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PayPal to Halt NY Gamblers

New York Attorney General Eliot Spitzer said that online payment firm PayPal has agreed to stop online gambling companies from using the service to accept money from gamblers who reside in New York State.

The move comes less than two months after PayPal's records regarding use of the payment service by gamblers were subpoenaed by Spitzer's office.

PayPal said it is taking the action in "voluntary cooperation with the attorney general and is not admitting to a violation of law."

It's another blow for the online gambling business, which has been taking it on the chin lately.

The action by Spitzer may be more symbolic than anything else, however, as auction giant eBay , which is in the process of acquiring PayPal, has said that it plans to shed the gaming side of PayPal's customer list once it completes its $1.5 billion acquisition of the Mountain View, Calif.-based company.

Over the past year, as more credit card issuing banks have chosen to block direct payments to Internet casinos, PayPal has emerged as the payment method of choice for many gambling Web sites. The service currently counts 260 online gambling merchants among its member businesses, according to Spitzer's office.

Under the settlement, PayPal will not process payments from New York customers to Internet casino Web sites as of Sept. 1 and will pay $200,000 to New York State to cover costs of the investigation and penalties.

"This agreement continues the work of my office to enforce the law prohibiting illegal gambling, online or off-line" Spitzer said. "This case shows that we intend stop any company (that) facilitates illegal gambling transactions."

In June Spitzer announced a settlement with Citibank, which agreed to block illegal online gambling transactions attempted through its MasterCard and Visa accounts.

PayPal has set Oct. 3 as the date for a shareholder's meeting to vote on the acquisition by San Jose, Calif.-based eBay. The acquisition won clearance Tueday from U.S. antitrust authorities.