From Wall Street Journal
Online casino gambling has become a potentially big player in the U.S., with three states passing—and others considering—laws allowing some form of it. The only problem: how should regulators deal with firms that have come under scrutiny or operate in so-called gray markets?
888 Holdings
Based in Gibraltar but owned in large part by its Israeli founders, 888 has big ambitions in the U.S. with partnership deals already with casino companies and a slot machines maker. With backing from investment firm Avenue Capital Group, it plans to spend more than $100 million to market its own brands. This year it became licensed in Nevada.
Yet like most big online competitors, 888 has long relied on markets where online gambling hasn’t been legalized. It says that around 40% of its revenue comes from gray markets. But it maintains its activities are legal for several reasons, including the fact that its computer servers, where it says bets occur, are in licensed jurisdictions.
Bwin.Party
Based in Gibraltar, Bwin. Party came out of a merger of two brands. One, PartyGaming, was the biggest online poker company in the U.S. until it voluntarily left the country in 2006, after a congressional law cracked down on the industry.
Now, with partnerships with casino and social-games companies, Bwin. Party has applied for a Nevada license. In 2009, PartyGaming agreed to forfeit $105 million to and signed a nonprosecution agreement with the U.S. Justice Department that said its online gambling sites and some of its financial transactions violated U.S. criminal laws. The company said any violation of the law was unintentional and that it “has moved on considerably since then.”
Playtech Ltd.
The firm is an important behind-the-scenes player in online gambling, providing gambling services for more than 100 brand companies across the globe. It has aggressive plans to become involved in the U.S.
One potential stumbling block: its founder and largest shareholder, Teddy Sagi, was convicted in 1996 in Israel of securities fraud. Last year, Nevada regulators, as part of its review over a U.K. firm’s application for a casino license, raised questions about a joint venture it had with Playtech at the time. In the end, the regulators approved the application but said they would reserve judgment on Playtech.
A Playtech spokesman said Mr. Sagi’s conviction hasn’t stopped it from receiving approval in other jurisdictions and that it is conducting its business with “the highest level of legal and ethical compliance.” Through a spokesman for him, Mr. Sagi declined to comment.
