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30 December 2011

Gaming - gambling companies happy as U.S. signals end of prohibition; Players rejoice

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Shares of online gaming firms hit the jackpot after the US Department of Justice revealed it now plans to free them from legislation that should only apply to sports betting.

As industry experts forecast the beginning of the end for online gambling prohibition in the US, Bwin.Party Digital Entertainment jumped 29.7p to 160p, 888 Holdings advanced 3.25p to 39.25p and Playtech 34.5p to 266p.

There is no doubt the new stance on the Wire Act of 1961 marks a huge shift for the Justice Department, which has previously proclaimed all forms of internet gambling – especially the increasingly popular online poker – are illegal.

The Wire Act, which banned gambling via telecommunications across state lines, has also been applied within states to prevent web-based betting.

But in recent months it has become evident the Justice Department was moving away from that strict interpretation.

In April Preet Bharara, the US Attorney in Manhattan, indicted 11 individuals in a crackdown on online poker websites and launched a £1.95bn civil lawsuit against firms including PokerStars and Full Tilt Poker, but did not include any Wire Act violations among the charges.

Rather, Bharara alleged the men had violated the Unlawful Internet Gambling Enforcement Act, which became law in 2006, and the Illegal Gambling Business Act.

And as the Justice Department now advises that the Wire Act does not apply to online poker, industry followers believe the way is clear for online gambling to proceed within state boundaries.

Broker Investec advised that the states of California, New Jersey, Nevada, Illinois, New Hampshire, Florida and Washington are in advanced discussions to open up gambling across state lines too, with regulation likely to take shape during the upcoming year.

A spokesman for Bwin.Party Digital Entertainment said: "It is an interesting step forward and we will continue to keep a close eye on the situation."

If individual US states are allowed to profit from online gambling, the federal government will soon take an increased interest in controlling and taxing the market rather than allowing a patchwork quilt to emerge.

Bwin.Party brands include PartyPoker, PartyCasino, PartyBets and World Poker Tour.

Other countries whose citizens enjoy online gambling - such as Australia, New Zealand, South Africa and Italy are watching the situation closely.

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