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I was totally unprepared. I thought it was today, not yesterday. I'm in a different time zone than the US, so instead of learning about it during the day I woke up and found out. Only, I found out after I looked at the internet gambling stocks I watch. Everything was plummeting and I started to wonder if it was because of the vote expected to be today. Then I read the news and I learned. The vote for HR 4411 was yesterday, and it passed. I sat there with the tune of jaws in my head. There's a shark in the water and it's coming for the drowning internet gambling industry. The first thing I did was go to Virginia Republican Representative Bob Goodlatte's site. There it was on the homepage in capital letters, "HOUSE APPROVES GOODLATTE LEGISLATION TO COMBAT ILLEGAL GAMBLING". Ouch. The pain just got worse as I read further, "The House of Representatives passed H.R. 4411, the Internet Gambling Prohibition and Enforcement Act, by a bipartisan vote of 317-93. This legislation was introduced by Congressmen Bob Goodlatte (R-VA) and merged with legislation introduced by Congressman Jim Leach (R-IA) to crack down on the growing problem of illegal off-shore gambling as well as illegal gambling that crosses state lines over Internet connections. These activities suck billions of dollars per year out of the U.S. economy, serve as a vehicle for money laundering, undermine families, and threaten the ability of states to enact and enforce their own laws. H.R. 4411 is bipartisan, sensible legislation that will tighten up existing federal law and make clear that the current prohibitions on gambling over wires apply to the Internet and other new technologies." It passed with a vote of 317-93. That is 77 percent for the bill. I've said all along that this has an amazing chance of passing. While Senator Jon Kyle of Arizona repeatedly tried to get similar legislation passed, he always did it the wrong way. This time Goodlatte and Leach did it correctly. This is extremely well written legislation. What a pity. If the US had chosen a different route, such as regulating the industry instead, then all of their allegations could have been controlled. There's no need for the money to leave the US to off-shore sites, however with online casinos being illegal the operators had no choice but to locate off-shore. As for money laundering, that is possible in any casino, land-based or internet. With regulation the books could be watched by federal agencies and any money laundering could be stopped. The allegation of undermining families I think is a bit much and I can guarantee there is no threat on the states enacting or enforcing their own laws. Hell, Washington state just made online gambling magazines illegal, that's how little control the industry has on the states. Goodlatte was tickled pink, of course. "I am extremely pleased by the passage of this legislation through the House of Representatives and now I call on the Senate to act on this important legislation,” said Goodlatte. “Gambling on the Internet has become an extremely lucrative business. Numerous studies have charted the explosive growth of this industry, both by the increases in gambling websites available, and via industry revenues. Internet gambling is now estimated to be a $12 billion industry, with approximately $6 billion coming from bettors based in the U.S. It has been reported that there are as many as 2,300 gambling sites." How can Goodlatte recognize how lucrative the industry is, and still want to ban it? He isn't doing it for the purpose of family values. Otherwise he would go after all forms of gambling. He's doing it for economic protectionism. If money is the issue, he would make a lot more by making internet gambling legal and regulated. This news is all over the media. BusinessWeek, The Washington Times, and more have been writing about this story. My Google alert was on fire when I checked my email this morning. The industry is shrugging off the news. Sebastian Sinclair, president of New York-based Christiansen Capital Advisors said, "Lawmakers can put a dent in it, but they are not going to stop it." Sinclair has followed the online betting industry since 1995. Frank Catania, president of New Jersey-based Catania Consultancy, which specializes in gaming adds, "Legislation is not going to affect offshore Web sites. It's a lot of smoke and mirrors and misstatements." The industry is right. HR 4411 is the bill stopping financial institutions from depositing into online gambling institutions. Most MasterCard and Visa companies have been doing that for years now. If this bill does pass it won't have more than a small momentary dent in the industry. However, if you like stocks then buy Neteller now. They will be the kings if this bill passes, as it will be legal for US citizens to deposit into Neteller, which is located in Britain. Internet gambling is legal in the UK so Neteller isn't breaking any laws by allowing their clients to use its services to deposit into online casinos. The scary bill is HR 4777, that one allows law enforcement to force ISP's to block internet gambling sites. If HR 4777 fails and HR 4411 passes, my advice would be to buy as much internet gambling stock on AIM as you can afford – especially Neteller. Sinclair predicts that HR 4411 might even help the industry, in the same way the industry benefited after MasterCard and Visa stopped allowing their cards to deposit. "The industry went down about 20 percent then," Sinclair says of shares in e-gambling companies. "A year later, they were back to the same level, and then, a year after that, they probably saw 20% to 30% growth. I expect you will see something similar." How ironic would it be for a bill meant to hurt the internet gambling industry could actually help it? The bill is now up to the Senate for debate. If the Senate fails to act on this bill or anything similar then the bill will die. If the Senate passes the bill then it goes to the president for signature, where it will then become a law. Related Links: Posted on: July 12, 2006
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