As much as £3 billion was today wiped off the value of UK online gaming companies after a dramatic US Senate ruling over the weekend that jeopardises huge swathes of their operations.

This morning, British companies active in the $6 billion American online gambling market rushed to update investors about the implications of the rule change amid a rout in their shares.

PartyGaming, the operator of the world's biggest poker website, saw about £2.32 billion wiped off the value of its shares after it said it would suspend all real money gaming business with US residents once President George W. Bush ratifies a new law that outlaws the processing of internet payments by banks and credit companies.

The FTSE 100 group, which like many rivals has already moved to win new customers outside of the US, said the suspension would remain in force until the law had been clarified.

Access to free parts of PartyGaming's sites will be unaffected, as will access to all of its sites by non-US residents.

PartyGaming shares slumped 57 per cent, falling 62p to 45p. To track the stock click here.

Sportingbet, the online bookmaker that last month unveiled takeover talks with smaller rival World Gaming, said those discussions were now off. Sportingbet said it had taken extensive advice over the weekend but was still unsure what specific actions it would take.

It said the full impact of the law was not completely clear. But it said it would suffer a material hit to its trading performance if its international banking partners outside America determined that the Act applied to them.

Sportingbet shares lost £457.3 million of their value, falling 70 per cent, down 129.25p to 55p. To track the stock click here.

World Gaming, which is heavily exposed to the US, said that if enacted the new law could have a material impact on its earnings. It said it was monitoring the situation closely and taking legal advice.

Its shares fell 75 per cent or 48.25p to 15.25p. To track the stock click here.

888 Holdings said it would halt its entire US-facing operation, which accounts for half its business, once the new law comes into effect. It said that while the suspension would also have a material effect on its annual earnings, it still had sufficient cash to continue its operations and develop the business elsewhere.

888 Holdings lost 45 per cent, or about £90 million, tumbling 66.5p to 80p. To track the stock click here.

Netteller, the money transfer business that specialises in the instant payment systems used in online betting, said the Act if passed could have a "materially adverse" effect on its US-facing business.

It said it would closely monitor developments and take steps to minimise the impact.

Empire Online also said it could suffer materially from the Act. It said it was still taking legal advice and would update shareholders accordingly.

Despite the Bill’s prescriptive nature, it excludes local online betting on horseracing, fantasy leagues and lotteries. It also has no impact on the hundreds of casinos and gambling emporia that dot America, ranging from the neon palaces of Las Vegas and Atlantic City to the riverboat casinos that ply their trade on the Mississippi.

One senior internet gambling executive said last night: "This is the worst form of protectionism I have ever seen. This will drive internet gambling underground and consumer protection will go out of the window. The religious groups that lobbied for this may live to regret it."

The Unlawful Internet Gambling Enforcement Bill needs only to be signed by President Bush to become law. Legal sources predict that he will do so in the next two weeks, possibly as early as Wednesday.

The passing of the Bill in the early hours of Saturday surprised the industry. Although it had successfully negotiated Congress, its passage through the Senate looked likely to be blocked through lack of parliamentary time.

However, Bill Frist, the Republican leader in the Senate, got the measure through by attaching it to an unrelated Bill that enhances port security.

"Gambling is a serious addiction that undermines the family, dashes dreams and frays the fabric of society," Dr Frist said. "The bottom line is simple: internet gambling is illegal. Although we can’t monitor every online gambler or regulate offshore gambling, we can police the financial institutions that disregard our laws."

The ban may drive some small companies out of business, although big operators such as 888 and PartyGaming will highlight the strong prospects of their non-US business.

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