Angry in the Great White North

Turmoil in the world of Internet gambling, with PartyGaming losing 10% of its value:

It wasn't only PartyGaming's stock that took a hit. About $1.5 million U.S. in market value evaporated from online gambling stocks in London after the arrest of Peter Dicks, chairman of Sportingbet, at New York's JFK Airport on Thursday.

It was a similar story of stock-market carnage two months earlier when David Carruthers, then chief executive of BetonSports PLC, was detained at a Texas airport and charged with federal racketeering offences.

Running afoul of the 1961 Wire Act, the arrests have sent a chill through the industry. Assumptions about just where the law applies are in doubt, and with doubt comes some serious flight of capital. It is seriously affecting the Mohawks:

The Mohawks of Kahnawake have had their stock-market debut rained out by storms lashing the Internet gambling world.

The Mohawks own a 40-per-cent stake in a company called Continent 8 Technologies PLC that was supposed to have gone public today on the London Stock Exchange's junior AIM market.

But volatility in online gambling stocks in London, amid fears of a U.S. crackdown on the industry, forced the postponement of the Continent 8 initial public offering until the fall.

Continent 8 has an exclusive agreement with Mohawk Internet Technologies in Kahnawake to offer its hosting services to owners of sites in the fast-growing $12-billion (U.S.) online gambling industry.

The Mohawks have put a lot of eggs in the online gambling basket:

MIT's powerful computer servers have made the Kahnawake reserve one of the world's most popular jurisdictions for hosting online gambling sites. Its 61 customers include the world's top five poker sites and seven of the top 10 online casinos, according to Continent 8's preliminary prospectus, an information document for investors considering buying shares in a stock issue.

Profitability is enhanced by the tax-free status of the reserve. Except that maybe gambling profits aren't tax exempt. More uncertainty:

The Mohawks assert their jurisdiction over gambling but the provincial and federal government maintain only the provinces and territories can operate gambling ventures. Quebec has so far tolerated MIT but a crackdown is listed as a risk factor in Continent 8's prospectus. The document also warns there is a risk that the company might fall under the grasp of the long arm of the Canadian tax authorities.

We're talking about $17.4 million in profit last year. The fight over this is going to make Caledonia look like a hissy fit. The Mohawk Warriors have a lot of money on the line. And this is not just money for the band -- every individual Mohawk stands to lose:

The Kahnawake economic development commission's stake is held in an Isle of Man registered company. Grand Chief Michael Delisle said in May that an essential feature of an IPO would be an allotment for ordinary members of the community.

But Canadian securities regulations make that a sticky proposition and Tobin said the postponement of the IPO will give more time for Kahnawake to figure out how to cut in individual band members.

Now you tell a Mohawk Warrior that because of some provincial law or federal law, his cut of a $17.4 million annual winfall is at risk, and you guess what the reaction is likely to be.