Legislation to Repeal Online Gambling Ban May Be Coming

The Financial Times online edition (subscription required for full article) has noted from an interview that Barney Frank, the democratic House Financial Services Committee chairman, is working on legislation to repeal the ban on online gambling in the US that was passed last year.  "Working on" is hard to define without more information

It is not clear at all if this is a "total repeal" or just a loosening of the laws.  It is also a question as to whether or not this legislation could even make it to the White House through Congressional votes, and it is unclear of this would be for 2008 and beyond or if it was sooner.  But either way, you have to look no further than Cryptologic (CRYP) to see how this could impact other stocks in the sector (they make online gaming software) if there is any truth to this.  CRYP has even managed to defy a weak market if you look at the shares.

In Australia, companies like Betcorp and Lasseters Corp were hit hard last year because of the ban.  In the UK, companies like PartyGaming Plc and 888 Holdings were also hit in 2006 over such issues.  Gigamedia (GIGM) and American Wagering (BETM) were also noted in a story late yesterday along with pari-mutuel horseracing company Youbet.com (UBET).  We have all missed the PartyPoker commercials as well.

Once again, take heed that "an interview" and "legislation" can be taken way out of context and there is always the possibility that this could be dead before it even gets started. My own call in so far has partially confirmed this, but with no details yet known.  Many of the European online gaming stocks also made some rather large moves last week because of some loosening of regulations in the EU.  There is not even assurance that it will make it to the form of a bill, so if you take any of this as "gospel" or as "fact" then the point has not been stressed enough that there may be no follow-through in reality.

I did put in a phone call to Congressman Frank’s office and was told that this is true, but I have not been able to get the details from the Financial Services Committee as of yet.  I am awaiting a call back to give more details. 

Jon C. Ogg
March 14, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.