From Deseret News archives:
Web casinos a bad bet?
The questions have intensified since BetOnSports, an online sports betting company traded on the London Stock Exchange, stopped taking bets from the United States after the Justice Department charged the company and current and former executives with operating an illegal gambling operation.
Investors and industry analysts, who have long said that owning shares in Internet casinos involved serious risk, nonetheless expressed surprise at the move by 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 BetOnSports prompted a big sell-off in the shares of publicly traded online casinos, but the sector has rebounded. Some industry analysts even call this a buying opportunity.
Greg Harris, an online gambling analyst for Canaccord Adams, a British investment bank, said many investors seemed undaunted by what they viewed as American bluster that could not 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 he also believed that panicked overselling had made some Internet gambling stocks cheap now.
That sentiment is not universal. The controversy swirling around BetOnSports 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 BetOnSports 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 had told him not to comment to the news media. "We're keeping our heads down."
There are indications that some major investors, including American investment houses, are beginning to distance themselves from the online gambling companies, either by dumping shares or by ceasing to provide analyst coverage.
But other investors, notably hedge funds, have led a comeback.
I. Nelson Rose, a professor and expert in Internet gambling law at Whittier Law School in Costa Mesa, Calif., said he had recently been contacted by major institutional investors trying to decide how to deal with the risk and volatility.
"The question I got the most was: 'Should we buy?"' Rose said.
Investors should do so only with the understanding that the investment is so risky that it could virtually disappear, said Sebastian Sinclair, an industry analyst with Christiansen Capital Advisors.
