Top Stories of 2006

1. U.S. prohibitionists get the job done.
2. The industry feels the impact of prohibition.
3. The European Commission questions member states' gambling policies.
4. I-gaming executives are jailed for their companies' actions.
5. Gambling is left out of the EU Services Directive.
6. The Italian government tells ISPs to ban hundreds of I-gaming sites.
7. Gambling operators in Germany fight to retain their monopoly statuses.
8. I-gaming sports sponsorships draw money and wrath.
9. Betting on World Cup games shatters wagering records.
10. Antigua stays aggressive with its WTO stance.

Friday, the 13th

It took a decade, but U.S. legislators pushing to pass a ban on Internet gambling finally got it done. Signed into law by President Bush in October, the Unlawful Internet Gambling Enforcement Act (UIGEA) makes it illegal to facilitate financial transactions for Internet gambling. Reps. Leach and Goodlatte struggled throughout the year to move the legislation (already passed in the Senate) until finally handing the ball off to House Majority Leader Bill Frist, who crammed the UIGEA through as part of a ports security bill. It became official with the stroke of the pen on Oct. 13, a defining moment in the history of online gambling.

Saturday, the 14th

The enactment of the UIGEA sent the I-gaming industry into an economic tailspin in which publicly traded companies saw their stock prices drop anywhere from 10 percent to 90 percent. PartyGaming says turning away U.S. players will cost it $250 million. 888 Holdings, Sportingbet, Empire Online Playtech and 32Red are additionally among the long list of companies feeling the crunch after shutting out U.S. players. The share values of several companies, including 888 Holdings, Parlay Entertainment and Neteller, declined by more than 50 percent. Some companies, such as FUN Technologies, Sportingbet, PartyGaming and World Gaming, suffered drops of more than 70 percent. Then came the big wave of consolidation. Among the biggest deals made: Sportingbet unloaded its U.S.-facing operations; BoS sold its Asia-facing operations; Playtech acquired assets from Tribeca; Bodog acquired Betcorp; Las Vegas from Home.com Entertainment Inc. sold its poker division; Paypoint acquired Metacharge; and PartyGaming acquired assets of Empire Online and Intercontinental.

Monopolies under Fire

With gambling left out of the EU Services Directive, matters involving cross-border gambling services and the rights of state-protected monopolies were left in the hands of the courts. The most significant EU-wide action in 2006--and entering 2007--was the European Commission's decision to take member states to court over their gambling policies. Eight member states--Germany, Finland, Sweden, Italy, Holland, Hungary, Austria and France--are being asked to justify policies restricting the operation of gambling services to only state monopolies. They must prove to the European Court of Justice that these policies are truly in the best interest of the citizens.

Behind Bars

The industry hasn't been the same since July 16. That was the day David Carruthers, at the time CEO of BetonSports, was jailed in Dallas for providing illegal gambling services to U.S. residents. The incident was the first of three busts that shook the industry--all in the weeks leading up the passage of the UIGEA. Next up was Peter Dicks, a non-executive chairman for Sportingbet, who was detained Sept. 6 in New York City and eventually released because of and extradition-related snag, followed by bwin's co-CEOS, Norbert Teufelberger and Manfred Bodner, who spent the weekend of Sept. 15-18 in a French jail and got out on bail. The three events spooked investors and caused I-gaming executives to reconsider their travel plans to jurisdictions that don't welcome their companies' activities.

Not Included

The aforementioned absence of gambling services from the updates to the EU Services Directive was welcomed news for supporters of preserving Europe's state-supported gambling monopolies. Had gambling been included, the member states would have had no choice but to open up their gambling markets to foreign competitors.

The Burdon

Pursuant to a new law passed in Italy, the country's Autonomous Administration of State Monopolies (AAMS) in February issued a list of gambling Web sites deemed to be off limits to Italian Internet users. The AAMS requires all Italian ISPs to block the listed sites. And the list will be updated periodically.

Exclusivity Times 16

The individual states of Germany are allowing only state-licensed monopolies to offer their services to their residents and have declared that all other operations are illegal within the state. German commercial lottery operators Fluxx A.G. and Tipp24 AG say they may abandon their home market if the country's 16 states pass a new law to uphold a monopoly on gambling and effectively ban private operators. Tipp24 said in November it is preparing to expand into at least one other European market to lessen its dependence on Germany. Fluxx and Tipp24 make a profit by charging state-owned lottery commissions for selling tickets to consumers on the Internet. In the meantime, Germany's federal states have postponed plans to propose a law upholding a state monopoly on gambling that may eliminate private lottery agents and sports betting companies. Ministers for the states met on Dec. 13 in Berlin to discuss the ban, despite pressure from the European Commission to open up Europe's gambling market to competition. The states of Saxony, Hesse and Bavaria imposed respective bans on commercial betting directed mainly at Austrian Internet betting firm bwin.com, whose German unit is the country's biggest commercial bookmaker.

Forbidden Shirts

Millions of dollars changed hands in 2006 in sponsorship deals between interactive gambling operators and European sports clubs. Interwetten.com, Admiral, tipp3, Betfred, Mansion, Sportech, 888.com and others built their brands by purchasing ad space on team jerseys, signage at stadiums and other high profile properties of European teams, including teams from the continent's elite football leagues. But leading the way by far was bwin, whose international sponsorship partners included Equestrian WC Aachen in Germany; FIA WTTC in Mexico; Kite-surf Pro and FC Barcelona in Spain; Club Brugge in Belgium; AJ Auxerre and Girondins Bordeaux in France; 1860 München, VfB Stuttgart and Werder Bremen in Germany; and AC Milan and Juventus Turin in Italy. They even managed to sponsor an entire Portuguese Soccer Federation as well as World Champion Basketball in Japan. Fame has its price, however, as bwin's aggressive marketing tactics also led to clashes with the governments of several member states. It faced lawsuits in Germany, for example, where teams have been forced to take the bwin logos off their jerseys. bwin's marketing practices ultimately led to the arrest of its co-CEOs in Nice, France--a kick in the groin for online operators hoping to proliferate in Europe.

Kicking Down the $1 Billion Barrier

World Cup 2006 generated more wagering than any other sporting event in history. Not only was it the first time an event brought in more than $1 billion in turnover, some analysts say it nearly reached the $2 billion mark. Some examples of the madness: William Hill says its bettors collectively wagered an average of £350 per second on the World Cup, more than £20,000 per minute, almost £1.5 million per hour, and over £30 million per day. OPAP received 450 million euro in bets through its fixed-odds Stihima game during the tournament, well surpassing its projection of between 200 million euro and 250 million euro. Centrebet attracted nearly 6,000 new customers during the tournament.

Never Say Die

The World Trade Organization gave the United States until April 3 to bring its policy on interactive gambling into compliance with the organization's General Agreement on Trade in Services, but the United States made no changes. U.S. officials stated upon the arrival of the deadline that the country's policy is already in compliance and that, therefore, no changes were necessary. Despite the impasse, Antigua, which took the matter to the WTO in 2003, continued pushing as many buttons as possible in an effort to force the United States into compliance. For starters, counsel for Antigua has appealed to the WTO for suspension of certain trading concessions, based on the United States' failure toe comply. In October, Antigua attended 32-nation summit in the United Kingdom at which it lobbied other countries to put pressure on the United States.

Additional Top Stories

• Nations participating in a U.K. summit call for international I-gaming regulations.

• Ontario bans "dot-com" advertising for I-gaming services.

• PartyGaming's founders sell of £232 million in shares.

• Las Vegas Sands announces plans for an online casino.

Stories that Weren't

• Betfair dominates the Australian betting market.

• Europe's major betting associations work together toward getting gambling included in the Services Directive.

• Kyl, Goodlatte and company succeed in making I-gaming prohibition a reality (rather than handing it off to Sen. Frist).