• Dow Jones , Thursday, October 12, 2006 11:31 AM

Neteller PLC, the British payment service that handles transactions for online gambling companies and others, says it will continue to operate in the U.S., despite the likely passage of anti-gambling legislation. "We are staying in the U.S.," Bruce Elliott, Neteller's executive vice president, marketing and sales, told an online gambling conference in Barcelona. "I don't think we have a very big problem."

Elliott's remarks came after Congress passed legislation forbidding Internet casino companies from processing financial transactions with U.S. credit cards. President Bush is expected to sign the bill into law tomorrow. Gambling on the Web has always been ambiguously illegal, but this legislation targets U.S. credit-card companies and banks rather than bettors, who are too numerous to prosecute.

It has been estimated that U.S. spending accounts for roughly half of the $12 billion spent on online gambling last year. So how come Neteller isn't worried? Two reasons: one, 85 percent of its earnings come from the U.S. and Canada, so Neteller won't give up most of its business without a fight. Two, Neteller is a payment service, sort of like eBay's PayPal. It basically acts as an "online wallet" into which consumers dump money and then go spend as they please at any of its numerous partner sites. Because of this, banks and credit-card companies would be processing payment to a payment service rather than a gambling site.

Many online gambling sites go through these intermediaries, which transfer money from bank accounts to online businesses for a fee. Neteller is hoping to ride this loophole all the way to the bank. If it holds up, the new law could be a real boon for the British Web site, as online gambling companies will be forced to deal with sites like Neteller if they wish to retain their large U.S. audience.

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