Tuesday, July 18, 2006

Internet gambling shares: Dropping like rocks

My friend Joseph Savirimuthu, an academic in the U.K. whom I met at the LSPI conference in Hamburg last May, sent along this piece from the BBC following the news of the indictment of BetonSports officials in the U.S. yesterday.


Internet gaming stocks, which have had quite a big run up (especially the Partygaming PLC stock, which had an IPO late last year), have fallen significantly on this news. The world is watching what will happen with regard to law enforcement efforts governing Internet gambling. With so many dollars flowing from U.S. citizens, any indications that those flows might be curtailed is a wet blanket on an active stock market. Effects of such inforcement are likely to be indirect, focusing on the infrastructure (e.g., financial transactions) and company officials who venture into US jurisdiction. The average gambler will not be targeted.

However, what will be interesting to watch is the overall effect of public legal action on the psyche of gamblers. To the extent that people feel bound to follow law, that motivation may be improved by public enforcement efforts. It remains to be seen whether that will translate into lesser business for online gambling firms, but the market seems to be betting that way.


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