By Cassimir Medford

Neteller said Thursday it would stop processing online gambling transactions from the United States, throwing the online casinos that heavily depend on the e-processor into disarray.

The announcement came one day after the owners of Citadel Commerce, another online gambling financial facilitator, announced it was shutting down.

Neteller, based on the Isle of Man, bid goodbye to two-thirds of its business after the arrest of two of its founding shareholders earlier this week (see Arrests to End Neteller’s Run).

The company said it had already begun a phased compliance with the Unlawful Internet Gaming Enforcement Act of 2006, a U.S. law passed in October that made Neteller’s business illegal even before the arrests.

Industry Reshuffle

But Neteller’s abrupt termination of its U.S. business has left online casinos scrambling for alternatives. Many of them depend on Neteller to process as much as 75 percent of their funds transfers.

“Both Neteller and Citadel shutting down almost simultaneously is a double whammy because now the online casinos will have to find other processors quickly, and that’s going to be difficult,” said Christopher Costigan, president of Gambling911, a gambling research and marketing site.

Operating without a reliable way for their customers to deposit money could jeopardize the financial futures of many of these companies, Mr. Costigan said.

Customers are no longer willing to send checks or money orders by overnight mail, the standard funds transfer method for hardcore bettors in the nineties, he said.

Over the past decade, the U.S. government has put immense pressure on banks and credit card companies to refuse online gambling transactions. That has made an impact.

“The industry has always had to seek out other ways of transferring funds, and Neteller became the cheapest and most efficient way to do that,” Mr. Costigan said.

The industry is now forced to adapt, again.

Smaller Players

Several smaller companies provide funds transfer services similar to Neteller’s. Click2Pay is probably the next most popular after Neteller. InstaDebit and eCheck also provide such services.

“Some of the larger online casinos have developed their own e-commerce methods, but most of them did not want to put that kind of money into payment services,” said Mr. Costigan. “They were spoilt by Neteller.”

Limited Release

Meanwhile, a Los Angeles magistrate granted Neteller co-founder John Lefebvre limited release on $5-million bail Wednesday.

Mr. Lefebvre, 55, faces charges of money laundering related to his role at Neteller. He surrendered his passport and is restricted to traveling only in California or New York, where he faces trial.