The unexpected passage of Internet gambling restrictions by the U.S. Congress has thrown sportsbooks into disarray.

Company stocks took a plunge Monday on the London exchange, as the gambling firms face the loss of about half their $12 billion annual income.

One company, Sportingbet PLC, said it would look into world trade rules to see if the U.S. law was in violation.

The measure, the Unlawful Internet Gambling Enforcement Act of 2006, passed in a parliamentary maneuver in the U.S. Congress early Saturday. The measure, which is almost certain to be signed into law by President George Bush, stops short of outlawing Internet gambling. But it does outlaw the use of financial instruments and credit cards by gamblers to pay for their bets. Since most bets are paid this way, the measure effectively shuts down gambling.

Legislation that was not passed would have prohibited Internet gambling outright by strengthening the 1961 U.S. wire law.

The Republican leadership of both houses attached the Internet bill,  H.R. 4411, to a bill requiring safe seaports during a meeting of a House-Senate conference committee. The combined bill quickly passed both chambers because the emphasis was on the port bill, a national security issue.

If Bush signs the measure, the U.S. Treasury Department and the Federal Reserve will have 270 days to come up with enabling rules.

New York Attorney General Eliot Spitzer tried the same approach in June 2002 when he arm-twisted a major credit card company based in his state and got an agreement from Citibank to block online gambling transactions. The New York Times said at the time that the attorney general threatened to prosecute the credit card company as a co-conspirator in violating the state’s gambling laws if it did not stop the use of credit cards for online gambling.

A number of payment systems have sprouted up to accommodate gamblers, Many of these are offshore, and U.S. and other companies like Western Union will be hard-pressed to identify each as a receiver for funds to be used in gambling.

Even now, gamblers who deal with some Costa Rican sportsbooks are told to make payments to individuals in a variety of countries.

In a statement, the board of directors of Sportingbet PLC noted that U.S. horse racing and U.S. fantasy sports, insofar as they are lawful today, together with U.S. intrastate and U.S. intratribal Internet gambling have been exempted from the legislation. The board said it will be seeking clarification as to whether the act is in violation of U.S. commitments under the General Agreement of Trade and Services and representations made by the US in recent World Trading Organization proceedings.

The country of Antigua and Barbuda filed a case before the World Trade Organization in 2003, contending that the U.S. restrictions on Internet gambling violated U.S. trade commitments. A 287-page report issued in November 2004 confirmed a preliminary ruling in the Caribbean nation’s favor. The case still is involved in international litigation.

However, the free trade agreement between the United States and Costa Rica specifically puts gambling outside the scope of the pact. Costa Rica has not approved the agreement.

Sportingbet PLC said that in the year ending July 31, some 62 percent of its bets came from the United States. Other companies may have a
higher percentage of U.S. players. Sportingbet said that as a result of the passage of the legislation in the United States it has canceled negotiations to buy World Gaming PLC.

The U.S. bill would not be expensive for the U.S. federal government to enforce. The Congressional Budget office estimated that implementing this bill would cost about $2 million over the 2007-2011 period, a tiny amount in the U.S. budget.

The main impact on Costa Rica would be in the salaries paid to nationals who work in the sportsbook operations. BetOnSports already has closed operations here after its chief executive officer, David Carruthers, was detained while passing through the United States on a London-San José booking.

Peter Dicks, the former chairman of Sportingbet
PLC, also was arrested. He was detained at JFK Airport after he traveled from London. His former company said that following consideration of legal arguments presented by Dicks’ lawyer George Pataki, the governor of New York, was not prepared to sign the  extradition order requested by the Louisiana State Police. and that Dicks was free to return to the United Kingdom Friday.

Dicks’ lawyer argued that his client had not been in Louisiana for at least 20 years and that a criminal allegation by that state involving Internet gambling overseas could not be successful.

Costa Rica has been shy about requiring much from the sports books companies and other gambling call centers. Although there is a type of license through the Ministerio de Economía, there are no background checks and hardly any rejections. Plus all the income goes to other countries. Under a tax bill that did not pass earlier this year, sportsbooks would be assessed a flat fee of $50,000 instead of paying a tax based on earnings like other businesses.

Calvin Ayre, the Canadian head of Bodog.com, claims to have become a billionaire as a result of his gambling activities, much of them here.

For more than two years the U.S. government made clear that it wanted to crackdown on overseas gambling operations. In part this was generated by the religious right of the Republican Party which saw gambling as something that destroyed families.

Focus on the Family praised the congressional action. “Internet gambling operations around the globe are stunned,” said Chad Hills, gambling policy analyst for the Colorado religious organization.  “Shareholders are pulling their money and online gambling stocks are plummeting all the way from Antigua to Costa Rica to the United Kingdom. Two of the UK’s largest online-gambling entities are canceling all U.S. operations. For the time being, Internet gambling in the U.S. is dead.” He was quoted on the organization’s Web site.