UK betting stocks hit after US Justice Department makes online gambling U-turn

UK betting stocks have fallen sharply after the US justice department performed a U-turn on its opinion of online gambling laws.

The US Department of Justice (DOJ) has reversed its December 2011 opinion that the 1961 Wire Act, banning certain forms of betting across state borders, only applied to online sports betting.

UK firms which have moved into the US market in recent years, such as 888, GVC and William Hill were impacted as a result.

Following the DOJ’s initial interpretation seven years ago, a number of US states launched online lottery, casino and poker operations.

But Monday’s report by the Office of Legal Counsel concluded the 2011 opinion “incorrectly interpreted the limitation,” ruling the law applied to all types of online gambling.

The interpretation will likely be challenged in the courts, the DOJ admitted

GVC Holdings, which owns Ladbrokes and Coral, dropped 2.3 per cent and was among the FTSE 100’s biggest fallers, while Paddy Power Betfair fell 1.3 per cent.

Outside the blue chip index, 888 Holdings, which bought out its joint venture partner All American Poker Network in December to further grow in the US, fell 7.8 per cent and William Hill slid 2.2 per cent.

UK companies have further expanded into the US since a ruling in May last year opened the door to legalised sports betting nationwide, as opposed to only in specific states, such as Nevada.

Tighter regulations at home also led UK firms to move into the US market.

In a note, Peel Hunt said: “The implications of this may not become clear until the US Government returns from shutdown, perhaps unless/ until prosecutions start.

“The apparent change of heart is unsettling to an already thoroughly unsettled sector.”