FINANCIAL NEWS / Online US
Grant Clelland, Deputy Editor
09 Oct 2006
When a continental European country takes action to protect its industry from external competition, it is called economic nationalism. When the US does the same, we are meant to believe it is about preserving the fabric of society.
Such was the justification used by US lawmakers for gambling regulations drawn up last month, making it illegal for banks and credit card firms to take payments and transfer funds to internet gambling sites. More than $6bn was wiped off the value of online gaming companies listed in London.
The sudden profusion of such companies on the UK’s stock market, combined with oddly named companies from China, Russia and the former Soviet countries of central Asia, has given London a somewhat exotic look that is not to the taste of many fund managers.
Investors should have seen it coming. The risks were clear in the prospectuses and this paper is one of many to have warned investors to steer clear of the sector. Those fund managers that invested should have known you can lose your shirt at the roulette table.
But investors probably did not foresee the sector becoming a political victim of the forthcoming US congressional elections. For Republicans struggling to hold on to both houses, the gambling crackdown is an easy vote winner. Senator Bill Frist, architect of the regulations, said: “Gambling is a serious addiction that undermines the family, dashes dreams and frays the fabric of society.”
Politically inspired legislation is hardly confined to the US, but the double standards on display are rivalled only by the French government. The law’s backers may rail about the pernicious effects of online gambling, but they seem happy with gambling itself. Groups such as Las Vegas Sands, Harrah’s and MGM Mirage are world leaders. Yet there has been no bill proposed to congress calling for the demolition of Atlantic City or Las Vegas.
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