 Online
gambling industry in trouble
The warning signs for the
online casinos industry were there. Laws against online casinos
were already in place and loopholes were being closed; Wall
Street lawyers were advising clients not to get involved with
online casinos; and listing prospectuses spelt out the risks in
the online casinos industry. So if you didn't know that online
casinos in the US were at best a grey area and at worst outright
illegal, you didn't really have much excuse.
But still, the arrest of a chief executive at one of the top
online casinos sent shock waves through the online casinos
industry. "We're not saying anything officially, for the obvious
reasons," says a source close to one of the rival online
casinos. "But it has not been a great week."
En route from London to Costa Rica, David Carruthers was sitting
in a transit lounge in Dallas Fort Worth airport when the FBI
arrested him last Sunday on charges of racketeering conspiracy.
After spending the week in custody, he was transferred to
Missouri, where the case will be heard. An application for bail
is expected to be made later this week. An arrest warrant still
remains for founder Gary Kaplan.
There have already been dire consequences for the online casinos
company. When the news broke, its market value slumped by 20 per
cent. On Tuesday, at the firm’s request, the shares were
suspended. And on Thursday it announced it had complied with a
US restraining order and closed around 85 per cent of its online
casinos, leaving only its Asian websites.
The only glimmer of hope came from reports that a deal had been
struck with the US Department of Justice (DoJ), but the rumors
were firmly rebutted by the online casinos company.
"It's going to be immensely difficult for (the firm) to recover
from this," says one online casinos analyst at a leading
investment bank, who asked not to be named. "People are going to
continue gambling, and so in the medium term they are going to
use other sites. Whether they will reopen accounts with (that
firm) when all this is over, I don't know."
But the shock has been felt not only by that one firm, which is
listed on the London market but based in Costa Rica, with
subsidiaries and staff in the US.
Shares across the online casinos and gambling sector have dived
and companies are becoming twitchy. A big industry conference,
due to be held in America, has been postponed and will now be
held outside the US. No one wants to speak openly for fear of
fanning the flames in the already controversial online casinos
industry.
"Is this just about (the firm) or are we all going to be tarred
by the same brush?" asks the gaming industry insider. "What are
the ramifications?"
Other online operators have tried to distance themselves from
the crisis. But many others do take these bets. The US is a huge
market for gaming and gambling.
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