Why Partygaming, Sportingbet & 888 left?

[Harmonica]

Hi

I'm have trouble finding an article I read that spelled out the reasons why the companies listed on the UK stock market reacted the way they did, could someone maybe quickly explain it to me or provide me with a link. Because I am trying to work it out in my head right now, and it doesn't make any sense, I'm I right in assuming the bill only goes after the banks so therefore it shouldn't affect us as poker players or the actual poker sites, because I thought that all the sites only dealt with companies such as Neteller, who have said that its basically business as usual.

Thanks

[AndyH69]

Because (I believe) the legislation has made it illegal for companies to take bets from US citizens.

888 mentioned it in their conference call with investors, and also highlighted it in one of their press releases:

"These provisions state that, from the date the legislation becomes effective, the receipt of funds by electronic funds transfer and other prescribed methods in connection with internet gaming that is illegal under U.S. state or federal law will constitute a federal offence by the relevant operator."

Press release taken from here: http://miranda.hemscott.com/servlet/HsPu...nsform=newsitem (http://miranda.hemscott.com/servlet/HsPublic?context=ir.access&ir_option=RNS_NEWS&item =36483599715355&ir_client_id=5118&transform=newsit em)

While others (such as Poker Stars) are happy to take the risk, publicly-listed companies cannot afford to do so. They would find it more or less impossible to get people (and most importantly institutions) to invest in their company if they were breaking the law.

[Quasar]

i dont understand why a european based company listed on the UK stock market is subject to US law.

it is illegal to own firearms in the UK so does that mean any american who owns a firearm in the US can be arrested as soon as he steps on UK soil even though he left it at home??

[Jestocost]

I'm afraid there's not going to be a simple and easy answer to any of this. Companies make complex business decisions based on potentially subjective criteria all of the time; some are more prone to a conservative approach others are more willing to take risks. Just as some poker players are more likely to gambool and others are weak-tight, so it is with companies. You can find successes in either camp.

In many cases, attorneys won't give you a black and white answer on an issue. The Internet gambling legislation is one that has been open to interpretation and there are many gray areas. One company when presented with a range of options and the accompanying risks will opt for a risk averse position and lay down. Another company may elect to take the risks.

In addition, the Internet gambling law can have an impact above and beyond what it explicitly bans. Online poker sites can fully believe that they are operating legally and are exempt from the U.S. law, but if their banks and other service providers believe otherwise then it may be a moot point. It can be argued that the publicly traded UK/Gibraltar poker sites have by virtue of their legal structure of choice made themselves more prone to the effects of these kinds of influences.

In the end, reasonable people presented with the same set of facts may come to different conclusions. Party, Sportingbet, 888, et al have determined that their best interests lie in complying with the U.S. law despite potentially valid legal opinions suggesting that they don't need to. Full Tilt, PokerStars, UltimateBet and others have taken the same basic inputs and elected to place their faith in those viewpoints, in the face of the risk that they may be proven to be wrong or that circumstances may not play out in their favor. Perhaps one side will be proven to have made the correct choice or maybe something else entirely will be the key to long term survival and success.

Like poker, business frequently is a game of incomplete information. It doesn't lend itself to completely objective analysis. Sometimes you gamble against all odds and come out ahead, sometimes you play it safe and get rivered by a two outer. Time will tell what happens in the Internet gambling world.

[betgo]

They are weak/tight.

[Phil153]

Because the legislation has made it illegal for companies to take bets from US citizens or assist in the transfer of funds in direct connection with illegal betting or wagering (defined by state laws).

Even TruePoker CEO, who made the strongest statements on this board about online poker operators not being affect by this law, banned certain states from playing at his site when the bill was signed, to the contrary of all his strong assertions that this bill absolutely did not not apply to operators.

[MagCFO]

It has to do with legal liability. Public companies have to be very careful with respect to shareholder lawsuits.

If you are operating in an illegal market and something happens that makes the stock tank (board member picked up while in the US, etc.), you will get you butt sued big time.

That's a risk these companies can't take. Smart people like Calvin Arye at Bodog never went public for this exact reason.

[Richas]

Before this act the companies could claim that they believed what they were doing was legal under the Wire Act etc even though the US gov thought not. Now there is no ambiguity it would be illegal to accept cash from US players.

This wiggle room allowed them to list in London so long as they detailed the risks. Now there is no doubt that taking US cash is illegal they can't carry on operating in the US as a listed company.

The rules are clear that you cannot be listed if you are a criminal enterprise. You can't list Mafia.inc in the UK even if Mafia.inc promise not to break the law in the UK. This applies to all sorts of companies so say a tobacco company is listed they can sell cigarettes that kill to anyone who can buy them legally but you couldn't list if your business plan was to sell cigarettes to tobacco smugglers. Of course all tobacco companies sell low duty cigarettes in one country knowing they will be smuggled - this is just OK so long as they try to stop their guys conspiring with the smugglers.It's not OK to have ciggie smugglers incorporated listed.

It's this sort of grey area that sites listed under. With the new act there is no grey. For the shareholders it is essential they can buy/sell their shares and they own the business so no US players. They could go private and relaunch or they could do what Sportingbet did and sell the US business to a couple of the managers but a listed company cannot be based on criminal activity.

[Quasar]

its probably my lack of knowledge of law in both the UK & US that is preventing me from getting my head round this.

I dont understand how party and the other listed companies can be criminal enterprises since they have no presence in the US and presumably have not broken any laws in Gibraltar where they are based or anywhere else whose laws they have been subject to.

Just because the US decides something is illegal doesnt make it illegal everywhere else surely. They can legislate and prevent US banks etc from handling gambling transactions but surely they have no power whatsoever to legislate against companies not based on US territory.

Sorry if i seem retarded here but i just dont get it.

[Phil153]

It's pretty simple. They're taking bets from US customers. That means they're breaking US laws. If they were taking bets from Swedish customers, they wouldn't be breaking US laws.

Think of it this way. If I (living in Australia) open an online bank account in the US and commit fraud with that account, I have broken the laws of the US. That means that if I ever set foot in the country, or if the American government could be bothered extraditing, I am able to be arrested under US law, since I have broken the law by transacting with a US bank in a fraudulent manner.

[Richas]

[ QUOTE ]
I dont understand how party and the other listed companies can be criminal enterprises since they have no presence in the US and presumably have not broken any laws in Gibraltar where they are based or anywhere else whose laws they have been subject to.

Just because the US decides something is illegal doesnt make it illegal everywhere else surely. They can legislate and prevent US banks etc from handling gambling transactions but surely they have no power whatsoever to legislate against companies not based on US territory.

Sorry if i seem retarded here but i just dont get it.

[/ QUOTE ]

OK I'll have another go. You are right that they are not committing a criminal offence in the UK by taking money from a US customer but they are breaking the law in the US. As it is not an offence in the UK they cannot be extradited for this nor can they be prosecuted in the UK - they could only be prosecuted if they went to the US and were arrested.

The rules for the stock exchange listings apply though and they include not allowing companies to behave illegally wherever they operate. If you buy a London Stock Exchange share they have to be audited they have to report and they have to obey the law wherever they operate. This is important to the stock exchange as their regulations act as a protection for investors which in turn helps the company by giving them greater respectability. The stock exchange has these rules and if you want to list on the LSE you have to meet them. Crucially the owners need the listing to be able to buy or sell their shares. If they did not comply their shares could be suspended and the company delisted, this would be even worse for the shareholders than the large falls as a result of this legislation. The LSE just like New York or Tokyo will not let companies be listed if their business is illegal where they operate.

[adios]

You're asking for a rational explanation for a seemingly irrational action. I have no idea as to the viability of shareholder lawsuits in Great Britain. It's definitely a possibility that Party Gaming's actions precluded share holder lawsuits. I can guarantee that share holder lawsuits would result in the U.S. from a meltdown in price like the one Party Gaming had recently for U.S. companies. That's standard. Here's a link to a thread that discusses the rationale for Party's actions.

Reason for Pullout Thread (http://forumserver.twoplustwo.com/showthreaded.php?Cat=0&Number=7565660&page=&vc=1)

[MiltonFriedman]

You might also look for an article titled, "The Period". It describes this rhetorical device for structuring your writing so as to more effectively communicate.

Or, you could just stop doing speed.

[DespotInExile]

Public companies cannot take the risk of breaking the law. No Director would authorize management to do this, especially outside Directors. In theory, if Party were to knowingly break US law, members of the Board of Directors might find themselves under arrest if they travelled to the US. So Directors instruct management to take the conservative course and not run afoul of US law. Corporate Governance 101.

[aces_full]

[ QUOTE ]
[ QUOTE ]
I dont understand how party and the other listed companies can be criminal enterprises since they have no presence in the US and presumably have not broken any laws in Gibraltar where they are based or anywhere else whose laws they have been subject to.

Just because the US decides something is illegal doesnt make it illegal everywhere else surely. They can legislate and prevent US banks etc from handling gambling transactions but surely they have no power whatsoever to legislate against companies not based on US territory.

Sorry if i seem retarded here but i just dont get it.

[/ QUOTE ]

OK I'll have another go. You are right that they are not committing a criminal offence in the UK by taking money from a US customer but they are breaking the law in the US. As it is not an offence in the UK they cannot be extradited for this nor can they be prosecuted in the UK - they could only be prosecuted if they went to the US and were arrested.

The rules for the stock exchange listings apply though and they include not allowing companies to behave illegally wherever they operate. If you buy a London Stock Exchange share they have to be audited they have to report and they have to obey the law wherever they operate. This is important to the stock exchange as their regulations act as a protection for investors which in turn helps the company by giving them greater respectability. The stock exchange has these rules and if you want to list on the LSE you have to meet them. Crucially the owners need the listing to be able to buy or sell their shares. If they did not comply their shares could be suspended and the company delisted, this would be even worse for the shareholders than the large falls as a result of this legislation. The LSE just like New York or Tokyo will not let companies be listed if their business is illegal where they operate.

[/ QUOTE ]


Here are a few more thoughts:

Prior to this bill, the only federal statue that might apply is the Wire Act, and that was ambiguous at best. Second, state laws are 100% ineffective when dealing with activites taking place across national borders. We already saw what a joke they are with the arrest of the online gaming exec who flew into New York. He was picked up on a Louisiana warrant, and New York refused to extradite him and sent him on his way back to London. This sent a clear message that the threat to offshore gaming execs was a joke-they were confident that they were safe in a legal grey area.

You are correct that these individuals are still 100% beyond the reach of US law. However, the new laws make it clear-accept a wager from a US citizen and you are breaking US law. The law also allows the US government to try these people in absentia-they can be convicted without ever being arrested. This means that from this day forth, there is no question. These people can never step foot in the United States again. They WILL be arrested, and the most likely WILL end up going to jail. There is no more grey area. Most of the sites that closed there doors are also gambling sites, not just poker sites, so it is very clear they are breaking the new law.

Flagrantly breaking laws is not good for any "legitimate business" (Thats why US companies move to third world shitholes where there are no laws lol). Look at it this way, if you had $10,000 to invest, would you want to invest in a company that is openly violating US laws? The stock would be very volatile. Every time an arrest was made, the gaming sector would drop just like it did when congress passed the bill. Lawsuits aside, I think Party and others would have a hard time finding investors if they openly defied this law.

I also think these sites have the delusional idea that if they publicly "play nice" that they will be welcomed with open arms on the day that the US decides to legalize online gambling. I don't see it happening, but if it does, you can bet that any site that openly defies this new law will never be allowed to operate a legally licensed gaming operation in the US.

As far as Stars,FT and others, I feel that they are deluding themselves that they are somehow exempt because poker is a game of skill. I think its only a matter of time before they change thier tune as well. Playing poker is gambling. The outcome of every poker hand is subject to chance. Yes, in the long run a skilled player will win money, but it is the element of chance that makes poker gambling, as opposed to other contests of skill. I also think these sites are kidding themselves because the federal government can not make online poker legal. This is because gaming is regulated at the state level.

Although I stated earlier that in reality these people were not subject to US law, now that these offences are federal, if our governemnt has a big enough hard on to stop online gambling, they could try to lean on the countries where these sites are run in order to force them to comply with US laws-good old America, world police.

[adios]

[ QUOTE ]
You are correct that these individuals are still 100% beyond the reach of US law. However, the new laws make it clear-accept a wager from a US citizen and you are breaking US law. The law also allows the US government to try these people in absentia-they can be convicted without ever being arrested. This means that from this day forth, there is no question. These people can never step foot in the United States again. They WILL be arrested, and the most likely WILL end up going to jail. There is no more grey area. Most of the sites that closed there doors are also gambling sites, not just poker sites, so it is very clear they are breaking the new law.

[/ QUOTE ]

Where in the statute do you read this? From Nelson Rose's analysis:

The Unlawful Internet Gambling Enforcement Act of 2006 Analyzed (http://www.gamblingandthelaw.com/columns/2006_act.htm)

“Unlawful Internet gambling” is defined as betting, receiving or transmitting a bet that is illegal under federal, state or tribal law. The Act says to ignore the intermediary computers and look to the place where the bet is made or received.

This does not completely solve the problem of Internet poker, or even Internet casinos. The Act does not expand the reach of the Wire Act, the main federal statute the DOJ uses against Internet gambling. Although the DOJ has taken the position that the Wire Act covers all forms of gambling, courts have ruled that it is limited to bets on sports events and races. State anti-gambling statutes have similar weaknesses, including the presumption that they do not apply if part of the activity takes place overseas. This new statute requires that the Internet gambling be “unlawful.” But it would often be difficult to find a federal, state or tribal law that clearly made a specific Internet bet illegal.

Seems like there's still a grey area to me.