Cryptologic To Screen Out US Online Gamblers
Published: Monday, October 02, 2006 Online-Casinos.com
CRYPTOLOGIC TO SCREEN OUT U.S. ONLINE GAMBLERS
Canadian software provider's move to Ireland is timely in light of US ban, but regulation is the real answer says CEO
One of the most respected and pioneer online gambling software providers, Cryptologic has become the latest company to announce that it will no longer accept business from United States residents.
In a statement today the company says that its Wagerlogic licensees will no longer take U.S. bets, effective immediately.
"This is a result of new legislation expected to be signed today (Monday) by President Bush that prohibits financial transaction processing in the U.S. online gaming market," the statement says. "The company has spent five years preparing for this eventuality by shifting its revenue base to fast-growing European markets, and is positioned for long-term profitability and growth."
"Since 2001, CryptoLogic has been shifting its business to Europe, and our record revenue and earnings in 2005 and 2006 to date flow from our success in the markets that embrace Internet gaming," said Lewis Rose, CryptoLogic's President and CEO. "While the new U.S. developments will be a challenge for the whole industry, our company's diversification, strong balance sheet, thriving European customers and potential new business in emerging markets enable us to face the future with confidence."
With more than 70 percent of its licensees' revenue now coming from outside the U.S., CryptoLogic is one of the industry's most geographically diversified businesses. The company also enjoys a very strong balance sheet. At June 30, 2006, CryptoLogic had $126 million in cash, $91.7 million in net working capital and no long term debt.
Based on historical results, the annualised impact on revenue of today's decision would have been approximately $30 million for the full year 2006, with an estimated effect on earnings of approximately 80 percent of that amount. In its remaining business, the company continues to maintain its corporate objective of growing revenue by 20 percent.
Continued, strong organic growth, the launch of Playboy's non-U.S. facing Internet casino and Internet poker sites and potential signings of new licensees will help CryptoLogic in this goal, the company statement claims.
On the evening of Friday, September 29, the U.S. Congress adopted the Unlawful Internet Gambling Enforcement Act of 2006, which prohibits financial transactions processing for certain types of Internet gaming. Certain types of gaming are exempt, including horse racing, state lotteries and intratribal transactions. The legislation addresses previous uncertainties in the law governing non-sports Internet gaming in the U.S.
The U.S. approach contrasts with that of the United Kingdom and other European markets, which are moving to regulate Internet gaming for fiscal and social benefits.
"We believe Internet gaming can and should be regulated, licensed and taxed. The U.K. model is the right one: create a safe, secure and regulated environment for players to enjoy this form of entertainment," Rose said. "We will continue to advocate regulation as the logical solution for all stakeholders, including players, investors, and governments. In the meantime, we will continue to deepen our existing relationships and attract potential new customers in Europe, Asia and other thriving and emerging markets."
CryptoLogic is proceeding with its plan to locate its global headquarters in Ireland, with continued commitment to its operations in Canada, the United Kingdom, Cyprus and Singapore.
