PartyGaming Settlement with US DoJ on the Cards

2008 May 31, Jonny Vincent

Rumors are circulating that PartyGaming has finally settled their long-running dispute with the US Department of Justice over the company's activities in the US prior to 2007.

The US party ended for PartyGaming (operators of popular brands Party Casino and Party Poker) when the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) was passed into law. PartyGaming withdrew from the US shortly after.

In 2007, the US DoJ reached a settlement with NETeller and PartyGaming responded by entering into negotiations with the DoJ in an attempt to 'clear the air'. A potential merger between 888 Holdings and Ladbrokes was scuttled when it became apparent that the US DoJ was aggressively pursuing legal action against publicly listed online gambling companies who had operated in the US. For PartyGaming or 888 to enter into any acquisition or takeover talks, it quickly became apparent they would need to settle their differences with the US DoJ first.

An online report on the The New York Post website yesterday indicated that PartyGaming had indeed reached a settlement and would pay a fine, which may end up in the $1 billion range.

Despite the size of the rumored fine, shares in PartyGaming Plc (LSE: PRTY) shot up almost 15% on the rumor in late trading.

If PartyGaming and 888 do reach a settlement with the US DoJ over providing online gambling games to US residents pre-2007, it will open the door to mergers, acquisitions and takeovers. Executives at both countries will also be able to travel through the US without fear of arrest.

PartyGaming has previously stated they will not re-enter the US market until the legislative situation there is resolved in favor of the online gambling industry. Privately-owned and unregulated online gambling companies are currently dominating the US market and the situation remains that online gamblers in the US are now exposed to greater risk post-UIGEA than before.