain under the weight of regulation, and may not be able to fully prevent the funding of accounts through checks and wire transfers.

It is also expected that many online gamblers will find alternative means of funding their accounts, through 3rd-party online payment companies such as NETeller.