Part two of UIGEA at 20: how a cataclysmic piece of legislation upended and reshaped the industry

Part one of the story can be accessed here

Monday 2 October in 2006 was carnage for publicly traded gambling companies, as share prices went into freefall after the opening bell in London. With the Unlawful Internet Gaming Enforcement Act (UIGEA) having been tacked onto the SAFE Port Act – a must-pass piece of legislation – late on Friday 29 September, investors clamoured to dump their holdings. 888 fell 47%, while Sportingbet was down 67% by the time the day’s trading concluded. The darling of the public online gaming companies, PartyGaming, tanked 60% as more than £2bn was wiped off its value.

That week listed gaming firms lost a combined value of £4bn. PartyGaming was demoted to the FTSE 250. “It was definitely stressful,” recalls Sportingbet founder Mark Blandford, who had to watch his firm’s stock sink from a peak of 447p in May to around 70p by the time President George W Bush signed UIGEA into law. “But we were working all sorts of hours, so we weren’t sitting watching paint dry. We had to reshape the budget, which was quite dramatic. We had to cut costs. We had to let a lot of people go.”

Before UIGEA, Sportingbet’s US operations employed more than 500 staff, including 300 stationed in Costa Rica, predominantly servicing the bookmaking operation, but also Paradise Poker. Another 20 or so managed the gaming servers located in Antigua. When factoring in severance and closure costs, shuttering the US-facing operations would have cost in the region of $14m.

However, management was able to quickly do a deal to sell this portion of the business to Antigua-based Jazette Enterprises for the nominal sum of $1. The disposal of the unit was announced on 13 October. “By selling it for $1 we were able to save $14m,” Blandford says. As a side note, he mentions he had been “an advocate of being in the US market”, so in early 2007 he decided to step down from the board.   

“The timing couldn’t have been worse”

Rob Gallo, the Sun Poker and Omni Casino founder informed by phone that his supplier Cryptologic was exiting the US, took the short drive to the office on 2 October from his recently constructed 4,000 sq ft beachfront home on Antigua’s Jolly Harbour. It was time for “some serious decisions”, he says, especially as $250,000 had just been spent building out a new office for the 40 employees on the island. “The timing couldn’t have been worse,” Gallo laments. Downsizing the office and operations meant more than 20 staff were let go.

Sitting in the conference room with his CTO, Gallo posed the simple question: “What are we going to do?” Like their publicly listed rivals, they quickly concluded that pivoting to focus on Europe was the logical move. “We found a good bulk of our poker players were coming from Europe, high-value super grinders out of Scandinavia.” They doubled down and set aside $1.2m for ‘One Sick Promo’ to giveaway 100 seats for the World Series of Poker’s $10,000 buy-in Main Event in 2007. “It put Sun Poker on the map,” Gallo states. “It was helpful we had good money in the bank – we had been saving for a rainy day, and it obviously poured on 1 October.”

Over at 888, COO Gigi Levy – just 36 at the time – was feeling the pressure. A former attack helicopter pilot in the Israeli Air Force, he says he’d had “almost no sleep for two to three weeks” such was the stress in the aftermath of the vote in Congress. Exiting the US meant having to wield the axe and reduce the headcount by 210 (736 employees at the end of 2006), with the Gibraltar HQ and Antigua hub bearing the brunt of the layoffs. The purse strings were tightened, too. “Turning 888 around meant getting people used to the fact that not everybody’s flying business class anymore and we need to start looking at costs like a normal company.”

888’s leadership “went very hard on localisation”, Levy explains, including hiring boots on the ground in various markets headed up by country managers. “The company had a call centre in essentially one language. Suddenly you need many languages,” he says. “The regulatory framework, everything.” The business started to see results in just a few months. In fact, net gaming revenue for H1 2007 rose 24% year on year to $96.8m, while pre-tax profits quadrupled to $18.9m.

At the time, chair Richard Kilsby said losing the majority of 888’s 26 million customers and more than half its revenue “could have potentially delivered a lethal blow” but that the infrastructure and plans were there “to ensure our survival”. Levy adds: “We had an amazing group of people and, as hard as it was, it was kind of fun rebuilding it from scratch, but it was definitely not what I signed up for. A few days after UIGEA the chairman calls me and says, ‘I want to make sure you’re not running away and leaving’. I asked why and he replied, ‘l would probably have left’.”  

PartyGaming ended up laying off around 950 people, or 40% of its workforce. A pre-tax loss of $47.1m was recorded for the first half of 2007 – a stark contrast to a profit of $320.5m in H1 2006. Adjusting to the new reality of the US being out of the equation meant, says Nigel Birrell, at the time group director of mergers and acquisitions, “a much smaller balance sheet” and “much smaller firepower”. His role, when he arrived in late 2005, included identifying potential acquisition targets to inorganically turbocharge growth and turn PartyGaming “into a behemoth”.

It was like being a kid in a candy store. “Should we buy Ladbrokes or William Hill – or both? We could afford to buy both,” Birrell laughs. Gamebookers was snapped up for around £70m in August 2006 as PartyGaming looked to expand into sports betting, yet UIGEA suddenly meant spending ambitions were less bold given its capital restraints. “We had this really ambitious M&A plan, which of course was ripped up in October 2006 it was now £100m deals when before we were looking at multi-billion-pound deals.”

The splinternet

While public companies felt they had little choice but to stop accepting American players, some privately held entities did the opposite and refused to budge from the US. It’s important to mention that UIGEA didn’t criminalise individual gamblers. People carried on logging onto US-facing igaming sites and betting with offshore sportsbooks out of reach of the US authorities in the Caribbean and Central America, so you could quite rightly argue UIGEA failed in its mission.

That included Bodog, a huge online gambling operation with 16 million customers in 2006, most of them in the US. Just a few months before Congress waved through UIGEA, its Canadian founder, Calvyn Ayre – the son of grain and pig farmers – posed at his $3.5m pad in Costa Rica for the cover of Forbes magazine, alongside the headline: ‘Catch Me If You Can’. The interview was almost goading the Department of Justice (DoJ).  

With online poker still booming, privately owned PokerStars and Full Tilt Poker took full advantage, immediately dethroning partypoker. The pair splurged on a marketing blitz and slugged it out to become the largest poker site in the US – and the world. “I think the sense was the companies were prohibited, but not the players,” says Michael Bolcerek, president of the Poker Players Alliance when UIGEA passed. “Since at the time they had no US presence, they felt like they weren’t going to get touched.”  

Birrell and his colleagues found it a bitter pill to swallow. “We had to sit and watch as some of our rivals like PokerStars and Full Tilt stayed and clearly grew significantly on the back of what we’d created. That was quite galling, to be honest,” he says. However, payments soon became trickier for US-facing sites with the arrest of Neteller’s two founders in the US in January 2007.   Steve Lawrence and John Lefebvre were charged with conspiring to promote illegal gambling and money laundering. Within 24 hours of their arrest, London-listed Neteller – at the time the world’s largest ewallet – had ceased facilitating gambling transactions for Americans.

The Isle of Man-based company, which was said to have processed more than $10bn in transactions for US customers related to online gambling, subsequently entered into a deferred prosecution agreement (DPA) and forfeited $136m to the US government. Another $94m was returned to US customers. Other companies – both B2B and B2C – feared they could face a similar fate to Neteller.

Simon French, a leisure analyst at Numis Securities between 2005 and 2008, says: “Because of the unregulated nature of what they were doing, banks wouldn’t lend to them, so they didn’t have any debt. They all had pretty decent cash piles, but the big concern was they would have to pay retrospective fines for the activity they had been undertaking before .” 

Deal or no deal?

Anurag Dikshit, the billionaire co-founder and original software engineer at PartyGaming, voluntarily travelled to New York and reached a plea agreement with the DoJ in December 2008. The Indian national forfeited $300m to the US government but avoided any jail time – a move which paved the way for PartyGaming paying a $105m settlement (spread over four years) in April 2009 to secure a non-prosecution agreement. Nick Hunt, at the time an analyst at KBC Peel Hunt, described the deal as “a good one for Party” and that $105m was “below our expectations”.

Birrell says: “You look at others who were operating exactly the same way as we were in the market – like 888 – they decided to sit on the sidelines and see what happened. They managed to carry on and are where they are today having no paid a fine, so there doesn’t seem to be any reward for doing what you think is the right thing with the authorities.”

Birrell also flags how Dikshit forfeited $300m “to get any overhang away from him” only for the DoJ to change its opinion in 2011 and deem the Wire Act didn’t apply to online gaming. “I suspect he didn’t get any of that back,” he broods. Meanwhile, the other most prominent London-listed company, Sportingbet, agreed in 2010 to pay $33m to avoid prosecution. Then CEO Andrew McIver said the deal would allow the business to “draw a line under the events of the past”.

The following year, in April 2011, the poker sites that ignored UIGEA and continued to accept US customers had a rude awakening when the FBI seized the domains of PokerStars, Full Tilt Poker and the Cereus Poker Network (Absolute Poker and UltimateBet). Indictments were also unsealed against the sites’ founders and executives, while the DoJ would later accuse Full Tilt Poker of running a Ponzi scheme.

In July 2012, PokerStars struck a deal with the DoJ to acquire Full Tilt Poker and hand over $547m to the US government, a sum which was used to repay around $160m owed to Full Tilt Poker’s customers in the US. Furthermore, authorities accused the poker sites of having “disguised payments to hundreds of non-existent merchants”, as goods such as jewellery and golf balls, while “highly compensated” payment processors, “lied to banks about the nature of the financial transactions”.

Today, of course, it’s a very different picture in the US. Thanks to PASPA’s repeal in 2018, sports betting is regulated in 39 states plus Washington DC and Puerto Rico, though it still isn’t legal in California and Texas. The proliferation of legal igaming has been far more muted (eight states), which partly explains why the American Gaming Association said in 2025 that Americans bet $673.6bn a year illegally – up 22% on its previous findings published in 2022.

French doesn’t see how legal online casinos in so few states will persist in the long term. “This can’t just be something that is banned forever because the pace of technological change and human ingenuity to always find a way around regulation and other impediments was never going to be sustainable,” he says.  

So, what happened to the companies featured in this article? Well, PartyGaming and Austria-based bwin announcement a merger in 2010 to create bwin.party. It was the world’s largest publicly listed gambling company at the time. “It took a lot longer to integrate than it should have done,” Birrell concedes, “which meant the eye came off the ball somewhat in terms of mobile and things like that.” Bwin.party was gobbled up by GVC Holdings (now Entain) in 2016, and both brands are still part of Entain’s portfolio today. As is Sportingbet (acquired in 2013).

888 flirted with M&A over the years before pulling the trigger on a highly leveraged £1.95bn purchase of William Hill’s non-US assets in 2022. Later rebranded to evoke, the embattled business is currently the subject of a £243m all-share takeover by Bally’s Intralot. PokerStars was acquired in 2014 by Canadian supplier Amaya Gaming for $4.9bn. From there, Amaya rebranded to The Stars Group (TSG) and snapped up Sky Betting & Gaming in 2018 from CVC Capital Partners and Sky plc in a cash-and-stock transaction valued at $4.7bn.

Two years later, TSG completed a £10bn mega-merger with Paddy Power Betfair to form what was later rebranded as Flutter Entertainment. French says: “I guess what UIGEA led to – whether it took five, 10, 15 or 20 years – was hyper-M&A activity, as people thought there’s only so many costs you can take out yourself. Suddenly it becomes more attractive to take costs out of a combined company.”

Birrell went on to become group CEO of Gibraltar-based bet-on-lottery outfit Lottoland in 2014, a position he still occupies, while Levy left 888 in 2011 and became co-founder of in social games company Playtika. The studio behind the hit free-to-play slots title Slotomania was bought by Caesars Interactive Entertainment in 2011. (Caesars sold the unit in 2016 for $4.4bn.)

Gallo offloaded his online gaming business to a private equity firm in 2010 and “quasi-retired”. Blandford, Sportingbet’s founder, is today a venture capitalist investor, though he hasn’t set foot on US soil since the arrest of chair Peter Dicks just prior to UIGEA. “You can’t negotiate with them once you got the orange jumpsuit on. I’d prefer to negotiate from here,” he remarks.  

Banged up abroad

As for AIM-listed BETonSPORTS, the online and telephone bookmaker collapsed after the arrest of CEO David Carruthers’, resulting in 2,400 people losing their jobs. Founder Gary Kaplan was jailed in 2009 for more than four years and ordered to forfeit around $43m in illicit earnings after admitting racketeering and various fraud charges related to the business. Carruthers, who had been electronically tagged and put under house arrest in Missouri, was gradually allowed outdoors. He took up running and was eventually permitted to enter the St Louis Marathon, crossing the finishing line in a respectable four hours and five minutes.

In early 2010, Carruthers pleaded guilty to racketeering and was handed a 33-month prison sentence. Critics accused the authorities of judicial overreach. Democratic congressman Barney Frank was quoted as saying the British citizen’s arrest and incarceration was “one of the most Stalinist things I’ve ever seen my government do”. Carruthers was released after 14 months behind bars at a medium security federal jail in West Texas and returned to the UK, where he served another five months in an open prison on the south coast.

Reflecting on his six years up until the summer of 2006 managing what he says was one of the biggest betting brands in the world at that time, Carruthers says: “I came up with the phrase that BETonSPORTS would become the Coca-Cola of gambling. The investment fund managers loved that kind of talk.” With the benefit of hindsight, though, the “biggest mistake” was taking the business public. “I thought they’d leave us alone and go after the bad guys. But it gave them the evidence to prosecute me. All the information was in the public domain.”

If things had turned out differently and PASPA had been repealed when Carruthers headed up BETonSPORTS, he reckons he would now be “on my private island doing painting or whatever”. These days a gambling industry consultant – following a three-year stint in Taiwan where he learnt Mandarin and opened a private restaurant – he insists the late 1990s and early 2000s were a licence to print money for internet gambling entrepreneurs. “You could have brought your grandmother to Costa Rica in the year 2000, given her a server and she would’ve been a millionaire in 18 months. It was that easy to be successful.”