PayPal ( PYPL) agreed to the New York attorney general's motion that it stop processing online payments made from New York residents to online gambling organizations by Sept. 1.

While PayPal has not admitted to breaking the law, the online repayment service will pay a $200,000 penalty to New York state to cover the attorney general's investigation. The company is cooperating voluntarily.

New York Attorney General Eliot Spitzer sent PayPal a subpoena in July seeking information on its online gambling payments, which made up about 8% of the company's $117 million in first quarter revenues. PayPal has agreed to be acquired by eBay ( EBAY), which has said it would move the company out of the business completely.

PayPal is being investigated by a federal prosecutor in Missouri in connection with its online gambling operations. PayPal said it is cooperating with the investigation.

The shares closed up 20 cents at $23.30 Wednesday.

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