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Bodog boss Ayre steers clear of U.S. Add to ...

Ever since Calvin Ayre landed on the cover of Forbes magazine's annual billionaires issue, people have been assailing him with one question: Why isn't he taking advantage of the growing thirst for gambling stocks with an initial public offering of his company, Bodog Entertainment Group?

Last week, they got their answer. A British gambling executive was handcuffed at a Dallas airport by U.S. authorities after a routine stopover, in part because his company accepts bets from Americans. The arrest cast a pall over the gambling sector, which is largely based in Britain, undercutting stock prices and prompting concerns that Internet sports betting and casino operations could be facing a serious crackdown.

"I think my decision to stay private is actually looking good right now," Mr. Ayre said in an interview. "I said a long time ago, if the U.S. Justice Department wanted to make a statement, they would go after a British guy. You're not going to crash my stock by grabbing me."

Just to be safe, though, Mr. Ayre, like other executives in his line of work, is not planning a U.S. vacation any time soon.

He was supposed to be hosting an international gambling conference in Las Vegas yesterday, but cancelled the event after the Justice Department jailed Betonsports.com chief executive officer David Carruthers, and charged him with racketeering, conspiracy and tax evasion. The company terminated Mr. Carruthers' contract yesterday.

"I would be shocked if any senior executive of any gaming company would go into the United States right now -- I don't imagine too many people are going to be changing planes [there]" said Mr. Ayre, a native of Saskatchewan who now makes his home in Costa Rica.

"Certainly, it appears that the people that they're going after are being beat about the neck and shoulders with the fact that they're involved in on-line gaming, at a minimum. They are definitely using that as a club to beat them."

Mr. Ayre was comfortably beyond the reach of that club yesterday and nestled in Vancouver, where he has family and business interests. The flamboyant 44-year-old entrepreneur, a self-promotional wizard whose website features him cavorting with celebrities and bikini-clad women, said he is departing Vancouver for Vietnam and China, where he will be making a documentary aimed at ending the practice of farming bears for their bile.

Somehow, that seems more reasonable than tempting fate south of the border, especially considering how visible Bodog has been in a country with strict rules against betting.

The problem for Mr. Ayre, and indeed, for gambling investors, is determining whether the U.S. government is taking aim at the entire offshore gambling industry, or merely one company.

Greg Harris, a gambling analyst with Canaccord Adams in London, is betting on the latter.

He noted that the Justice Department had been working on the Betonsports indictment for several years, and said the sharp drop in several British gambling stocks, like Sportingbet PLC, is likely an overreaction.

"I would really look at this as more company-specific, and as a reminder that the sports betting companies formed their businesses offshore for a reason, and probably should not be travelling through the United States," he said.

He predicted that a proposed piece of legislation aimed at preventing financial companies from processing on-line bets will likely fail to get approval in the U.S. Senate.

U.S. gambling rules are notoriously complex, at best, and there are a mass of seeming contradictions between state and federal laws.

Both Bodog and Betonsports take bets over the phone from Americans, which is viewed as somewhat risky.

Sportingbet accepts on-line wagers, where the rules are murkier, but has avoided telephone betting for fear of being pursued by U.S. authorities.

Other major gambling companies, such as PartyGaming PLC, offer casino games and poker, which are more loosely regulated than sports betting.

Bradford Smith, a lawyer and gambling consultant who formerly headed the New Jersey Casino Control Commission, believes Mr. Ayre's caution is well founded.

He predicted that the recent arrest of Mr. Carruthers and nine others, including Betonsports founder Gary Kaplan, will have a chilling effect on the industry and its shareholders.

"If you're involved with on-line gaming, and you're accepting customers from the United States, you have to be concerned," he said. "Just the threat of criminal prosecution -- look what that's doing. That's a tremendous cloud hanging over these companies and their executives."

Market size

The annual turnover of the gambling industry is estimated at nearly $100-billion (U.S.) with on-line sties generating $12 billion in 2005. Some eight million U.S. residents placed bets on the Web. Worldwide revenue from on-line gambling is expected to hit $24.5 billion by 2010, according to estimates form Christiansen Capital Advisors.

U.S. law

A 1961 law called the Wire Act forbids interstate telephone betting, which the Justice Department says also applies to the Internet but Americans bet via access to thousands of foreign websites. Earlier this month, the House of Representatives passed a bill to block most forms of Internet gambling. The U.S. Senate is working on similar legislation.

Big offshore sites

BetBug of Toronto; BetWWTS.com of Antigua; Bodog Sportsbook, Casino and Poker of Costa Rica; and Betfair, which has offices in London.

 

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