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Last Updated: Friday, 13 October 2006, 21:27 GMT 22:27 UK
Gaming firms exit US for just $2
Sportingbet logo
Gaming firms are preparing for the US ban
Online gaming firm Sportingbet has sold most of its US business for $1 (53p) hours before a law was passed outlawing internet gambling across the country.

Rival Leisure & Gaming has followed suit, selling its US operation to a new firm set up by its chief executive.

But the firm said the deal may breach market rules and the London Stock Exchange has launched an investigation.

On Friday, President Bush signed into law an act making it a crime to accept proceeds from online gaming.

Investors took the signing of the bill badly, with shares in gaming firms - which have been devastated since the law was announced - continuing to fall.

Sportingbet lost 10% of its value on Friday while its rival Partygaming saw its stocks slip 4.5%.

Sale frenzy

The imminent passage of the legislation has led to some dramatic corporate manoeuvring as affected firms seek to limit their US liabilities before the new laws came into force.

World Gaming called in the administrators on Friday after agreeing to cease its US operations and most of its directors have resigned.

Meanwhile, Empire Online, a company which offers marketing services to the internet gaming industry, said it was immediately ending all business in the US - where it earns 65% of its revenue.

This may constitute a technical breach of Alternative Investment Market rules
Leisure & Gaming statement

Sportingbet has sold its US sports betting and casino businesses to Jazette Enterprises for the nominal sum.

Leisure & Gaming, meanwhile, has hastily agreed to sell its US business to a newly formed company headed by chief executive Alistair Assheton, who has resigned from the business.

The AIM-listed firm said it had sanctioned the sale without prior shareholder approval since it would avoid about $6m in liquidation costs and it believed this was in investors' interests.

But it admitted the transaction - which it said would enable the firm to continue operating and would be put to a shareholder vote in due course - may "constitute a technical breach" of stock market rules.

The firm's shares were suspended after its nominated financial adviser, Altium Capital, resigned.

The London Stock Exchange said it would investigate the circumstances surrounding the sale.

"We will fully investigate any apparent rule breaches and I can confirm we are looking at this case," a spokesman said.

Several gaming firms, including Partygaming and 888 Holdings, had already said that they would stop accepting bets from US residents once the act becomes law.

'Fantastic business'

Sportingbet had been reviewing its US business since its former chairman Peter Dicks was arrested in September.

Though Mr Dicks has since been released, the arrest was part of a series of moves made by US authorities trying to discourage online gambling operators.

We are saddened to have to dispose of such a fantastic business as a result of political actions in the US Congress
Andrew McIver, Sportingbet

State officials in Louisiana had issued a warrant accusing him of "gambling by computer" but a New York court refused to sanction Mr Dicks' extradition to Louisiana.

"We are saddened to have to dispose of such a fantastic business as a result of political actions in the US Congress," said Andrew McIver, the firm's chief executive.

"The sale, however, prevents significant closure costs which would have been both expensive and time consuming."

Sportingbet said it would now focus on developing its business in Europe and Australia.

It will retain its Paradise Poker site, but will stop accepting US cash later on Friday.

Legal clarity

US lawmakers took the gambling industry by surprise when they agreed sweeping measures criminalising the transfer and handling of proceeds from online gambling earlier this month.

President Bush
President Bush's signature will alter the dynamic for gaming firms

Gambling on sports events was already illegal in most US jurisdictions.

But the scope of existing law governing the gambling industry was considered to be unclear and gaming firms promoted their businesses there on the expectation that their operations would be left alone.

US lawmakers are concerned that internet gambling has been fuelling social problems, such as debt and addiction, and could act as a magnet for criminal activity.

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02 Oct 06 |  Business

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