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PayPal settles with N.Y. over gambling

Under the agreement, PayPal will no longer allow residents of New York State to use its online payment service for gambling.

PayPal will no longer allow residents of New York State to use its online payment service for gambling, under an agreement the company reached with the state attorney general's office.

Under the agreement, announced Wednesday, PayPal will stop processing payments from New York customers to Internet casino Web sites as of Sept. 1. PayPal will also pay $200,000 in disgorged profits, costs of investigation and penalties, the attorney general's office said. New Yorkers make up about 1.1 million of PayPal's 17.8 million member accounts, according to the agreement.

eBay, which announced plans to acquire PayPal in July, said at the time that it would discontinue the company's online gambling services, which were expected to account for 10 percent to 15 percent of total revenue in fiscal 2003.

New York subpoenaed PayPal in July as part of a broader investigation into online gambling.

PayPal is not entirely out of the woods with regard to its gambling connections, however. The U.S. Attorney's Office for the Eastern District of Missouri has also issued grand jury subpoenas concerning the company's processing of online gambling transactions, the company revealed in filings with the Securities and Exchange Commission.