888 Holdings Shares Slide as UKGC Problem-Gambling Investigation Confirmed

Shares of 888 Holdings Plc have taken a hit this week on news that the company is “under review” by the United Kingdom Gambling Commission (UKGC) to ensure that the firm is in compliance with UKGC licensing requirements, particularly in regards to problem-gambling behavior and effective self-exclusion.

888 Holdings’ shares tanked during Monday’s trading, dropping about 10% of their value, and have shown no sign of recovering.  The sell-off occurred when 888 issued the following brief statement, a disclosure required under UK securities law:

Gambling Commission Review

The Company has been informed that the United Kingdom’s Gambling Commission (the “UKGC”) is currently conducting a review of the manner in which a subsidiary of the Company (the “Licensee”) has carried on its licensed activities to ensure compliance with the UKGC operating licence held by the Licensee. The review has been initiated to assess certain measures that the Licensee employs to ensure social responsibility to its customers including, amongst other items, effective self-exclusion tools across different operating platforms.

The Company is dedicated to providing players with a responsible as well as enjoyable gaming experience and the Licensee will be proactively engaged in a cooperative and collaborative manner with the UKGC throughout this review.

The Company will make a further announcement as and when appropriate.

The statement does not specify which subsidiary’s activities drew the UKGC’s investigative attention; the company operates the prominent 888Sports brand in addition to mainstays 888Casino and 888Poker.  However, the size of the share-price decline, at about 10%, suggests that analysts believe the company might be in for a significant wrist-slapping, once all the evidence is reviewed.  The UKGC has a wide range of remedies available, should it be determind that regulatory violations have occurred.  Such remedies include fines, and in extreme cases — though it’s not likely here — that a company’s operating license could be revoked.

888 has offered no additional details on the UKGC review, nor has the UKGC itself.  However, the UKGC has, by way of declining to offer specifics, confirmed that the investigation is underway.  “We are unable to talk about individual cases — this includes confirming whether an investigation is taking place,” a UKGC spokesman told the Financial Times.  “If we decide to take action against an operator, then we will make an announcement”.

The 10% share-price slide is also curious given that other gambling firms have faced recent investigations without taking such a market hit.  Last year, Gala Coral, Paddy Power Betfair, and Betfred underwent similar problem-gambling reviews from the UKGC.  And just a few weeks, the UKGC slapped BGO Entertainment with a £300,000 fine for “misleading advertising on its own and its affiliates’ websites.”  BGO operates the popular Power Spins online-casino brand.

The UKGC’s review of 888’s problem-gambling protections (or lack thereof) will be conducted under the 2005 Gambling Act’s Section 116, which establishes the terms for review.  The 888 matter is likely to be handled under Part 1 of the two-part section, which reads as follows:

5.13 Under section 116(1) of the Act the Commission may review matters relating to a class, or type, of licence. The purpose of such a review will be to review the manner in which a particular class of licensees carry on the licensed activities authorised by their licences, and, in particular, how the licensees in question comply with the conditions attached to the class of operating licence.

5.14 Section 116(2) of the Act gives the Commission the power to review any matter relating to an individual licence if the Commission:
• suspects that conditions of a licence have been or are being breached
• believes that the licence holder or any person connected with the gambling activities, has been convicted of a relevant offence in Great Britain or abroad; or
• for any reason:
o suspects that the licence holder may be unsuitable to perform the licensed activities
o thinks that a review would be appropriate.