Editorial: EiG - One Year Later

21 August 2007

Last year's European I-gaming Congress and Expo in Barcelona, the biggest I-gaming conference in Europe, was a fantastic show and an absolute success, but it was riddled with anticipation . . . and not the good kind. The unfortunate timing of the impending enactment of the Unlawful Internet Gambling Enforcement Act (UIGEA) was clearly on everyone's minds.


On Oct. 13, 2006, closing day of the show, the tension was palpable as we awaited President Bush to sign the UIGEA, effectively cutting off payment options for Internet gambling transactions between U.S. citizens and offshore companies.

In the meantime, attendees witnessed a verbal tug-of-war during the midday closing session of the show as top executives from companies such as PartyGaming, CryptoLogic, SBG Global and 888 disagreed over which direction the industry should go in the brand new prohibition era.

PartyGaming CEO Mitch Garber announced that his company would be exiting the U.S. market upon Bush's signature, while SBG Global's Eduardo Agami put out a call to arms, asking for the industry to band together to fight the new law.

Bush was scheduled to sign the bill at 10:00 a.m. (EST), but given the six-hour time difference between Barcelona and Washington D.C., it would be evening before we received confirmation that he had actually gone through with it. By the time word spread that the bill had indeed been signed, there was almost a sense of numbness awash over the attendees.

The Next 12 Months

This has been a rough year.

As promised, publicly held companies like Party Gaming, Sportingbet, Leisure & Gaming, 888 and others immediately withdrew from the U.S. market. Sportingbet went so far as to sell off its U.S.-facing operations for $1 to an Antigua-based company called Jazette Enterprises.

Besides PartyGaming and Sportingbet, in the month following the enactment we saw a mass exodus of operators and providers from the U.S. market, resulting in a loss of over half of the industry's revenues (about $7 billion).

Then came the payment processors. FireOne was the first to bail out of the United States on Oct. 13. And while it seemed for a while that FireOne may be the only company to leave, just a few months later we saw the second wave of deserters.

Neteller, which upon the passage of the UIGEA announced that it would continue processing payments for U.S. players, found itself under federal investigation in January when its two founding directors were arrested in the United States and charged with conspiracy and money laundering in connection with illegal Internet gambling. Neteller quickly suspended its U.S.-facing operations, followed by Instadebit, Citadel and Click2Pay, which decided not to take on new U.S. customers.

Neteller has since settled with the Department of Justice and will not be prosecuted for any federal crimes so long as it fulfills the conditions of the settlement agreement within a two-year time frame, including reimbursing U.S. customers whose funds were frozen upon the company's suspension in January. Neteller began its payback plan on July 30 and has since disbursed over $70 million of the $136 million owed.

Some changes have been positive. CryptoLogic CEO Lewis Rose predicted during the closing session last year that "prohibition precedes regulation. . . so, what you'll see is regulation that follows in due course."

And what happened in April? Rep. Barney Frank, D-Mass., introduced the Internet Gambling Regulation and Enforcement Act (IGREA) which proposes a licensing and regulatory regime enabling domestic and offshore gambling companies to operate in the United States.

Following the introduction of the IGREA, three more I-gaming regulation bills were introduced in Washington.

The UIGEA regulations were due in the middle of July, yet here we are approaching September and we have heard nary a whisper from either the Federal Reserve Board or the U.S. Department of Treasury.

Looking Forward

I have interviewed representatives from a few companies that seem hopeful about this year's event. One executive even said that he hopes the mood is different this year and that focus is on moving forward.

So, here's the question: Can the industry come together this year and not necessarily forget the events of the last year, but learn from them and look positively toward the future? We've had to adapt to big changes and those changes are reflected in this year's program. There are relatively untapped regions to explore, such as Asia and Latin America. We have other sectors to examine, such as social networking. Could it be the future of casual betting? And we still don't know whether bingo is worthy of the hype.

Let's focus on other parts of the world this year.

Emily Swoboda is the senior staff writer at IGamingNews. She lives in St. Louis, Mo.