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Arbitrator rejects most claims against Youbet

20 November 2006

WOODLAND HILLS, California -- (PRESS RELEASE), Inc. (NASDAQ:UBET) announced today that the arbitration of its dispute with TVG over alleged underpayment of fees under its license and content agreement from April 1, 2002 through March 31, 2005 concluded yesterday with a ruling that requires Youbet to pay less than $1.0 million of TVG's initial $5.8 million claim, plus TVG's royalty examination fees and expenses, and pre-award interest in the aggregate amount of approximately $250,000. This payment, which is net of an approximate $90,000 payment TVG is required to make to Youbet because TVG was found to have violated Section 16(b) of the Securities Exchange Act of 1934, will be made in Youbet's fiscal fourth quarter ending December 31, 2006.

In conjunction with the monetary ruling, the arbitrator upheld Youbet's understanding of the key provisions in the agreement regarding host, license and transaction fees, and the definition of TVG Exclusive Tracks. The ruling also provides for adjustments in the calculation of fees that will benefit Youbet's business.

"The arbitrator's rulings clearly affirmed our implementation of the license and content agreement with TVG," said Youbet CEO Charles F. Champion. "From the onset, we had an obligation to defend ourselves against TVG's claims, and the non-financial claims were potentially more damaging to our ongoing value than the monetary claims. At the same time, we had a series of important business principles to assert, and we were successful.

"Suffice it to say, we see the outcome as a victory for our shareholders and our racing partners," Champion said. "With this ruling, our company is better positioned for the long-term, both financially and strategically. In turn, that means we can continue to develop marketing programs where tracks and horsemen are equitably compensated for their content."

The Arbitrator also ruled that, to the extent that host fees set by tracks to obtain consents from horsemen exceed 3%, the overage is also to be counted against the 8.5% cap. If total host, licensing and transaction fees exceed 8.5% of handle, then TVG's license fee is reduced accordingly.

TVG maintained that Youbet should pay license fees for any wagers placed by Youbet's customers on the tracks listed in the agreement, regardless of whether or not TVG had an exclusive arrangement in place with said track (such as Laurel Park and Pimlico Racecourse). The Arbitrator ruled that Youbet is only required to make payments on account of wagers on listed tracks that are in fact "exclusive", and only to the extent TVG continues to possess such exclusive rights. Further, the ruling affords Youbet the ability to pay higher host fees to TVG Exclusive Tracks (as TVG has done in the past), with those additional payments being subject to the 8.5% cap. As a result, the tracks and horsemen potentially benefit along with Youbet.

The arbitrator also ruled that Youbet can reduce license fees payable to TVG to avoid losing money on California-based wagers. The ruling negated TVG's contention that Youbet had to accept money-losing wagers in order to pay TVG its full license fee.

The findings of the arbitration cannot be appealed. However, Youbet and TVG have 20 days from the date of the ruling to ask the arbitrator to correct clerical or computational errors.

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