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Credit Card Ban of Online Casinos Costly

  1. How much of an impact will this have on EBT??
    particularily its US affiliates operations.
    - mycall101

    Wednesday June 26, 8:26 pm Eastern Time
    Reuters Internet Report
    Analysis: Credit Card Ban of Online Casinos Costly

    LOS ANGELES (Reuters) - Internet casino growth could be cut by as much as half next year due to a growing tide of credit card issuers who refuse to process online gambling transactions, according to an analysis released on Wednesday.

    According to the analysis by Bear Stearns, revenue growth rates for the industry next year could be cut to 20 percent from the 43 percent now expected. The lowered rate would trim expected revenues for next year to $4.2 billion industry-wide, said Bear Stearns analyst Jason Ader.

    "This is a real challenge for e-gaming companies," Ader said. "Credit card transactions are their life blood. Without them, it will be tough for the sites to thrive."

    Bear Stearns performed its analysis in light of a recent series of announcements by major credit card issuers, which said they would no longer process gambling-related transactions for online casinos.

    The legal status of such gambling is unclear in the United States, but jurisdictions generally treat casino-style online gambling as illegal and have no infrastructure to support the industry.

    Legal issues, coupled with concerns that some cardholders may refuse to pay such charges, have led many credit card issuers to decide the business isn't worth the risk, analysts said.

    The list of card issuers that no longer will process online gambling transactions includes Bank of America (NYSE:BAC - News), Fleet, MBNA and Chase Manhattan, Ader said.

    Most recently, industry giant Citibank (NYSE:C - News), which controls 12 percent of the U.S. credit card market, said it also would stop processing online gambling transactions.

    Ader said the policy change by credit card issuers, coupled with negative publicity toward online gambling, could spark a major slowdown for the industry, leading to market contraction and consolidation.

    "While we have not yet scaled back our overall industry estimates, we may look to do so if we do not see a fundamental shift in operator business models in the near term," Ader said.

    Among the nation's four top casino operators MGM Mirage (NYSE:MGG - News) is the most bullish toward online gaming, while other companies have expressed more limited interest.

    None of the major U.S. companies have operational online gaming sites, with most reluctant to enter the arena for fear of jeopardizing their U.S. gaming license. Instead, the field is dominated mostly by smaller companies based outside the United States.

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