The online gaming industry's bet that American legislators would never outlaw internet games such as poker went wrong yesterday.
An estimated €6 billion was wiped off the sector's value as share prices crashed after a weekend ambush by Washington.
PartyGaming and 888 Holdings admitted they will have to suspend operations in the lucrative US market if a new bill, passed by congress on Saturday and designed to cut off players' access to funds, is signed by President George Bush.
The prospect of the new law forced Sportingbet to abandon merger talks with World Gaming yesterday.
"Funds and investors will be licking their wounds for, what I believe, has been a mirror image of the technology crash only seen five years ago," said Marvin Sones of spread betting firm WorldSpreads.com.
Online gaming executives, however, said the industry still has a future, albeit a less lucrative one in the short term as they scramble to replace lost US revenues with cash from players in countries that have a more benign regulatory approach.
"We have a very viable business going forward - not as large as it is now, but that's okay. We will have to catch up, that's all," said John Anderson, chief executive of 888 Holdings, which makes just over half its revenues in the US.
"Internet gaming is here to stay," he added. "People like to do it, it is a leisure pastime, people enjoy it and they are not going to stop. They are not even going to stop in America, what will happen there is it will go underground." Analysts, however, were not so sure.
"We believe that this will have a very material impact on the long-term prospects of online gambling and, in particular, poker," said Julian Easthope, a UBS analyst.
Shareholders are nursing massive losses after yesterday's crash. Among the losers will be pension fund managers who were forced to buy into the online gaming sector because they run tracker funds that must invest in FTSE 100 constituents, such as PartyGaming.
The new law makes it illegal for banks and credit card companies to make payments to online gambling sites. - (Guardian service)
