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U.S. Political Isolation Increases as U.K. Repeatedly Says Yes to Online Gaming

U.S. Political Isolation Increases as U.K. Repeatedly Says Yes to Online Gaming 0001

A virtual line in the sand drawn by United Kingdom officials responsible for the oversight of Britain's legalized online gaming industry is likely to further isolate the United States in its efforts to legislate online gaming out of existence. As reported in The Register, the U.K. will strengthen its commitment to regulating and licensing online gambling companies, though it will still extradite U.K.-resident gaming executives to the U.S. upon request. The announcement comes out of the recent conference of over 30 countries currently housing online gaming, hosted by Great Britain at its famed Royal Ascot racetrack.

According to U.K. Culture Secretary Tessa Jowell, "We do not support the approach the United States has taken. The enormous risk of prohibition is that it forces the industry underground." In a separate release, Jowell is quoted as saying, "We will welcome them here because we believe that by allowing those who want to gamble to do so over the counter not under the counter is the best way to protect children and vulnerable people and keep out crime."

The U.K. announcement changes very little on the surface as it applies to U.S.-based online gamblers, but it has a very deep secondary effect, one likely to make land-based gaming concerns in the U.S. wondering if they've backed the wrong horse in their long-shot hopes that the UIGEA will break down and reassemble the online-gaming market into a form more to their suiting. U.S. gaming concerns had cause to hope that the damage caused by the passage of the UIGEA would have a domino effect throughout the online-gaming industry, with major casino interests more likely, at a later date, to be able assume a dominant worldwide market position should a subsequent federal legalizing of online gaming occur.

This argument, buttressed by the size of the U.S. gambling consumer market, was that other countries would fall in line behind the U.S.'s wishes. When combined with the gigantic marketing muscle wielded by the largest U.S. land-based gaming interests, it wasn't that much of a stretch to imagine the U.S. trying to bully its way to the top of a market where it was severely behind the curve, assuming it could shake free of far-right motives behind the UIGEA's passage. The odds of a Harrah's becoming the worldwide online-gaming leader have become rather more remote.

More to the point, the U.K. announcement is intended to create a baseline for those licensed and regulated companies (e.g.: PartyGaming, 888, SportingBet) whose stock values nosedived weeks ago, assuring them that the U.K. still intends to serve as a stable leader in the future of online gaming. As for the acknowledgement about the extradition, it's a confirmation --- despite its form --- that British stock-market regulations will still apply. Most of the publicly traded U.K. gaming firms reside on London's Alternative Investment Market [AIM], and one requirement of all publicly traded companies is that they abide by the laws of the countries in which they do business. To not acknowledge that the extradition threat still applies would have granted the U.K. online gaming companies a privilege not allowed under stock-exchange regulatory law.

What it all means is that the U.S. will find itself ever more isolated as it seeks to defend and implement the UIGEA, and is likely to find itself under more direct market attacks as privately held companies housed in other nations attempt to reattach their tentacles to the juicy U.S. market. It's also possible that companies such as those above, now frequently mentioned in merger and acquisition talks, may find themselves even more energized to re-privatize in an attempt to re-enter the U.S. market.

Antigua and Barbuda, already embroiled in a trade dispute with the U.S. which the UIGEA has further inflamed, is already touting itself as a viable alternative. According to Mark Mendel, who heads up the legal team in charge of Antigua's WTO dispute, "We believe that once the United States ultimately comes into compliance with the WTO rulings in Antigua's favor, which it must, you will see the FTSE AIM-listed companies re-entering the American market via subsidiaries or affiliates located, licensed and regulated in Antigua."

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