Online Gambling Gone Wild: U.S. Crackdown Sparks Offshore Boom: Page 4 of 9

Bodog.com, which also decided to stay in the U.S. market, offers a wide variety of card games other than poker. Here's a blackjack game in progress.

Still, Scheider, like many other industry observers, believes that companies still hoping to stay in the U.S. market can expect to prosper -- albeit under a "Prohibition mentality." Other than that, she doesn't believe that the long-term effects will be all that significant. "It's very likely that revenues will just move from one person's pocket to another. The companies that have continued to take U.S. players are doing very well," she said.

Many of the companies that chose to withdraw from the United States simply changed their focus to non-U.S. venues. Other than in a few isolated countries -- notably, France and Israel, which are making noises about enforcing their own anti-gambling initiatives -- most governments have rolled out the welcome mat. And positive results are beginning to roll in. One of the world's largest gambling sites, 888 Holdings PLC, a U.K. company, announced in mid-February that its full-year net revenue rose 7% even after leaving the United States.

"It's very hard to believe that the revenues of online gaming providers will flat line," said Tom W. Bell, a professor at the Chapman University School of Law who is an adjunct scholar at the Cato Institute and who follows the legal issues of online gambling. "Although at a low point last fall, they almost immediately began to bounce back, and my guess they will continue to steadily increase over time."

Double Trouble
Although the Safe Ports Bill that President Bush signed into law on Oct. 13 had a huge impact on the market, it wasn't the only step the U.S. government took to deter online gambling. Having an arguably more dampening effect were other actions by the Justice Department.

Bodog.com, one of the most popular online gaming sites that still caters to U.S. players, provides craps tables that allow for stakes as high as $1,000 per roll.

The United States has taken other steps to deter online gambling.The arrest of David Carruthers, CEO of BetonSports, at a Dallas airport in July -- before the Unlawful Internet Gambling Enforcement Act was passed -- put a chill on the industry. Carruthers was indicted, along with 10 other people, under federal racketeering laws and the Wire Act of 1961, which forbids using a "wire communication facility" for transmitting information about "bets or wagers."

Indeed, in late January 2007, despite the passage of the UIGEA, the DOJ continued making arrests based on the Wire Act of 1961. It charged two former executives of Neteller, a publicly traded U.K. online money transfer company, with moving billions of dollars of illegal gambling proceeds from U.S. citizens to Internet gambling companies located overseas. By far the largest online gaming transaction processing concern in the world, more than $7.3 billion in 2005 and $5.1 billion in the first half of 2006 went through Neteller's hands. Some estimates put that figure as representing as much as 50% of the global online bettor market. Also in January, there were press reports that the DOJ had issued subpoenas to a number of prominent global banks that had participated in the underwriting of the IPOs of overseas gambling sites. Upon this news, stock prices of online gambling concerns registered on the London stock exchange tumbled.