By Kevin Felix | September 25, 2009

UK gambling companies are eagerly looking to their south, ready to pounce on the French online market should it open up as anticipated. On October 7th, a bill will be before France’s parliament that will make it legal for foreign companies to offer internet gambling services to the country’s residents.

Despite pressure from the European Commission, France has remained steadfast for several years in its monopolistic stance on internet gambling. Only one company, Groupe Francaise des Jeux, provides lottery services, and only one company, Pari Mutuel Urbain, offers horse racing. No other gambling is permitted. Should the proposal pass in October, however, foreign companies, including PartyGaming, William Hill, and 888 Holdings will be able to offer poker to the people of France as early as the middle of 2010.

According to an article on Bloomberg.com, consulting firm H2 Gambling Capital estimates that the opening of the market will more than double electronic gambling sales in the country in 2010, taking them up to €671 million ($983 million). That number will shoot up to €1.03 billion ($1.50 billion) in 2011.  The aforementioned UK gambling firms are licking their chops, as the horrible recession has severely hurt financial results. PartyGaming, owner of PartyPoker, reported a net loss of $66.9 million for the first half of 2009. William Hill saw its first-half net income drop by 26 percent to $95.8 million, and 888 Holdings experienced a 57 percent decrease to $8.1 million.

PartyGaming’s CEO Jim Ryan told Bloomberg, “The size of the population and the appetite for gambling, and the group’s historically cautious approach to France make this a particularly exciting opportunity for us.”

The United States government should take a lesson from France, as it has all but admitted prohibition does not work. A major reason why France is now opening the country’s virtual doors to foreign gambling companies and regulating the market is that in its current monopoly state, its citizens have been able to logon to over 25,000 illegal gambling sites. A quarter of them operate from within the nation’s borders, and all of the illegal sites combine for 75 percent of internet wagers in France. Opening and regulating the market will both bring in tax money for the state and help protect gambling customers.

When it comes to taxes, sites will be levied a two percent fee on poker deposits and a seven and a half percent tax on sports bets.

Patrick Germain, spokesman for Groupe Francaise des Jeux, told Bloomberg that should the bill pass as expected, it will create, “the same taxation, the same rules on responsible gaming, the same rules on the struggle against corruption in sport, and permit Francaise des Jeux to compete equally.”

Just as UK operators are preparing for the moment when they can apply for a license in France, they are also keeping their eyes trained on the United States. In fact, they are working to influence U.S. lawmakers by spending money on lobbying activities on Capitol Hill. UC Group, a company which provides online payment services for ten online gaming companies, has spent over $5 million over the last few years. Since September 2008, it has spent $2.31 million lobbying, while it only made $3 million in pre-tax profits last year. PartyGaming’s founders, Ruth Parasol and Russell De Leon, have personally spent over $1.5 million in lobbying efforts.

Another tactic that some have taken is the old “cover your rear.” PartyGaming as a company agreed to pay $105 million in fines to the United States for offering online gambling to U.S. residents prior to the passage of the Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006. In exchange, PartyGaming and its subsidiaries are exempt from prosecution. Many believe this to be a way for PartyGaming to get in the good graces of the U.S. government so that the company will be able to get a license when and if online gambling is legalized and regulated in the U.S.

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