WPT Enterprises, Inc (WPTE) and the UIGEA Repeal

WPT Enterprises, Inc. (NASDAQ:WPTE) has been on a steady decline since the Unlawful Internet Gambling act of 2006 (UIGEA). The stock has fallen 70% in the last year.

Attendance in the U.S. is down in most tournaments, and ratings for the premiere poker shows including the WPT have also dipped. Poker is no longer seen as this "gold mine" amongst the mainstream public and Wall Street. There has been a lull in mainstream interest (a lot of that can definitely be credited to the UIGEA to some degree).

WPTE 1 Year Chart:

Online poker is arguably the catalyst that started the poker craze in this decade – a lot of players just aren’t comfortable with going to a brick-and-mortar card room to play.

The Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) was passed as an attachment to the Port Security Bill of 2006.  The UIGEA was attached at the last moment before the election recess, by then Senate Majority Leader Bill Frist, knowing that almost no one on the House-Senate Conference Committees had an opportunity to read it.

You should be keeping an eye on poker and gambling stocks for 2 reason:

The UIGEA Repeal

According to Reuters on April 25th:

WASHINGTON (Reuters) - House Financial Services Committee Chairman Barney Frank on Wednesday said he will introduce a bill this week to lift a ban on online gambling.

“Why anyone thinks it is any of my business why some adult wants to gamble is absolutely beyond me,” Frank told a community bankers group conference.

Frank, a Massachusetts Democrat, said he will introduce the legislation on Thursday.

Internet gambling in the United States was effectively banned last October when President George W. Bush signed legislation outlawing gaming financial transactions. -End of Reuters story

Frank is openly opposed to the UIGEA and holds a powerful position as the chairman of the House Committee on Financial Services. He railed against UIGEA's passage last October because he believes the law is an invasion of privacy.

The WSOP Final Table Delay

From pokernews.com:

By now, everyone in poker has heard about the new format for this year's WSOP Main Event. The final table will be delayed several months to be shown "nearly live" on ESPN. It's a bold and controversial proposal, surrounded by rumors and wild theories.

The demographics for televised poker have been dropping in recent years, and that affects everyone in the poker world, from Harrah's and ESPN to PokerStars and Full Tilt to the grinders in the cash games who have fewer fresh fish to feed on. This change is designed to increase the buzz around the final table of the WSOP  Main Event in an attempt to put it on par with other major "sports" championships. (While poker isn't actually a sport, the fans watch it in much the same way.) If the TV ratings for poker continue to fall, we face the possibility of losing poker on TV, except for late-night paid-for specials.

The proponents of this plan claim that it will reinvigorate televised poker, draw new fans to the game, and potentially create another Moneymaker-style poker boom that would boost the entire industry. (Is there anyone in poker who didn't benefit from the post-Moneymaker boom?) The detractors of this plan claim that this delay could kill the WSOP — or worse, kill some of the final nine players.

See the whole article here.

Fellow Stockmasters, what I’m getting at here is that if and when the UIGEA is repealed, you can bet on the fact that the poker craze will be back in a major way. The passage of the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) sent the online gaming world into shock. Stocks of online gaming companies plummeted on European stock exchanges. Thousands suddenly found themselves out of work. A brief history shows that UIGEA was tacked onto a totally unrelated bill, presented in a late night session of congress with no room for debate, and was designed to pander to a very tiny minority of US citizens.

One of the effects of this legislation is a massive loss of potential revenue for the federal government. A recent study conducted by the top accounting firm of Pricewaterhouse Cooper found that the United States government is missing out on potential revenue to the tune of $7 to $42.8 billion dollars. Thanks to UIGEA most of this money is now going to offshore banks and governments.

So there you have it, I’m banking that the UIGEA will be repealed. That event, coupled with the new WSOP Final Table delay, could provide a big turn-around for Poker and WPTE Stock.

 Disclaimer: The author has no shares of the securities mentioned in this article

Article written by Eric Cheshier

Co-Founder of theStockMasters.com

If you liked this article, Eric Cheshier also contributes to the Master Picks Newsletter and the Quant Method , only available at WallstNewsletters.com.