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To Invest in online casinos?

How much more of a gamble has it become to own shares in online casinos? Will the online casinos industry make profits in the future or decline? Will the online casinos industry rebound? What is in store for new online casinos or mainstays looking for an edge in the ultra competitive online casinos industry?

The questions have intensified since one of the top online casinos stopped working in the United States after the U.S. Justice Department charged the online casinos firm and current and former executives with operating an illegal gambling operation.

Online casinos Investors and online casinos industry analysts, who have long said that owning shares in online casinos involves serious risk, nonetheless expressed surprise at the move by the prosecutors. They say the development, coupled with legislation in Washington that could clamp down further on the industry, has created new cause for concern.

And yet investors keep coming.

The indictment of a top online casinos firm prompted a big sell-off in the shares of online casinos, but the sector has rebounded. Some industry analysts even call this a buying opportunity.

Greg Harris, an industry analyst for Canaccord Adams, a British investment bank, said that many investors seemed undaunted by what they saw as American bluster that cannot stop the industry.

"You can throw a lot of things to scare them, but there are still guys finding value," Harris said of investors bullish on online casinos. He said that he, too, believed some Internet gambling stocks were inexpensive now, thanks to panicked overselling.

That sentiment is not universal. The online casinos firm case has raised questions about whether other companies might soon be in the Justice Department's sights, industry executives and analysts said.

"None of us know whether this indictment is specific to (the firm) or a sweeping attack against online gaming per se," said an executive from a publicly traded online gambling firm who requested anonymity because company lawyers told him not to comment to the press. "We're keeping our heads down."

There are indications that some major investors, including U.S. investment houses, are beginning to distance themselves from the online gambling companies, either by selling shares or by ceasing to provide analyst coverage.

Neteller, a company used by many online gamblers for payment processing and one seen by some as an industry bellwether, was at 597.50 pence on July 4, fell to 319 on July 20, and is now at 400 pence.

The day the indictment was unsealed on July 17, trading in the firm was halted after a 17 percent slide in the shares. Kevin Smith, a company spokesman, said that he thought it could be more than a month more before the London exchange reopened trading. Trading has not resumed.

I. Nelson Rose, a professor and expert in Internet gambling law at Whittier Law School in Costa Mesa, California, said he had recently been contacted by major institutional investors trying to decide how to deal with the risk and volatility.

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