Business Risk: Online Gambling firms seek assurance from US

One of the companies, PartyGaming, says that it has opened a channel of communication with the authorities in the US and as a part of its discussions has agreed to release information to US authorities. The other, 888, which advertises heavily at televised sporting events, says that its discussions centre around bets taken before the US passed new laws last September, following which the company ceased taking bets from US customers.

PartyGaming is in discussion with the District Attorney's office for the Southern District of New York - that's Robert Morgenthau's Manhattan office. Whilst the company is not saying so, this implies that Morgenthau, who pioneered the strategy that all US interbank payments clear through Manhattan and therefore fall within the jurisdiction of his office - a strategy that, 25 years later, was enshrined in the US PATRIOT Act - is considering using counter-money laundering laws to seize profits relating to internet gambling by US residents.

If circumstances so demand, the USA PATRIOT Act could be used to block companies from using, via their own non-US banks, US dollars for transactions, and could lead to a freezing of funds in the hands of the company's bankers' US representatives.

888 is in discussion with the US Department of Justice, but it has not said which part of that department it is talking to.

The legislation in the US led to a collapse in the value of internet gambling companies, and Ladbrokes pulled out of a proposed purchase of Isreali owned but London listed 888.com in the light of uncertainty over potential arrests.

SportingBet, BetonSports and payment gateway Neteller have all been the subject of investigations with officers being arrested, some having been charged and some having settled.The US is reckoned to be by far the largest market for internet gambling both on games of chance and sporting events. Inter-state and international sports betting has long been considered by the US authorities to be illegal under existing laws relating to use of inter-state communications media.

But 888.com has had something of a result which has shored up its value: in February this year, a judge in Israel ordered that it was illegal to place bets with any non-Isreali company. However, 888.com's position is tenuous: although 51% owned by two Isreali brothers, it is listed on the London market and in fact operates from Gibraltar, where sources say that it's operations are in the same building as Ladbrokes and PartyGaming.

In January, the EU warned the US that its laws were interfering with lawful business conducted in the EU. Britain, with an economy that is largely missing anything but services and tourism, wants to become a gambling centre and has passed casino and on-line gambling friendly (including tax breaks) laws.

In Hong Kong, the authorities have warned payment processors and banks that as Hong Kong law prevents the making of bets by anyone in Hong Kong other than with the Jockey Club, any passing of payments is tantamount to money laundering or funding a crime.

Both Visa and MasterCard banned the use of their cards for betting by US residents some three years ago, leading to an upsurge in alternative payment mechanisms including Neteller and a host of copycat services.