Top Stories of 2007

11 January 2008
See Also:

A Look Back at 2007

The Best and Worst of 2007

A Glance at 2008

  1. The WTO delivers its final decision in the US/Antigua case.
  2. European member states' gambling policies remain in question.
  3. The United States mounts its case against BetonSports
  4. Neteller endures a painful divorce with the U.S. market.
  5. Unibet challenges European law . . . and suffers the consequences.
  6. Yahoo, Google and Microsoft succumb.
  7. The industry adjusts to the UIGEA era.
  8. New prohibition efforts emerge across the world.
  9. More governments regulate I-gaming.
  10. England restricts advertising from non-approved territories.

WTO - Finally Over?

The year began with chatter about the possibility of the European Union joining Antigua and Barbuda in the fight against the United States' unfair Internet gambling laws. And in March, a World Trade Organization panel delivered yet another victory for Antigua, declaring that the United States had done nothing to bring its laws into compliance with international trade laws as prescribed by previous WTO decrees. But, rather than comply with the order or appeal the decision, the United States decided to withdraw gambling services from its commitments to the General Agreement on Trade in Services -- opening itself to compensation claims from any WTO member affected by the decision. As expected, over the next few months several mmbers, including Antigua and the European Union, filed compensation claims per GATS policy. Meanwhile, Antigua awaited a decision from a WTO arbitration panel, the final step in the resolution process in its dispute with the United States. The panel handed down its decision on Dec. 21, awarding Antigua a potential $21.1 million in trade sanctions per year against the United States. Also in December, the European Union settled with the United States. The value of the agreement was not revealed, but it was thought to be far less than the $100 billion the European Union was reportedly seeking.

Europe - The Border Wars Rage On

Remote gambling policy has long remained a heated issue in Europe, and during 2007 the EU 27 were certainly no strangers to high-profile developments. The European Court of Justice handed down its anxiously-awaited Placanica decision, an arguably ambiguous development which saw both the cross- and closed-border camps claim victory. Open infringement proceedings brought by the European Commission against several member states also made a splash. France, for many years a staunch opponent of opening its borders to foreign competition, began negotiations with Brussels to liberalize its pari-mutuel sector. Germany, on the other hand, passed over the commission's response to its controversial Interstate Lotteries Treaty--all 16 federal states signed off on the treaty in December. Meanwhile, the commission, headed by cross-border proponent Charlie McCreevy, opened new infringement proceedings against Greece in June.

BetonSports - The Waiting Game

As the I-gaming industry watches on pins and needles, the U.S. federal case against BetonSports is inching its way toward a trial. Defendants kicked off 2007 by filing pretrial motions, among which was a motion to dismiss the case based on the U.S. violation of international trade laws and its dispute with Antigua and Barbuda regarding I-gaming. Magistrate Judge Mary Ann Medler has yet to rule on the motion. In late March, an eight-month worldwide search ended as the FBI arrested BoS founder Gary Kaplan in the Dominican Republic. Kaplan was arraigned in May in St. Louis, pleading not guilty. He has been denied three appeals for bail, and remains in custody. Prosecutors amended the indictment in June, adding another defendant, former BoS employee Penelope Tucker, who was arrested and charged with Count One (racketeering conspiracy). Meanwhile, BoS plc faced contempt charges at the beginning of 2007 after repeatedly failing to appear in court. In February, District Court Judge Carol Jackson found the company in contempt of court for deliberately ignoring a Dec. 28, 2006 court order to appear. Finally in May the company's attorneys appeared in court to enter a guilty plea to the racketeering charges. In the same month, the company went into liquidation to begin repaying its creditors. BoS Plc has not been sentenced yet.

Neteller - A Very Bad Year

PayPal's exit from the I-gaming industry in 2002 spelled glory days for next-in-line payment processor Neteller. But the UIGEA slammed the door on four incredibly prosperous years for the London-listed industry leader. The January arrest of Neteller founders Stephen Lawrence and John Lefebvre was followed by the company ceasing to serve American customers, and most of its competitors quickly followed suit. The UIGEA's passage three months earlier had led to surging business for operators who stayed in the U.S. market after their public rivals fled, but customers grew skeptical and confused when payment options dwindled. The resulting loss of business has been profound, and payment processing has become the single biggest challenge in the American market. Lawrence and Lefebvre founded Neteller in 1999 after US credit card companies began denying transactions for Internet gambling, and in April 2004 they each sold £5 million in shares in the company's AIM float. The men no longer held executive positions with Neteller when they were arrested, but they remained major shareholders of the company. Both pleaded guilty to conspiracy charges in July, but have yet to be sentenced. While Neteller's founders fought their legal battles, the company itself was a target of U.S. law enforcement. An investigation conducted by the U.S. Attorney's Office for the Southern District of New York resulted in the embattled payment processor agreeing to a $136 million settlement in July. Then, after a six-month absence on the London Stock Exchange, the company started trading again, with a renewed emphasis on targeting non-U.S. markets. But, the road back to prosperity is anything but easy. In addition the $136 million hit, the company has been tasked with replenishing its depleted customer base and paying back $94 million to U.S. account holders.

Unibet - Not an Easy Ride

Unibet, one of the industry's most outspoken supporters of European cross-border commerce, several times found itself on the wrong end of developments that bordered on the bizarre. Despite a host of legal challenges--even the written support of the European Commission--Unibet's cycling team was still barred entry to the sport's most prestigious race, the Tour de France. Teams representing state-owned monopolies, however, including the Française des Jeux and Belgium's Predictor-Lotto, were allowed to race. After the Tour, Unibet announced that it would withdraw its sponsorship of the team. In October, Chief Executive Petter Nylander was detained on a French warrant while traveling through Amsterdam, Holland. The arrest was reminiscent of the bwin arrests by French authorities in September 2006. Nylander was extradited to France from Holland, posted bond and returned to London. The morning of his return to the United Kingdom, Nylander told reporters Unibet would continue to take bets from French customers and called French gambling laws "obsolete."

The US Ad Crackdown - Born Again?

In the shadows of the UIGEA, the Neteller investigation and the BetonSports case, little was heard throughout the year on the "aiding and abetting" front in the United States . . . until December, when Microsoft, Yahoo and Google agreed to pay a combined $31.5 billion in fines for promoting illegal Internet gambling. Many months had passed since a major media outlet buckled under pressure applied by the U.S. attorney for the Eastern District of Missouri, and now one might wonder whether the advertising crackdown has been rekindled. It started in 2003 with a letter to the National Association of Broadcasters, advising that U.S. media carrying I-gaming ads might be aiding and abetting illegal activity. This was followed by subpoenas to numerous media outlets of all sizes and a string of threats that Discovery Channel, Sporting News, and others made disappear for a few million bucks. The advertising cases had somewhat taken a backseat to the new prohibition law and the arrests of prominent industry execs, but the new settlements serve as a reminder that the ad crackdown isn't dead.

UIGEA Fallout - Wound Licking

The interactive gaming landscape has changed dramatically in the 15 months since the US passed its UIGEA. Prior to prohibition, the majority of online gamblers came from North America, but North Americans now represent less than 10 percent of the global market. Europe has the lion's share of close to 70 percent. Asia and the Middle East comes in second with about 15 percent of the market. Before the UIGEA, 1,955 gambling sites accepted U.S. action, but the number has shrunk 45 percent to 1,079 since then. Many companies that abandoned the US market have found new opportunities in other regions; some have even replenished their player bases beyond pre-UIGEA levels. Companies like PartyGaming, Neteller and Sportingbet are hoping their new directions will translate to bullish investment in 2008. Leading London-traded I-gaming group 888 has already rebounded well, entering 2007 trading at 122.12p and closing the year at 142p. For some of the LSE-listed companies, the process of severing ties with the United States entailed negotiating fines with the Department of Justice. In addition to the Neteller settlement mentioned above, PartyGaming and 888 were believe to be negotiating deals that combined could cost them over $1 billion.

Despite the industry's moving on without the U.S. market, anti-UIGEA efforts persist in the States. The Poker Players Alliance continued to lobby for regulated online poker, flying poker professionals to D.C. in October to use their celebrity status and well reasoned arguments to further its cause. As one of the biggest supporters of skill-gaming legislation proposed by Rep. Robert Wexler, the PPA appears to favor distancing online poker from other online gambling activities. Meanwhile, the Interactive Media Entertainment & Gaming Association is challenging the legality of the UIGEA in federal court.

Prohibition and Enforcement - Follow the Leader

UIGEA Fever has taken the world by storm. Numerous countries considered or passed prohibition laws, and a few, such as Norway, are going the route of implementing a payments ban similar to that of the United States. Other jurisdictions on the prohibition trail in 2007 include Turkey, the Czech Republic and Brazil. Law enforcement in several additional countries--China, France, Greece, Israel and New Zealand, to name a few--ordered online gambling operations to seize doing business within their borders. The big difference in 2007: While U.S. prohibition and law enforcement efforts were often considered unrealistic in previous years, governments are now looking to the U.S. approach as an effective model.

Global Policy - Roads to Regulation

On the other side of the coin, several jurisdictions took steps toward regulation in 2007. The U.S. Congress, for example, further considered the Frank regulatory bill, as well as the Berkley bill, which seeks to establish a study commission to explore regulation. Spain and Mexico adopted laws permitting I-gaming, while South Africa took significant steps toward moving a regulatory bill. In the Asia-Pacific region, Papua New Guinea passed a gaming regulatory law that included I-gaming and top regulators in Macau made it clear that I-gaming is on their agenda. Across the Indian Ocean, executives from bwin lobbied in India for legalized sports betting in that country. Nevertheless, certain countries appear to be missing the mark, by implementing regulatory laws that are not at all conducive to industry growth. For example, long awaiting liberalized gambling rules have not made the United Kingdom anymore attractive to I-gaming operators because the cost of doing business in England is much higher than that of competing jurisdictions. And it is believed that South African policy, anticipated for many years, will not legalize poker and will not allow operators to advertise domestically.

England - The White List

On the heals of Italy's infamous blacklist of forbidden I-gaming operators in 2006, U.S. government officials tasked with providing enforcement mechanisms of the UIGEA toyed with the idea of maintaining a similar list, but concluded that doing so would be too costly and perhaps not very effective. But the list that caused a real uproar in 2007 was England's catalog of approved territories. The U.K. white list specifies which countries' licensed operators are worthy of advertising in England, and all but two of the territories--Alderney and the Isle of Man--are within the European Economic Area. Some of the territories failing to make the list, such as the Netherlands Antilles and the Alexander First Nation in Alberta, Canada are looking to make changes that will give them inclusion. Meanwhile, many I-gaming operators based in non-white-listed jurisdictions are considering relocating so that they can advertise in the United Kindgom.

Additional Top Stories:

  • The crackdown on I-gaming continues in China, with more raids, the creation of a special net monitoring unit and the arrest of two execs from British gambling group Betex.
  • AbsolutePoker is rocked by a cheating scandal linked to a "trusted consultant."
  • The state of Washington shuts down P2P betting site and its founder faces charges in Louisiana.
  • Land-based casino operator Groupe Partouche fights for the right to operate online in France.
  • An IP ruling in against Bodog in the United States results in the Online betting giant Bodog losing its domain name and the company's boss losing his cool.

Stories that Weren't

  • The I-gaming industry is destroyed by the passage of the U.S prohibition law.
  • Thanks to the Placanica verdict, the legality of cross-border gambling in Europe becomes crystal clear.
  • As scheduled, the U.S. Treasury establishes rules for enforcing the UIGEA.
  • Macau and South Africa follow up on plans to regulate I-gaming.
  • Thanks to its reformed gambling policy, England rules the I-gaming universe.