Morgan Stanley October Monthly Form Guide

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Morgan StanleyOnline Gambling: Monthly Form Guide
Oct 2011


There were several regulatory developments in September with some positive signals in Europe and the USA. Schleswig-Holstein was the first of the 16 German states to pass a bill regulating online gambling with no restrictions on the number of licences that can be issued, and a 20% gross profits tax for all products. The German Lander continue to work towards a consensus framework to regulate online sports betting, with a tax rate lower than the current proposal of 16.67%. Hungary plans to introduce a 20% gross profits tax for internet gambling. On the 20th of September the European Commission sanctioned Denmark’s new gaming laws, ruling that the benefits of regulating and liberalising the sector outweighed the potential distortion in competition due to lower tax rates for online operators. In the U.S. former FBI director, Louis Freeh, called for online gaming to be regulated stating that current laws inhibit both the financial and law enforcement communities and Republican Barney Frank reaffirmed his support in pressing for proper regulation to be established. Full Tilt had its licence revoked by the Alderney Gambling Control Commission who argued they had been fundamentally deceived over the financial position of the firm. It also emerged that Groupe Bernard Tapie is in talks to buy Full Tilt, should there be a favourable outcome to the U.S. Department of Justice hearings, even after Full Tilt was accused of running a Ponzi scheme. In other acquisition news, William Hill confirmed it is in preliminary talks with Probability on a potential buy-out.

Poker Traffic Update:

Poker liquidity remained broadly flat in September over August, which is disappointing for the industry given the expected seasonal uplift. Within this, Partypoker continues to perform well, with year-on-year growth of c.20% and with liquidity remaining around 20% greater than before the indictments. Additionally, iPoker continued to hold its liquidity premium of broadly 20% over the pre-indictment figures.

Exhibit 25:

Partypoker’s liquidity remained around 20% above its levels at the date of the indictments.


Ready to Roll:

We highlight some of the key forthcoming dates and events.

05/10/2011 – Sportingbet Q4 Results – Confirmed
13/10/2011 – Ladbrokes Q3 IMS – Confirmed
21/10/2011 – Rank Group IMS – Confirmed
21/10/2011 – Q3 Results – TBC
26/10/2011 – Paddy Power Roundtable (Places available. Contact [email protected])
27/10/2011 – William Hill Q3 Trading Update – TBC
27-28/10/2011 – German minister meetings – Online gambling rules – Confirmed
02/11/2011 – Unibet Q3 Results – Confirmed
02/11/2011 – 888 Q3 Results – TBC
03/11/2011 – Lottomatica Q3 Results – Confirmed

Biggest Pot:

Ilari FIN (Ilari Sahamies) won the largest pot ever played on PokerStars worth $421,826.

US Regulation and Prohibition

Full Tilt Poker founders accused of running a Ponzi scheme by the U.S. Department of Justice A civil suit was filed by the U.S. DoJ within which Messrs. Lederer, Ferguson and Furst are accused of defrauding thousands of online players out of more than $300m that is still owed to them.

Regulators revoked Full Tilt gambling licence The Alderney Gambling Control Commission said it had been “fundamentally misled” by Full Tilt Poker about its financial means, including its failure to report that US prosecutors had seized more than $300m of its funds over a four-year period.

Groupe Bernard Tapie is in discussions to buy Full Tilt. This is subject to a series of conditions, including settlement with the US Department of Justice.

Former FBI director calls for federal internet poker regulation Louis Freeh labels the Unlawful Internet Gambling Enforcement Act of 2006 as a vague statute that frustrates law enforcement and the financial community.

Paddy Power targets Nevada mobile gaming licence Nevada’s pursuit of legalisation – contingent on federal approval – of internet poker is thought to have motivated Paddy Power in its choice of jurisdiction.

U.S. Republican Barney Frank continues to push for legalisation of online gambling He said his views were unchanged despite criticism that he took money from Full Tilt, which has been accused of running a Ponzi scheme. If found guilty, Mr. Frank will donate the campaign contributions he received to the victims.

The casino and horse racing industries are supporting a yes vote in the sports betting referendum in New Jersey Adam Ozimek of Econsult, a Philadelphia economic consulting firm, said research he has conducted on Internet betting projected that online sports betting alone would generate $217 million in new revenues for New Jersey casinos and racetracks and create 1,600 jobs.

European Developments

Schleswig-Holstein became the first of the 16 German states to pass internet gaming regulation The new law will issue licences from March 2012 and will permit operators to offer all mainstream products with a 20% gross profits tax.

The European Commission has sanctioned Denmark’s new gambling laws The EC ruled that the positive impact of liberalisation on the sector outweighed the potential distortions of competition due to a lower tax rate.

William Hill confirmed it was in preliminary talks with Probability William Hill said it was in discussions to acquire Aim-traded Probability, adding that there was no certainty an offer would be made.

Germany looks set to open up its gambling market more than expected following criticism from the European Commission Commercial operators in a new online sports-betting market could now end up paying only half the planned 16.67 per cent tax on each punter’s stake, while the number of concessions looks set to be raised from a proposed seven.

Opap’s monopoly in its home market of Greece looks set to continue for a time Greece’s OPAP has agreed a €935m deal with the government to extend its gambling monopoly until 2030 and hand it control of the country’s VLT market. We believe discussions relating to online licences are ongoing.

South Africa re-affirms the view that online gambling is illegal Online casino Piggs Peak has closed its South African-facing business after losing an appeal in a case which ruled that online gambling is illegal in the country.

Gaming taxes in Hungary are set to be raised Hungary is set to regulate online gambling, with a gross profits tax rate of 20%, according to local newswire MTI

The Court of Justice of the European Union (CJEU) published its ruling on the Austrian online gambling case The Court strongly questions the compliance of the Austrian gambling legislation with EU law, stressing that justification of state monopolies based on attempts to curb online gambling addiction must be consistent with laws that do not expand the opportunities for gambling.


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