Online gambling shares in Europe and Canada declined this week after the announcement that David Carruthers, BetonSports, Plc. chief executive, was detained and charged with racketeering and fraud stemming from taking sports bets from U.S. citizens.
In response to the indictment, BetonSports shares fell 23 p to 122.5p, down 16%. At times, the stock was down as much as 24% before the company suspended trading of its shares today.
Sportingbet lost 42.25p as well, and PartyGaming, Plc., which doesn't take sports bet, was down to 96p in early trading, a 13p drop, but managed to recover to end the day at 103p.
Leisure & Gaming, Plc., owner of the VIPsports betting brand, also declined 21p, down to 71.5p, as well as 888 Holdings, Plc. which dropped 13%, down 24.5p to 168.5p.
The Europe-based companies weren't the only ones taking a hit following the BetonSports news. Canadian companies connected to online gambling technology also saw losses in their shares.
Cryptologic shares dropped $3.66 to $21.22 on the Toronto Stock Exchange, while Fun Technologies saw less of a drop but still lost 3.7% as their shares fell 20¢ to $5.20.
Chartwell Technology, Inc., a Vancouver-based company, was also down 2¢, and shares in LasVegasFromHome.com Entertainment Inc. were down 15%, dropping to 17¢.
According to an industry analyst, the news of indictments against BetonSports has sent the entire online gambling sector into a frenzy because it's unclear whether the U.S. Department of Justice is focusing on BetonSports in particular, online sports betting, or online gambling in general.
Carruthers and 10 other people from BetonSports and three Florida companies that handle promotional activity for BetonSports were charged with conspiracy, racketeering and fraud in the United States. The Department of Justice is seeking forfeiture of $4.5 billion as well as cars and computers from the defendants.
Representatives from the Department of Justice have said before that the department regards online betting, which includes sports betting and gaming, as an illegal activity. Under the Wire Act, they consider any bets taken by online gambling sites from U.S. citizens to be an illegal act.
The House of Representatives recently passed a bill that would clarify America's position on online gambling and effectively ban all forms of online gambling except for state lotteries and horse race betting. Though H.R. 4411 was approved by the House, it still has to pass in the Senate and be approved by the President before becoming law.