April 8, 2009 (PAP Newswire) – Yesterday’s announcement that PartyGaming has
settled with U.S. prosecutors over its online gaming activities in the
United States has been greeted with a flurry of coverage in some
high-profile media outlets.
Even though some in the iGaming
industry are apparently unhappy that PartyGaming is relenting under
what seems to be biased and unfair persecution by the U.S., the general
consensus has been markedly positive.
As reported yesterday,
the immediate point of interest was a sharp rise in shares for the
U.K.-based gaming company, as well as for other gaming companies.
PartyGaming’s shares “soared more than 15 percent,” according to the Associated Press.
There’s also a great deal of speculation that a wave of mergers and
consolidation will be forthcoming, finally allowed by the resolution of
this long-standing thorn in the industry’s side.
“That’s because some financial analysts see the settlement as possibly leading to others,” writes Gilbert Gaul in the Washington Post, “thus reducing uncertainty in the industry and opening the door to industry consolidation and expansion outside the U.S.”
“[The settlement] does remove a big uncertainty,” agrees Jeremy Warner in the U.K.’s Independent magazine,
“which ought in time to allow renewed access to equity and debt markets
so the company can begin the process of consolidating this
The settlement is also being
greeted as good news by many analysts because it allows PartyGaming to
escape criminal prosecution, and because the sum that was negotiated is
lower than many analysts had predicted. (The fee is $105 million, to be
paid out in installments through September 2012.)
settlement covers the period from 1997 to October 2006, when
PartyGaming offered internet gaming to US players, including real-money
poker and casino gaming,” writes Chris Tryhorn and Julia Kollewe in today’s online edition of the U.K.’s Guardian newspaper.
“The company admitted that even before the 2006 crackdown — which
forced it to abandon the US market — some of its activities had broken
“Prior to 13 October 2006, certain of the US customer
transactions intended for PartyGaming that were processed by third
parties, and other gaming and payment-related activity, were contrary
to certain US laws,” PartyGaming representatives said in a statement
published at the Guardian.
In his Independent column,
Jeremy Warner goes on to conclude that the settlement can also benefit
PartyGaming by creating a positive relationship with the U.S. in case
online gambling is ever legalized there. “This is not altogether
impossible at some stage in the next few years,” he writes. “In the
search for new sources of income, some of the big physical gaming
groups in the US are dropping their objections to the genre. Some
privately owned poker sites, such as Full Tilt Poker and PokerStars, still operate illegally in the US, and as a result have cleaned up in the online poker market.”
U.S. market, though off-limits at the moment, still represents the
world’s largest and most enthusiastic group of poker players. According
to the AP, the U.S. accounted for 80 percent of PartyGaming’s revenue
before it was forced to leave the market.
Finally, amid the
wave of positive reactions, there is some frustration about an industry
leader of PartyGaming’s stature admitting to breaking laws that are
vague, confusing, and seemingly haphazardly applied. After all, the
settlement essentially amounts to admission that the company committed
bank fraud, writes Roger Blitz at the Financial Times, who also hints that the financial results may not be as positive as initial reports indicate.
The Washington Post’s Gilbert Gaul also takes a more skeptical view: “Prior to the enactment of the Unlawful Internet Gambling Enforcement Act
in October 2006, PartyGaming operated one of the largest and most
active Internet poker sites in the U.S. The company immediately
withdrew from the U.S. market and stopped accepting U.S. players, which
caused a dive in its earnings and stock price. Nevertheless Justice
Department prosecutors continued to consider charges against the
company for targeting U.S. players before 2006, contending that
previous laws also outlawed Internet gambling.”
The Washington Post article also features some helpful analysis on the state of the anti-UIGEA movement in the U.S.; click here to read it. The Financial Times article can be found here, and the Guardian article can be found here. Click here to read Jeremy Warner’s article in the Independent, and, last but not least, the Associated Press coverage can be viewed via the Forbes website, here.