GAMBLING LEGISLATION TO AFFECT ECHO's BOTTOM LINE

21 October 2006

PACIFIC COAST BUSINESS TIMES
Bill Lascher
Staff Writer
10/20/06

Fallout from legislation targeting Internet gambling has landed in Ventura County.

Camarillo-based Electronic Clearing House Inc., or ECHO, announced that its annual report for the fiscal year ended Sept. 30 would look different after the Unlawful Internet Gambling Enforcement Act of 2006 was signed by President George W. Bush Oct. 13. The law prevents companies from accepting payments for Internet gambling and requires financial institutions and payment processors to stop any payments that could be used for Internet gambling.

“We’ve always known that it was possible that our Congress would try to legislate morality,” ECHO Chairman and Chief Executive Officer Joel M. Barry said.

ECHO processes debit and credit card transactions and clears checks for clients throughout the United States. It has been caught on the fringes of the high-tech dragnet because it also processes fund transfers for a popular internet technology that is sometimes used to pay for Internet gambling.

Many ECHO customers offer a product known as an “Internet wallet.” Similar to the service offered by eBay-owned PayPal, these wallets allow users to deposit money into online accounts to be used at the user’s convenience to buy products, pay for services, or place a few bets on the pass line of a virtual craps felt. PayPal was the most popular such service for online gaming until it was purchased by eBay, which pulled it out of the industry.

The new legislation does not prohibit Internet wallets. Instead, it requires their providers and companies like ECHO to block transactions connected to illegal online gaming. Although the law took effect upon its signing, it could be up to 270 days until federal agencies adopt guidelines for enforcing the law.

ECHO Chairman and CEO Barry said that although his company will be able to work around the new regulations, they were developed for purely political reasons. Notably absent from the legislation were proscriptions of wagers on horseracing and state-sponsored lotteries.

“The industry itself had had an active lobbying effort and had been assured that this would not happen,” Barry said. “It kind of undermines the logic of the congress to leave online horse racing alone. I think it was more of a political year calculation than a serious effort, but it’s going to have a lot of impact.”

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