In Brief: PayPal, N.Y. Settle Web Gambling Dispute

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MOUNTAIN VIEW, Calif. - The person-to-person electronic payment specialist PayPal Inc. said Wednesday that it had settled an inquiry by New York prosecutors, partly by agreeing to quit processing state residents' online gambling payments.

The announcement came a day after PayPal and the online auctioneer eBay Inc. received antitrust clearance to proceed with an acquisition deal. When it was announced last month, eBay's deal to purchase PayPal for stock was valued at $1.5 billion.

PayPal did not admit to breaking any laws but agreed to pay $200,000 in lost profits, investigation costs, and penalties, New York Attorney General Eliot Spitzer's office said in a press statement.

As of June 30 PayPal had 1.1 million commercial and individual accounts with New York addresses, a spokesman for the department said, but it was unclear how many of these were used for gambling. After Sept. 1 New York residents will be barred from using PayPal to send money to online gambling sites.

eBay has said it intends to sever PayPal's ties to all online gambling sites after the acquisition deal closes. PayPal currently serves about 260 such sites. PayPal is the leader in person-to-person payments, in which individuals send money online from their bank accounts or credit cards. In a separate statement Wednesday, PayPal said its shareholders would vote Oct. 3 on the acquisition deal. - Steve Bills

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