Internet gambling has become possibly the fastest-growing, technology-driven business in the world and nowhere is this more evident than with online poker company, PartyGaming. PartyGaming, a company established by former porn queen Ruth Parasol, her husband Russ De Leon, and two technology students from India, Anurag Dikshit and Vikrant Bhargava, has seen amazing growth since its early beginnings as demonstrated by the company’s profits. In 2002, PartyGaming declared gross pre-tax profits of $5.8 million and, by 2003, gross profits had jumped to 89.2 million dollars. In 2004, profits had jumped to 372 million dollars, reaching 125 million dollars in the first quarter of 2005. 2005’s first quarter profits break down to about 1000 dollars every minute. In fact, at any given time, Partypoker.com, the online poker-playing site owned by PartyGaming, has about 70,000 players sitting at its virtual poker tables. PartyPoker makes its money by using a simple revenue model. By providing a platform for people to player poker online using real money, PartyPoker takes a commission (also known as a “rake” in poker lingo) off the top of the money bet on each hand. The commission is about one percent.

PartyGaming was established in1998 when Parasol and De Leon sold their porn and sex chat empire to start PartyGaming. They then hooked up with Dikshit and Bhargava who handle the technical and marketing aspects of the business. Dikshit owns approximately forty percent of PartyGaming and Bhargava owns about fifteen percent. The timing for establishing PartyGaming couldn’t have been better as growth in the online poker market has been incredible. In 2004 the online poker market grew by 460 percent to reach an estimated $770 million. Industry analysts now believe that the online gambling sector is worth over eight billion dollars.

Geographically, PartyGaming is rather spread out. For tax reasons, PartyGaming is headquartered in Gibraltar, but the servers for PartyGaming are hosted on a Mohawk Indian reservation in Canada, while its marketing office is located in London. Finally, the majority of PartyGaming’s staff works at a call center and software development site in Hyderabad, India. PartyGaming’s staff members could benefit nicely if PartyGaming’s recently announced plans to launch an IPO on the London Stock Exchange are completed successfully. The staff is slated to receive approximately $550 million in free stock options. The offering could yield three billion dollars in subscriptions and create a valuation of ten billion dollars plus for the business.

While the growth and success of PartyGaming is extraordinary, it’s continued success is by no means guaranteed. The largest obstacle to the company’s continued success lay in the legal arena. Firstly, unlike the British government, which is decidedly more relaxed about Internet gambling, the U.S., where a majority of PartyGaming’s customers reside, is staunchly opposed to online gambling and has explicitly banned the activity under the U.S. Interstate Wire Act. Secondly, gambling is also illegal in India, although Internet gambling is not specifically addressed, and the illegal status of gambling there puts the staff in Hyderabad at risk legally. Needless to say, these legal questions could have a significant and negative effect on PartyGaming’s upcoming IPO.