No play for Ebay’s PayPal

Jul 16, 2002 8:17 AM

A euphoric celebration broke out in the headquarters of PayPal Inc. (PYPL) last week when the announcement was made that the company was being acquired by the highly-successful online-auction house Ebay Inc. (ebay).

But, the smiles quickly faded when the company was advised through subpoenas that it was being investigated by the New York state’s attorney general’s office because of its dealings with off-shore internet casino companies.

Just a few days earlier, PayPal had announced that it was more than doubling its relationships with Caribbean casinos so that it would become the dominant provider of resources for the gambling payments made by off-shore casino customers.

New York State authorities have been activists in prosecuting illegal Internet casino operators and recently were upheld in higher court decisions confirming the conviction of a high-profile Internet casino operator.

Because of the legality questions surrounding Internet gambling, particularly with Caribbean casinos, credit card companies such as Visa and MasterCard and a number of America’s largest banks said they would no longer permit their cards to be used in satisfying gaming debts. This appeared to open the door to a company such as PayPal.

However, Ebay put an end to that activity by announcing that when it takes over PayPal it would discontinue all gambling business.

PayPal officials acknowledged the AG’s subpoenas and said it would cooperate fully in developing information sought by the investigators.