PartyGaming announced Tuesday that it has entered into a Non-Prosecution Agreement with the U.S. Attorney’s Office for the Southern District of New York (USAO), ending discussions that have been going on for about two years. The agreement protects PartyGaming and its subsidiaries from prosecution stemming from the company’s offering of internet gambling services to United States residents before the Unlawful Internet Gambling Enforcement Act (UIGEA) was enacted on October 13, 2006.
PartyGaming must comply with a couple important terms:
- Pay a fine of $105 million in semi-annual installments, starting this week and ending on September 30, 2012. The first two payments will be $5 million and $10 million, while the rest will each be $15 million.
- PartyGaming must not provide internet gambling services to customers in the United States.
For its part, the USAO will make sure other regulatory and licensing authorities know of this settlement, essentially letting them know that PartyGaming is being cooperative and demonstrating good behavior.
While PartyGaming did not offer sports betting, which is the only internet gambling service explicitly prohibited by United States law, the company was required to admit that, “From 1997 until 13 October 2006, PartyGaming offered internet gaming to players located in the US, including real-money poker and casino gaming”, as if this is key to PartyGaming’s supposed wrong-doing. The company had to also admit that U.S. customer transactions were processed by third party payment processors, which is against the law.
In PartyGaming’s press release, CEO Jim Ryan declared:
“The resolution of our position with the US authorities marks an important day for PartyGaming. It has been a long and complex process but we have reached an amicable solution with the USAO that makes commercial sense for our business and is in the best interests of shareholders. We are now well-placed to seize organic as well as strategic opportunities that previously were beyond our reach.”
There has been much speculation as to why PartyGaming would bow to the USAO and concede to engaging in illegal activities, when it really never did. One reasonable explanation is that the company’s executives felt that they would forever be targeted by the United States Department of Justice and would never be truly safe from arrest and prosecution unless they raised the white flag. PartyGaming officials may just want to be able to travel to the U.S. and go about their every day lives without living in fear of being cuffed and dragged off to prison while transferring planes in Atlanta.
The other prevailing theory, which falls along the lines of “conspiracy” theories, is that PartyGaming wants to get into the good graces of the U.S. government so that if and when online gaming is legalized and regulated in the States, PartyGaming will have priority when it comes to licensing and market access. This might not be such a wild theory, however, considering that the press release did say (as mentioned earlier), “…the USAO will bring the co-operation and remedial actions of PartyGaming to the attention of other licensing and regulatory authorities.” After all, why would that be important, some would ask, unless a licensing opportunity may present itself in the future? Of course, this is speculation, not fact, but it can be entertaining to think about.
This agreement comes just a few months after PartyGaming founder, Anurag Dikshit, voluntarily pled guilty to violating the Wire Act of 1961. He was assessed a fine of $300 million and will be sentenced on December 16, 2010. Dikshit could face up to two years in prison.
Prior to the enacting of the UIGEA, PartyGaming offered both poker (through its most recognized brand, Party Poker) and casino games to customers in the United States. The company withdrew Party Poker and its other gaming services from the U.S. as soon as the UIGEA was enacted, something that is noted in the agreement with the USOA.
Party Poker had been the number one online poker room in the world until 2006, but when PartyGaming shut its doors to U.S. customers, player traffic dropped precipitously. The gap between Party Poker and PokerStars had already closed earlier in the year, months before the UIGEA, because Party Poker had cut off its skins from its network (see: Party Poker Flashback: Split with the Skins, posted April 3, 2009), but the UIGEA did the most damage.
Currently, Party Poker ranks fourth in terms of cash game traffic, according to PokerScout.com, behind PokerStars, Full Tilt Poker, and the iPoker Network. Both PokerStars and Full Tilt still accept U.S. customers, whereas iPoker and Party Poker do not.