Daniel Stewart

Daniel Stewart comments on online gambling industry in light of potential legislation changes in US


In a commentary on the online gambling industry in the United States, London-based stockbroker Daniel Stewart said it believes that new online gambling legislation may be introduced and passed in the US during H2 2010.

According to Daniel Stewart, the UIGEA legislation, which essentially outlawed onlune gambling in the US in September 2006, has not worked as a prohibition measure, as a number of major operators continued to offer their gambling services to US citizens, most notable of which are the online poker operators PokerStars and Full Tilt Poker, the broker stated.

The stockbroker noted speculation that US Senator Harry Reid and his pro-legislation cohorts are preparing a Bill that could be introduced into the Senate within the next three months and ready for approval by the President during H2 2010.

Daniel Stewart believes that the proposed Federal legislation will encompass just online poker and exclude casino and sports betting services, which should ensure that it is easier to implement.

The broker also highlighted that the land-based gambling industry association, the American Gaming Association (AGA) - which includes major Las Vegas players MGM (NYSE: MGM), Harrah’s Entertainment, Wynn Resorts (NASDAQ: WYNN) and Las Vegas Sands (NYSE: NVS) - recently changed its stance on online gambling from neutral to positive. The move is partially attributed to a perceived change in view of both MGM and Steve Wynn, who had historically been sceptical about the online market, Daniel Stewart said.

“The legalised US online poker market represents a massive pot of gold for the entities that can monetise a market we estimate to offer likely annual gross gaming revenue of >$8bn annually”. According to Daniel Stewart, the clear winners from the proposed US legislation will be the US-based gambling giants such as Las Vegas Sands, MGM, Harrah's and Wynn.

In terms of European operators potentially landing US licenses, the broker believes the ‘jury is out’, and it will depend on how the new legislation is set up. Daniel Stewart noted that in one instance, the legislation may favour domestic land-based operators by effectively excluding offshore operators.

However two other scenarios may potentially provide opportunities for European-based operators. According to the broker, the legislation may allow other operators to secure a licence if they built or acquired a land-based presence.

The third and ‘most exciting’ scenario identified by Daniel Stewart would be that the legislation is open to ex-US operators that pass tests of appropriateness for securing a licence. Under this scenario European-based operators could potentially pass the requisite tests given their scale and experience in operating in regulated markets such as the UK and Italy, and having invested heavily in KYC (Know-Your-Customer due diligence and regulation) and anti-money-laundering technology, Daniel Stewart said.

Should the rumoured legislation come to pass, Daniel Stewart identified several European listed companies who may potentially benefit - Playtech (AIM: PTEC), bwin Interactive (AUT: BWIN), Sportingbet (AIM: SBT), PartyGaming (LSE: PTY), 888 Holdings (LSE: 888) and online payment service group Neovia (AIM: NEO).

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