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magazineGambling stocks under pressure on threat of further regulatory clampdown
A potential clampdown on using credit cards to gamble in the UK and a possible ban on online gambling in the US may put UK-listed gambling companies under even more pressure this year.
Gambling companies have been struggling with an intense regulatory clampdown both overseas and in the UK as authorities aim to help and protect problem gamblers.
UK culture secretary Jeremy Wright has warned credit cards could be banned for making bets in a bid to reduce people betting with money they may not actually have.
Approximately one fifth of deposits are funded by credit cards according to Canaccord Genuity analyst Simon Davies.
‘There would undoubtedly be an impact and it is unhelpful for sector sentiment, suggesting scope for a further regulatory squeeze,’ he comments.
The UK Government is currently working on ways to reduce problem gambling by looking at risks for both online and offline activities.
Matters have not been helped by apparent failings in the self-exclusion scheme GamStop as an investigation revealed people could still place bets despite banning themselves from online platforms.
POTENTIAL US ONLINE GAMBLING BAN
This is not the only headwind facing the gambling sector as the US Department of Justice has changed its interpretation of the 1961 Wire Act, according to reports.
Initially under the Wire Act, which applies to transactions across state borders, only sports betting was illegal. A change in interpretation could make all online gambling illegal over state borders, not just sports betting.
Peel Hunt analyst Ivor Jones says the implications of the department’s change of heart may not become clear until the US government returns from shutdown or if prosecutions start.
There is little official information with Peel Hunt currently relying on unofficial sources as US government websites are currently not being updated in the shutdown.
Jones flags it will be a challenge keeping every aspect of internet gambling within a state. Problems could emerge with payment processes, inter-state poker and daily fantasy sports, which partly operate across state borders.
The Department of Justice’s U-turn comes at an odd time as the US recently legalised sports betting in individual states, offering embattled gambling operators an attractive growth opportunity. Many UK operators have subsequently made in-roads to exploit this new market.
The US sports betting market could be worth up to $9bn in gross gaming revenues according to gaming consultant Global Market Advisors.
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