Online Casino Play

April 7, 2009 - Ontario, Canada

The online casino gambling industry could be on the verge of a huge consolidation with PartyGaming agreeing to pay out a $105 million dollar penalty.

PartyGaming PLC said Tuesday it has reached a non-prosecution agreement with U.S. authorities over its defunct operations there, with the online gambling group agreeing to pay a $105 million fee.

After almost two years of discussions, the U.S. Attorney’s Officer for the Southern District of New York has agreed not to prosecute PartyGaming or any of its subsidiaries for providing internet gambling services to customers in the U.S. prior to the U.S. government banning the online gambling industry in October, 2006. In turn, U.K.-listed PartyGaming has accepted a “statement of facts” about its business activities prior to the ban, and will pay $105 million in eight installments over a period ending Sept. 30, 2012, from its existing financial resources.

Under the statement of facts, PartyGaming admits that it offered internet gaming to players in the U.S. from 1997 to Oct. 13, 2006, which was “contrary to certain U.S. laws.” PartyGaming has also “agreed to maintain, with respect to its operations, a restriction preventing internet gambling services from being provided to customers in the U.S. in violation of the prevailing law of the U.S. or any jurisdiction with the U.S.” Chief Executive Jim Ryan said it has been “a long and complex process but we have reached an amicable solution with the USAO that makes commercial sense for our business and is in the best interests of shareholders.”

“We are now well-placed to seize organic as well as strategic opportunities that previously were beyond our reach,” he said. PartyGaming’s successful resolution with U.S. authorities was seen as turning point for the online gambling industry, with many analysts forecasting industry consolidation.

So even on a ‘bad’ market day with the DOW down – companies like CryptoLogic Ltd is up over 7% on this exciting news. CryptoLogic’s share price has been beaten down over the past 12 months but now there seems to be a large pot of (buyout) gold at the end of the rainbow. After rumored to have turned down attractive offers last year it is expected that CrytopLogic would jump at a good offer from PartyGaming.

Gambling Las Vegas style have hit the Philippines, the State-owned Philippine Amusement and Gaming Corporation (PAGCor) has announced that it is proceeding with plans to build the $15 billion Entertainment City near Manila. The site is situated on a 150 hectares of reclaimed land in Manila Bay and could feature up to eight hotels alongside theme parks, shopping malls and other recreational establishments including casinos when completed. It is being touted as the nation’s answer to Macau and Las Vegas but faced several hurdles including fears over a potential rise in levels of prostitution. ‘We expect to begin construction of the project by first quarter of next year,” said Rafael ‘Butch’ Francisco, President and Chief Operating Officer for PAGCor, which owns the nation’s 13 casinos. “The project will then take about five years to complete. We’ve been trying to assure the Church for the past two years that there is not going to be casinos in every corner of this development.” The last hurdle was cleared last week when the local government of Paranaque granted the project ecozone status, the final pre-construction requirement providing tax incentives for investors including delays in paying property tax. Francisco revealed that three companies had already expressed interest in investing in the project, Japan’s Aruze Corporation.

Alliance Global and the SM Group of Companies, while America’s Steve Wynn and Australia’s James Packer have reportedly passed for now. ‘This project will result in about 400,000 jobs including the multiplier effect it will have on contractors, cement producers and other establishments to be built around Entertainment City,’ said Francisco. The local government stated that it expects to earn around $10.6 million annually from the project by receiving 25 percent of the take from gambling and five percent on non-gaming revenues, both of which are below the Philippine corporate tax rate of 35 percent.  Good news for the government of the Philippines.  I hope they have bingo games at the new casino because that would be all the encouragement I need to visit.  At this point I would even be pleased with some online bingo action.

Many gaming companies are closely watching Danish courts as it applies toward online poker.  The Copenhagen Post has reported that a Danish municipal court has ruled that poker tournaments do not contravene Danish gaming laws.  Poker is not merely a game of chance but also requires skill and is therefore legitimate competition, a municipal court in the district of Lyngby ruled Friday.

The ruling acquitted the president of the Danish Poker Association, Frederik Hostrup, of charges of arranging illegal gambling events. Hostrup had been sued by hotel and restaurant trade organisation Horesta on behalf of the nation’s [land] casinos. The ruling goes against a decision by the Justice Ministry’s legal affairs committee in 2006, which concluded that poker constituted illegal gambling.

Hostrup’s attorney, Henrik Hoffmann, told Politiken newspaper that Friday’s ruling legitimises poker, which has become immensely popular in Denmark over the past couple years.

“Poker has become a sport of the people,” he said. “There are between 200 000 and 300 000 Danes who play poker at least once a week and more than half a million who now play regularly.”

Illegal gambling is, according to Danish criminal law, games or competitions where the organiser “attempts to achieve a commercial economic gain”. Hoffmann said poker is more about betting wisely, playing smart and getting the other players to think you have different cards than those you actually have in your hands.

“You can win in poker based on being clever enough to hide your strategy, even though you might have a fairly poor hand,” he said.

Horesta spokesperson Erik Jensen was disappointed and surprised by the ruling. “Anytime you play for money, the risk for becoming a gambling addict increases,” he said. “[Unspecified] Research has shown that there are some 85 000 Danes who are potential addicts, which is why these precautionary measures are so important.”

Prosecutors now have 14 days to decide whether to appeal the ruling.  It is interesting to see the logic being used to make poker legal.