Investors dumped shares of CryptoLogic and other companies related to online gambling on Monday after U.S. lawmakers banned the use of credit cards, cheques and electronic money transfers in the U.S. online gambling market.

CryptoLogic, the Canadian company that makes software for the online gambling industry, saw its shares drop $4.76 to close at $19.87 on the TSX. The stock traded as low as $17.06 — a new 52-week low.

CryptoLogic's three-month trading.

CryptoLogic said its licensing subsidiary would no longer take bets from U.S. players. The company said it has been preparing for the U.S. move for the last five years by concentrating on opportunities in Europe.

"Since 2001, CryptoLogic has been shifting its business to Europe and our record revenue and earnings in 2005 and 2006 to date flow from our success in the markets that embrace internet gaming," CryptoLogic chief executive officer Lewis Rose said in a statement.

CryptoLogic said 70 per cent of its licensees' revenue comes from outside the U.S. 

Last week, CryptoLogic announced plans to move its headquarters from Toronto to Ireland early next year, saying Europe is a more "gaming-friendly" environment that offers it more "strategic flexibility."

Vancouver-based Chartwell Technology, which makes software products for the gaming industry, saw its shares lose 16 per cent of their value (down 35 cents to $1.80).

Shares in Burnaby-based ESI Entertainment Systems Inc. fell 40 cents to $2.20 on the Canadian Venture Exchange. It said it was "evaluating the negative impact of this new legislation on our activities."

Montreal-based Dynasty Gaming Inc. said the impact on its operations will be "minimal" because its business focuses on the Chinese mahjong market, where players use prepaid cards. Its shares tumbled as low as 42 cents on the Canadian Venture Exchange but later recovered to trade at 50 cents, down three cents. 

But British online gaming companies like Sportingbet PLC and PartyGaming PLC saw their shares collapse by 60 per cent or more.  

'We've watched this shadow industry explode'

On Saturday, the online gambling legislation passed the U.S. House of Representatives and the Senate as part of a port security bill.

"Congress has grappled with this issue for 10 years, and during that time we've watched this shadow industry explode," Senate majority leader Bill Frist, a Republican from Tennessee, said in a statement.

"For me as majority leader, the bottom line is simple: internet gambling is illegal."

PartyGaming, which is reported to be the world's largest online gambling company, said it will exit the United States if the legislation is signed by President George W. Bush.

Another U.K. firm, 888 Holdings PLC, said it has stopped its online betting operations in the U.S., while Sportingbet has scrapped its takeover talks with World Gaming.

Reports indicate that companies that could be hit hardest by the new legislation include firms that offer wagering in U.S. dollars.

With files from the Associated Press