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This is going to sound odd, considering the death toll I've been ringing for the past few weeks ever since the anti-internet gambling legislation passed in the United States, but I think that now might be a good time to buy some internet gambling stock. It's a shocking opinion, I know. On Friday September 13th, 2006 President George W. Bush signed the Safe Port Authority bill. Attached to this bill was a completely unrelated amendment regarding internet gambling. The anti-internet gambling amendment bans all direct deposits from banks or credit cards into online casinos, poker rooms, and sports books. It makes the actual bet a crime via the bettor. There is a huge gaping loophole in the form of third party processors, such as Neteller, who are not located in the United States, but that is becoming irrelevant since every major online casino company is now banning US residents from their sites. The few who are not banning US residents are typically not the kind of casino, poker room, or sports book I would recommend depositing in. The first internet casino opened online in 1996 and the industry grew to approximately $12 billion dollars a year in ten years. Industry experts estimate that up to eighty percent of that income came from the United States. Now that the US is out of the picture online gambling is almost back to square one. Next year the revenue will be a pathetic smidgen compared to what the industry took in this year. Why would I even suggest buying the stock? Well, actually maybe buying now wouldn't be the perfect time. Perhaps next year after the first quarter results are announced and everyone sees how dismal they are and the stock dives, perhaps then would be the right time. Either way, between now and then would be a good idea to buy some stock. I see this set-back in the gambling industry as temporary. I do not think the US will go back on their legislation, but I do think there is the rest of the world out there waiting for the ability to play online. From my limited experiences it seems South Africans love to gamble. My first boss in this industry was South African and he told me about how his people loved casinos. In the movie, Croupier, the biggest gambler was South African (or living there). Not exactly much to go by, I know, but they should be passing internet gambling legislation next year which will allow advertising for online casinos and poker rooms. As it is now, sports books are already legal and doing quite well there. The major setback in South Africa, as it is in much of the rest of the world, isn't the desire to gamble online but the ability. Internet access is intermittent. One of my best friends moved back to South Africa a few years ago and she still doesn't have internet access, which is just shocking to me. This was a woman who was completely connected to the world via the web. South Africa's internet situation is a lot like the United States in 1996. Most people didn't have internet access in their home, and if they did it was through a dial-up. It took forever to download casino software and the games were slow at best. The whole industry was a fraction of its current self. Yet the internet grew, and the online gambling industry grew with it. The industry relies on progress in the internet, as more of the world becomes connected so there are more potential customers around the world. The end of the United States as a client doesn't have to mean the end of an industry. The biggest online poker rooms, casinos, and sports books have been preparing for this possibility for the past year. Marketing schemes have been perfected and plans have been made. There is no reason to think that what PartyGaming, Sportingbet, or Bodog had accomplished in the United States could not be accomplished in other countries. Their business practice is sound, even if they did get screwed by US legislation. Since all of the systems are already in place it should take even less time. Add all of that to the change of heart in Italy and South Africa regarding legislation. While South Africa hasn't actually changed the law yet, Italy has and they will be regulating the industry from January 1st, 2007. This means those 600 sites which were previously banned will be taxed and regulated, much as they are in Britain. Actually, the legislation in Italy is almost exactly like it is in Britain, only the Italians are asking for even more money. The thing is, the online casinos, sports books, and poker rooms will pay it. While it will cut into their profit it will also allow them the legal right that they so crave and desire. Some of these rights include the right to legally go after fraudulent players, advertise freely, and the right for executives to travel through the country without the fear of being arrested. These next few years will be hard ones for the industry, but the big companies will survive. The small ones, on the other hand, will very likely perish. Not having the reaching power of the big organizations they will either be eaten by the big fish or they will struggle and fall apart. The internet gambling industry will slaw its way to being huge again, and when this happens those stocks will sore. That is why I say buy now, because if you look at the history of Neteller you will see that they double in price annually for their first few years. I'm not sure if they have reached their all-time low now, but they are close. This means a potential stock bargain. So buy now, yes, it is high risk and I could be wrong, but this is all about gambling after all. The higher the risk the greater the potential reward. Posted on: October 23, 2006
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