Sportingbet, an online sports book and owner of Paradise Poker based in London, announced on September 24 that it would pay a $33 million fine to the United States Department of Justice. Sportingbet agreed to the fine to avoid going to court to face charges that it operated illegally under the Unlawful Internet Gambling Enforcement Act. Sportingbet had admitted that they illegally masked credit card transactions from American customers to make it appear that they were not doing business in an illegal territory.
The total fine of $33 million will be broken down into three separate payments to the DOJ. The first payment of $15 million has reportedly already been paid. Sportingbet will also pay $12 million next year and $6 million in 2012 to finish off the debt. Because it agreed to the fine, Sportingbet now has a clean slate with the United States government. It has been predicted that Sportingbet (and PartyGaming, who agreed to pay a $105 million fine in 2009 to the DOJ) didn’t fight these fines because they hope to be able to one day operate within the USA, should they eventually legalize online gaming.
Sportingbet and other companies hoping the United States repeal the gambling laws may be in for a long wait. In short, a number of Democrats have pushed to repeal the gambling law, believing that legalized gambling would cut into the budget deficit. A number of Republicans, however, are less excited about this method to cut into the debt.
Shares rose by 14% after the settlement was announced, but the cheery news did not extend to the company's earnings report. On October 6, company officials announced that despite the rise in share prices, profits were down 69%, though the bulk of the loss was due to the first $15 million installment payment on the debt. Additionally, on October 11 it was announced that directors of Sportingbet have been selling some of their shares for “their personal finance planning.” Chief Executive Andrew McIver, alone, sold 1.4 million shares worth a reported £1 million.
Despite the large profit losses, the outlook for Sportingbet looks good. In addition to the possibility of operating within the United States, online gaming revenue in the United Kingdom has risen by 17% over the last two months, compared to the same two months last year.
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