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888 Holdings Plc's official response to the Unlawful Internet Gambling Act

The Board has discussed the implications of the internet gaming provisions contained in Title VIII of the Safe Ports Act which passed Congress in the USA early on the morning of Saturday 30 September. These provisions state that, from the date the legislation becomes effective, the receipt of funds by electronic funds transfer and other prescribed methods in connection with internet gaming that is illegal under U.S. state or federal law will constitute a federal offence by the relevant operator.

The legislation is expected to be signed into law by President Bush within the next two weeks, and will become effective immediately thereafter. In addition the Act requires the Secretary of Treasury, within 270 days, to issue regulations requiring financial institutions to block transactions in connection with internet gaming.

In many respects the precise effect of the legislation is unclear and it is not yet known what the implementing regulations will say, or how financial institutions at whom part of the legislation is directed will react.

However, this legislation indicates Congressional intent to treat internet gaming, whether sports related or not, as illegal. In addition, it is the first federal measure to address internet gaming explicitly. This represents a significant development in the US legal status. The Act also addresses certain jurisdictional and other uncertainties in the previous U.S. legal situation.

In the light of these considerations the Board has concluded that it is appropriate to suspend participation by US based customers in activities covered by the legislation. The Company will implement this suspension immediately upon the legislation taking effect and the suspension will continue for so long as the legal situation remains the same. The Board will continue to seek clarification of the overall US legal position to determine whether and to what extent if any resumption of participation by US customers is feasible. At present however no assurance can be given that this will be possible. The Company will continue and develop those aspects of its US business which are not affected by relevant legislation.

In recent years 888 has pursued a strategy of building its brand and business in markets outside the US. In the six months to 30 June 2006 revenues from non US players amounted to approximately 48 per cent of the Group's net gaming revenue and in the second quarter of 2006 approximately 68 per cent of first time depositors (new customers) were non US. The Board believes the Company is well placed to achieve further growth outside the US and will continue to focus its attention on growth in non US markets.

A significant proportion of the Group's cost base is variable and relates directly to the level of activity. The Company will review its fixed cost base in the light of the suspension of US business described above and this may result in charges being taken in this year's results.

Whilst suspension of US activities will have a material adverse impact on results for this year and beyond, the Company has significant cash resources which are more than adequate to continue its operations and further develop its business taking account of sums required to cover return of deposits to US customers and the dividend payment due to be made to shareholders on 31 October 2006.

Notwithstanding the planned suspension of US business referred to above, the Board is confident that 888 remains a viable, profitable business and looks forward to pursuing growth opportunities in its international markets with continued vigour.

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