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While it looks easier for a thoroughbred to squeeze through the eye of a needle than for Internet gaming to win political approval, that just might be what (UBET) is trying to do. is the online betting outfit that beautifully illustrated the magic of being a .com stock when it changed its name Jan. 20. from

You Bet International

. Its share price subsequently rose as high as 22 1/4, about triple its 1998 high of 7 3/8.

The company took some lumps in the financial press for its .com transition, but in this case it actually makes sense. This is not some fish-oil or ball-bearing company trying to cash in on the Internet craze, but a company that conducts all of its business online. If there's cause for criticism, it should be for not having done it sooner.

"But," you must be wondering, "isn't online gaming close to political dog meat?"

Yes, but that's where the eye of the needle comes in. In the last session of


, the

Internet Gambling Prohibition Bill

, which proposed to make gambling on the Internet a federal crime, passed the


90-10. The bill, from

Sen. Jon Kyl

(R., Ariz.), died only because the


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version was incomplete before the end of the session.

So on March 23, Kyl introduced

S. 692

, a kinder, gentler version that was careful to exempt certain methods of betting on the ponies and thus increases its odds of passage. Kyl's spokesman, Vince Sollitto, explained that the bill specifically allows "closed-loop, subscriber-based services which operate in accordance with state laws and which provide for protections against underaged gambling."

Not coincidentally, is available only to those who use their proprietary software and subscribe using credit cards. The open architecture of Web-based gaming sites disqualifies them from Kyl's exemptions.

On, the punter must open a wagering account, and access to the account is not possible through an ordinary Web browser -- two things Kyl likes because it keeps people from, in his words, "clicking the mouse and betting the house." But for $5.95 per month, subscribers can get the equine version of the slo-mo live video. They also get the ability to place bets through the Pennsylvania subsidiary of British megabookie


. stresses that it does not actually accept wagers, but passes them along to Ladbroke's. Turf fiends pay their usual Ladbroke's fee, and collects 50%.

In addition, has nonexclusive broadcast deals with 24 racetracks across the U.S., including the well-known Santa Anita in California and Pimlico in Maryland. The monthly subscription fee also includes handicapping and other data, live track odds and official track programs.

Sounds like a sweet deal for the couch-potato handicapper and a good market for According to the company, some 77% of horse-track betting comes from off-track bets.

But if it were this easy, everybody would do it. Which brings us back to the eye of that needle: gambling-specific issues and other issues common to early-stage .com companies.

First, in order to be legal, approval must be granted both in the bettor's state and in the state where the bet is accepted, according to Kyl's spokesman. This is not a problem, says in its

Securities and Exchange Commission

filings, because Ladbroke's does not accept wagering accounts from people who live in states that outlaw it, including Colorado, Georgia, Hawaii, Mississippi, Nevada, North Carolina, South Carolina and Utah.

Moreover, in state-licensed off-track-betting parlors, the state gets a cut of the bet. But with, the states get nothing. While there are no organized state efforts to block, the issue is a real one. In order to broadcast races at Santa Anita, just a few miles south of's corporate headquarters in Los Angeles, had to agree not to accept wagers from Californians for races there. While not a deal-killer, it could limit the market for or any other competitors (none online so far).

Robert M. Fell, chairman and CEO, said his company is prepared to work with states to "resolve the concern by establishing a 'hub' operation within that state or working out some other economic arrangement."

Assuming enough state politicians are willing to work with that, still faces some tough turf on its way to the pole.

Its technology is suspect.

Washington Post

horse-racing columnist Andy Beyer panned YouBet's technology in an April 3 column, "When Cyberspace Wagering Did Not Compute," complaining of confusing instructions, software crashes and missed bets. And postings on's message board -- which, to its credit, has not censored -- contains rants from unhappy users.

"The A/V

audio/visual is really bad!!!!!!!!!!" reads one typical posting. "The race starts, then everything stops and after watching the screen you get part of a broken call and the results if the damn thing hasn't stopped altogether." President David Marshall told Beyer, "It's not perfect, but our idea was: Let's get it out there. What you see today is the worst you're ever going to see."

The company's finances could also pose a hurdle. Like other Net stocks, is losing money. For last year, the company lost almost $14 million and has accumulated losses of $37.5 million since its inception in 1995.

These losses have not stopped it from raising a bundle of cash. On April 6, it announced the completion of $36.7 million in 11% five-year convertible notes; three days later it filed an S-3 to register almost 3.9 million shares. Fell says he hopes the offering will allow the company to roll out its service worldwide and enable it to qualify for a listing on the

Nasdaq National Market


So is going to become Well, it's certainly come out of the gate first and fast, but every punter knows that no horse is a sure bet. If's secondary offering is a success, that should give it the war chest to keep improving its odds before the tote board closes.

Perdue helped launch three technology companies in roles ranging from marketing executive to chairman/CEO. He has written widely on technology for InfoWorld, PCWorld, Interactive Week, Forbes ASAP and many others. Perdue is also editor and publisher of

Wine Investment News. At time of publication, he held no positions in the stocks discussed in this column, although holdings can change at any time.