Back in 2002, WPT Enterprises (NASDAQ: WPTE) revolutionized the gambling business. That is, the firm created the highly popular World Poker Tour television show. In fact, by the middle of 2005, WPT's stock hit $26.50.

Unfortunately, things haven't been so rosy since then. Today, PartyGaming PLC -- a major online gambling operator in the U.K. -- agreed to buy WPT at a paltry $12.3 million. On the news of the deal, the shares of WPT are up 3% to $1.08 per share.

PartyGaming co-founder Anurag Dikshit has agreed to pay $300 million to the United States government as part of his decision to plead guilty to charges related to operating an illegal online casino. Mr. Dikshit owns a 27% stake in the company, which is publicly traded in the United Kingdom.

I guess this is good news because the federal government really could use the money right about now. But in a moral sense, everything about this case is hypocritical and infuriating. Mr. Dikshit operated an online business that provided a service to people who wanted to participate. There has never been any suggestion that consumers -- who were required to be 18 years old to play -- were being ripped off by PartyGaming. He did not rip off investors as Bernard Madoff has done, nor did his product cause cancer like Philip Morris' (NYSE: MO). So all that the company really did was break laws banning the operation of an illicit casino -- laws that, by the way, serve to protect the monopoly of the 39 states that offer the lottery.

If there's anything morally repugnant about offering people an opportunity to gamble, why do state governments do just that? If there isn't, why persecute an entrepreneur like Mr. Dikshit?

It's unfortunate that federal officials don't devote their energy to stopping businesses that actually rip people off.

Jim Chanos, the founder of Kynikos Associates and the renowned short-seller who was among the first to smell something funny at Enron, was interviewed by the Financial Times on Friday. His most recent high-profile short pick is bond rating firm Moody's Corp. (NYSE: MCO), which he says is "no longer a referee on the playing field, they are actually playing at this point. So although they are wearing an umpire's outfit, they have a Yankees hat on and I think that's the real problem, in that they are so entwined in the structured finance business."

Chanos opines on the private equity boom, hedge fund regulation, and explains how he knew to short PartyGaming (OTC: PYGMF), not long before its decline on news that the United States had banned online gambling.

Jim Chanos is one of the greatest investment minds of our time, and everyone who cares about his or her money should be an eager reader of what Chanos has to say. The top short-sellers are among the best investors in the world, and they get an undeservedly bad rap. These guys are the market's first line of defense against fraud, and it's time that they got a little more respect.

As part of a port securities bill passed by the House and Senate recently, online gaming in the US would be outlawed for foreign-based companies that offer online betting transactions in American currency. Though the comapnies are generally based in the Caribbean or Central America, they derive the bulk of their revenues from US gamblers. If this legialation is signed into law by President Bush, US gamblers will not longer be able to transfer money to foreign-based gaming companies using credit cards, checks, or electronic fund transfers. I guess gamblers could mail big wads of cash to their off-shore bookies. The legislation is designed to make it harder for terrorist organizations to move money around under the guise of legitimate businesses. Also, domestic gambling operations, such as those in the Gulf Coast region, would have fewer competitors for consumer access to real money poker.

PartyGaming, the world's largest online gambling company, indicated it would cease business operations in the US if this legislation is enacted, as would 888 Holdings PLC and Sportingbet PLC. Shares in PartyGaming have already plummeted by over half, closing recently at 84 cents. 888 Holdings in down by 26% and Sportingbet is the big loser, declining by 65% to close at $1.24.

The legislation seems also to prohibit many forms of sports-related gambling, including wagering on the games leading up to the World Series, as well as the monumental betting pools for the Super Bowl in early 2007.