The Future of the Online Gambling Industry Post-UIGEA

April 5, 2017

Last updated: Feb 18, 2007

When U.S. President George Bush signed the Unlawful Internet Gambling Enforcement Act in 2006, the online casino industry was in shock. In the months leading up to the bill, many internet companies decided to play it safe and started looking at other market options in Europe and the Far East. However, nobody really expected the bill to be passed, especially the way it was sneaked through, attached to the totally unrelated Safe Port Act.

Immediately after the bill was signed, many top casino companies, especially those that are publicly listed and therefore have stockholders to answer to, closed their doors to American gamblers. These companies had two choices - they could stay and risk having their personnel arrested or they could pull out of the U.S. market and seek other markets while it was relatively early days yet. Most companies opted for the latter choice and Party Gaming - a U.K. based company that trades on the London Stock exchange - was the first to go.

One of the main problems facing these companies that have chosen to block U.S. customers is the fact that they need to lay off staff, since a majority of their market has been lost - even if only temporarily. Party Gaming, for example, had to lay off 800 of its employees in India and 80 in Gibraltar.

Not only does the Unlawful Intenet Gambling Enforcement Act affect online casino operators directly. We need to consider the many different industries that are affiliated to the internet gambling world, such as advertising and media fields. Lost advertising revenue means that some publications and media outlets have had to lay off staff and the trend does not seem to be slowing down.

The long arm of the U.S. law continues to stretch to other areas. Recently, American authorities arrested two founding members of the popular online payment company, NETeller - despite the fact that this company is based in the United Kingdom. In addition, the U.S. has subpoenaed several non-U.S. banks to check their records relating to internet payment transactions. It seems that no company is safe from the clutches of the UIGEA.

Economically, the UIGEA has had a tremendously detrimental affect on the internet gambling industry. Share prices for many of the top companies plummeted to unprecedented levels and big names such as Party Gaming, 888 and Sporting Bet are struggling to retain some sort of grip in the market.

The focus of online gambling seems to have shifted to Europe and the Far East. For those companies that had a bit of foresight and tried to establish themselves in the European market before or directly after the UIGEA was signed, there may still be hope of getting a piece of the market. Many smaller companies, however, find it difficult, if not impossible, to get a foothold in these markets and need to succumb to a merger or closing down altogether.

As the United States goes ahead with its Prohibition process, the United Kingdom is taking a completely opposite direction and is ironing out the final creases in its plan to regulate the gambling industry in its country. The effects of this policy are already spilling over into other European countries that are struggling to define their national stance on internet gambling, all the while attempting to comply with the free trade policies of the European Community. Acting on the success that the tiny Caribbean country, Antigua had in its case against the U.S. involving internet gambling, the EU is reportedly considering taking the new UIGEA to the World Trade Organization with claims that it goes against WTO policy.

It remains to be seen what the future holds for the global internet gambling industry, and whether the pro-gambling lobby in the United States will be able to successfully revoke the new law and correct some of the damage that has already occurred in gambling markets across the world.

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