Aussie Response To Anti-Gambling Legislation

If you haven't yet read that George W is about to sign a law effectively banning online gambling in the US, you're internet has been down. The law prohibits credit card and money transfer companies from accepting payments to gambling websites. Without a way to cash out my winnings, why would I gamble?

Unsurprisingly, this uncertainly has seen online gambling stocks caned. PartyPoker, until recently a darling of the LSE, has fallen more than 60%. That's a loss in value of around A$5 Billion!!! And if this law really does prevent US citizens from gambling online, that real value of might be even lower. Already, several large online casinos have pulled up the welcome mat for US customers.

The reason for the law is relatively unclear, and its passage unexpected. To paraphrase the big man himself, I put it down to "shock and awe". Shock at how little the government knows about the passage of money online, and awe at the quantity of cash moving about. This makes governments nervous, particularly those who worry about how laundered money might end up buying a dirty bomb for downtown NYC.

In Australia we do permit some gambling online, but it is heavily regulated and predominantly sports betting. The main Australian player with exposure to the US market is Betcorp (ASX: BCL). It had a similarly catastrophic share price experience and fell more than 55%. It's a pity to see an Australian innovator suffer this fate (although BCL is moving to the London AIM), but in all of the carnage there is a real opportunity.

It is totally unrealistic to believe that US residents will cease gambling online, and equally implausible that companies will cease offering online gambling services to US customers. Instead, one of four outcomes will occur:
1. The law will not be enforced
2. A way around the law will be found
3. The industry will be taken over by organised crime
4. The law will be rescinded.

1 and 4 are both unlikely, given that the law has only just been passed (although 4 might occur as a result of extreme pressure). Option 3 is plausible, but presents no opportunity I want to discuss in this blog!

But option 2, a work-around, is exciting. Some great payment workarounds have met with astounding success online. The most well-known of these is Paypal, which is a way to reduce the risk of paying by credit card online (eventually acquired for a bucketload of cash by ebay).

There are already several Australian companies working in the online payment space, and surely this represents a prime opportunity for one of those to take the lead here. Paymate.com.au is one example, but there are also others below the radar that have developed more high tech solutions.

This challenge represents a prime opportunity for Australian innovation - perhaps in partnership with Betcorp, who may then find themselves global leaders in the online gambling space.

the Chinese have a well-worn curse: "may you live in interesting times". But perhaps Betcorp can take solace in another Chinese saying; in adversity lies opportunity.