by Hillary LaClair, Senior Editor
April 15, 2009
The recent settlement agreement between Party Gaming, a big name in the online poker industry, and the U.S. Department of Justice as sparked a great deal of controversy among gaming operators who feel that it has set dangerous precedents for the future of online poker. Whether ultimately good or bad for other offshore gaming operators, the settlement has brought much needed attention to the legal status of online gaming in the United States.
Although Party Gaming executives initially criticized co-founder Anurag Dikshit for his having reached a settlement with the DoJ, on April 7th Party Gaming struck a $105 million settlement with US authorities that has freed the company from the risk of prosecution and has allowed the company to begin to consolidate in the online poker industry. The charges against the online poker giant remain unclear as the company exited the U.S. market when the 2006 Unlawful Internet Gambling Enforcement Act went into effect.
The settlement between PartyGaming and the U.S. attorneys in New York calls for a fine of $105 million to be paid by the company over the next 3 ½ years. Additionally, PartyGaming admits to violating what the Post article calls “a disconnect(ion) between 21st century technology and the 20th century laws used to protect Americans from gambling.” PartyGaming officials said the government would not prosecute the parent firm or any of its subsidiaries for offering online poker and other forms of gambling to U.S. customers between 1997 and October 2006.
The Washington Post has responded to the settlement in a piece entitled, “Online Poker Settlement Could Shake Industry.” “Prior to the enactment of the Unlawful Internet Gambling Enforcement Act in October 2006, PartyGaming operated one of the largest and most active Internet poker sites in the U.S. The company immediately withdrew from the U.S. market and stopped accepting U.S. players, which caused a dive in its earnings and stock price,” the article reads. “Nevertheless Justice Department prosecutors continued to consider charges against the company for targeting U.S. players before 2006, contending that previous laws also outlawed Internet gambling.”
The attention that the settlement has brought has certainly benefited the company. An immediate point of interest was a sharp rise in shares for the U.K.-based gaming company, as well as for other gaming companies. PartyGaming’s shares “soared more than 15 percent,” according to the Associated Press.
“That's because some financial analysts see the settlement as possibly leading to others,” writes Gilbert Gaul in the Washington Post, “thus reducing uncertainty in the industry and opening the door to industry consolidation and expansion outside the U.S.”
It is unclear what effect Party Gaming’s decision to settle will have on the industry, especially while the U.S. is involved in multiple trade disputes over discriminatory acts towards offshore online gambling establishements.
“The U. S. government has now succeeded in driving out the reputable, publicly-traded Internet gaming operators,” said Joseph Kelley, a professor of business law at the State College at Buffalo. Kelley, who has served as an expert witness for gaming and government interests, concluded, “It has not decreased online gambling, but has reduced the ability to monitor suspicious transactions.”
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