UK gambling stocks drop after U.S. DOJ reverses opinion on internet betting

FILE PHOTO: Paddy Power logo is seen behind a keyboard and gambling dice in this illustration taken in Sarajevo, September 10, 2015. REUTERS/Dado Ruvic

(Reuters) - Shares of British betting companies, which have been pushing into the United States market because of tighter regulations at home, fell after the U.S. Department of Justice called for wider restrictions on all gambling on the internet.

UK bookies such as William Hill Plc (WMH.L), Paddy Power Betfair Plc (PPB.I) and 888 Holdings Plc (888.L) fell between 1.5 percent to 7 percent on Tuesday after the U.S. regulator reversed its 2011 opinion that made only sports betting online illegal under the Wire Act.

The 2011 reading of the federal law, which came into effect in 1961, prohibits certain types of gambling in the United States including sports betting, but the regulator now says the provisions under the act must now be considered in tandem with the Unlawful Internet Gambling Enforcement Act.

The opinion by the regulator's Office of Legal Counsel, dated Nov. 2, 2018 but disclosed only late on Monday, added that the new interpretation of the law's scope will likely be contested in courts.

UK gambling companies had been pulling off deals to move into the U.S. market after a U.S. Supreme court ruling in May took the United States a step closer to legal sports betting in numerous states, perhaps nationwide, rather than select states like Nevada - home to gambling capital Las Vegas.

GVC Holdings Plc (GVC.L) in July agreed to set up an online betting platform in the U.S. with hotel and casino operator MGM Resorts (MGM.N). William Hill in September signed a 25-year sports betting deal with casino operator Eldorado Resorts Inc (ERI.O).

Peel Hunt analysts said in a note that the implications of the developments may not become clear until the U.S. government returns from a shutdown and perhaps until prosecutions start.

(Reporting by Tanishaa Nadkar and Pushkala Aripaka in Bengaluru; Editing by Bernard Orr)