Regular readers of this blog have known about my interest in the internet gambling sector, something that has been beyond difficult in North America because of the very severe US regulations regarding internet gambling. But there are signs that things are changing which would be very encouraging on many levels.
Why make it legal?
Internet gambling, especially in the poker and sports arenas, has been going on for a long time and has barely been slowed down by the various things the US government has tried. It has made it very difficult for such offshore operations to do business mainly through legislating money transactions of this nature. However, no matter how much they try, they are losing the battle as companies have found various loopholes to be able to do business. Sure, from time to time there are successful prosecutions but taking out a fish or two does not clean up an ocean. Yesterday, a Canadian man was charged with conspiracy and bank fraud for laundering $350 million for foreign internet gambling companies. The basic way these companies do it is find ways to transfer back money without a “gambling tag”. They sometimes get caught but more often than not, things go without any trouble
But there are three main reasons why the US government will probably end up making internet gambling legal:
-To protect its citizens: How can the government enforce laws when all of these websites are not even abiding by US laws?
-Because it is illegal: The US government has lost time after time in International courts regarding its ban of internet gambling that has been judged illegal.
-To get tax revenues: No doubt about it, by making the business legal, the US government is forfeiting huge amounts in possible tax revenues and that could change quickly if made legal.
How quickly could it happen?
From the look of things, it could change very quickly. One of the dominant internet gambling companies, PartyGaming, a UK company agreed to pay $105 million to the US government to avoid prosecution. It was doing so partially to abide by US laws but also because it believes that internet gambling could become legal in the US as early as late this year and Partygaming obviously wants to be in a good position with the US government if that happens to take a solid position in the lucrative US market and it will also make it much easier for US companies to do business with PartyGaming.
Other possible investments
What would be interesting if internet gambling became legal in the US is how important sports gambling would become. I think it’s safe to say that major Las Vegas casinos would be well positioned to gain market share but a couple of European companies that already have major market share could also become interesting investments (I will ignore Betfair here since it is a private company).
-William Hill: A very respected UK online and offline broker, William Hill would certainly be an interesting option
-BetandWin: This Austrian based company is also an innovative company that has solid market share in Europe and would certainly jump at the opportunity to enter the US markets