Amidst the flurry of announcements by online gambling companies that they intend to float their businesses on the London Stock Exchange, legal officials in the United States have begun stepping up their efforts to put an end to illegal internet gambling in the U.S.

Officially, the U.S. considers almost all forms of Internet gambling illegal and prosecutes companies involved in the online gambling industry accordingly. The 1960’s era Wire Act, which prohibits the use of phone lines for placing wagers, forms the foundation of the U.S. ban on online gambling, but the World Trade Organization recently challenged the legality of the ban. Lawyers representing Antigua, a tiny island nation that has built up a booming business by hosting online gambling businesses, complained to the WTO that the U.S. ban on online gambling violated free trade agreements because the U.S. allows online horseracing betting by U.S. operatives while, at the same time, banning all other forms of Internet gambling. Eventually, the WTO made a rather ambiguous ruling on the case that allowed both countries to claim a victory. In the meantime, however, clarification on U.S. policy and what the U.S. Government can actually do about online gambling is lacking. This lack of clarification and the fear that U.S. regulators are going to increase their efforts to clamp down on online gambling could have adverse effects on the online gambling companies. Greg Feehely of Altium Capital said: There is no doubt that there is a regulatory risk attached to this company and investors need to be aware of that. But that risk has also already been priced into PartyGaming’s valuation. A company with that sort of growth record and potential would float at more than twenty times earnings. It is only being valued at around ten to twelve times its earnings, because of the risk of the uncertain legal situation in the U.S.” Feehely does not believe that the U.S. would try to prosecute overseas poker companies.

PartyGaming, the world’s largest Internet poker company, is planning a ten billion dollar stock market flotation later this month, and the uncertainty of U.S. actions is problematic for potential investors. The majority of PartyGaming’s customers are American with only five percent of its players coming from the UK. This also holds true for online gambling company, SportingBet, PartyGaming’s main competitor in the UK. Both PartyGaming and SportingBet contend that they are doing nothing illegal. SportingBet maintains that, because it operates within the UK it is not breaking any laws, while PartyGaming argues that the Wire Act pertains only to sports betting and not to poker.