28 Aug 2006
Although the legislative ban against internet gambling has not yet been passed in the United States, the recent arrest of online gambling executive reveals that the US Justice Department is getting serious about cracking down on online gambling companies. As a result, internet gambling companies are finding ways to reduce their exposure in the US. One of the ways to do this is to consolidate with European companies that have little or no US exposure.
The Justice department’s strong and serious stand against online gambling, and their refusal to change banning laws that the WTO has declared illegal, could cause huge losses to the online gambling companies. Indeed, half the global income from online gambling comes from the US. Some companies rely on US gambling for 85% of their business. This scare has caused companies to reevaluate their US business and look to new markets for gambling revenue.
One of these potential new markets for online gambling is Asia. However, while this market is largely untapped, it does not have the growth potential of the US market. Other challenges, such as Japan’s banking system and China’s enormous size, make this market more problematic. A safer market for expanding internet gambling seems to be Europe. While taxes are high, the European market nevertheless seems safer for expansion and consolidation of online gambling companies. In the meantime, the online gambling industry continues to flourish, growing at a 40% rate annually, despite its problems in the United States. While most companies are looking to reduce their reliance on the US, it seems that Americans will be gambling online in spite of the crackdown.
