Illegal in America, Yet it Makes a Fortune From its People

At PartyGaming, Everything’s Wild – New York Times

A giant in the online gambling business, PartyGaming is an often-overlooked megasurvivor from the dot-com crash of the late 1990’s. As hundreds of profitless commercial sites disappeared into the digital ether, PartyGaming’s popular gambling sites – like – soared, with revenues and profits growing exponentially year after year.

This week, the company will go public in what is expected to be the largest offering in years on the London Stock Exchange, one that will make billionaires out of its ragtag assortment of founders and major stockholders – including a California lawyer who earned her first fortune in online pornography and phone-sex lines. All told, as much as $9 billion is expected to be raised, with all of the cash going to private shareholders selling portions of their stakes.

But there will be no Wall Street investment houses lapping up fees in the giant deal, no victory dances in the offices of American corporate lawyers. That is because PartyGaming, based in Gibraltar, has no assets in the United States, and its officers or directors could risk being served with a civil suit – or an arrest warrant – if they came to the United States on business.

The reason? The Justice Department and numerous state attorneys general maintain that providing the opportunity for online gambling is against the law in the United States – and PartyGaming does it anyway. Indeed, of its $600 million in revenue and $350 million in profit in 2004, almost 90 percent came from the wallets and bank accounts of American gamblers.

To justify this, PartyGaming walks a very thin line. Providing online gambling is not illegal per se in the United States, the company argues – federal prosecutors just say it is. The company has already received an e-mail message from the Louisiana attorney general demanding that it cease providing online gambling in that state; PartyGaming simply ignored the communication and waited for additional action that never came.