PartyGaming Remains In Talks With US

by Jason Gorringe, Tax-News.com, London

06 March 2008

Gibraltar-based online gaming firm PartyGaming has revealed that it is still in talks with the US legal authorities to avoid criminal prosecution for taking online wagers from US customers prior to the introduction of legislation in 2006, which effectively shut down the industry in the US.

PartyGaming revealed in its preliminary results for 2007 that it is "continuing to respond voluntarily to any requests for information" from United States Attorney’s Office for the Southern District of New York, with which it initiated discussions with in June 2007.

While PartyGaming and other global e-gaming firms claim to have stopped taking bets from US customers immediately after the enactment of the Unlawful Internet Gambling Enforcement Act (UIGEA), the industry fears that the US authorities may still crack down on companies which took bets from Americans prior to that date, when the legality of the activity in the US was still open to question.

"The Group remains unable to assess the likelihood of any particular outcome of these discussions but is actively pursuing a resolution as soon as practicable," the statement explained, adding that the exact timing of such a conclusion "remains uncertain".

Mitch Garber, PartyGaming's CEO, told a press conference that he was hopeful a resolution could be reached during 2008. However, Garber also announced his decision not to renew his contract with the company when it expires in May 2009, and indicated that he could step down sooner if a replacement is found in the meantime.

However, he played down the possible impact of this on the legal negotiations, stating that: "I don't think that...it would have any impact, negative or positive, on the DoJ discussions."

It is understood that PartyGaming, as well as other e-gaming firms engaged in talks with the Justice Department, including 888 Holdings and Sportingbet, are also keen to reach a favourable settlement in a bid to appease the concerns of banks, which are reportedly refusing to lend to these companies, fearing a backlash from the US authorities.

The UIGEA was approved by Congress in 2006 and prohibits gambling businesses from accepting payments in connection with unlawful internet gambling, including payments made through credit cards, electronic funds transfers, and checks.

However, the legislation is facing challenges to its legality, both from within the US and beyond. Last June, the Interactive Media Entertainment and Gaming Association, filed a suit in challenging the law's constitutionality.

The US government is also facing mounting pressure for compensation from some of its trading partners, including the EU, after abrogating one of its WTO treaty commitments to sidestep a ruling by a WTO dispute panel in favour of Antigua & Barbuda, which has challenged US efforts to ban internet gambling.

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