Online Casinos in Full Retreat Down Under

One major online casino is closing its doors tomorrow and another has asked the Australian Stock Exchange (ASX) to suspend trading in its shares.

The moves are part of growing fallout from yesterday’s Australian federal government legislation imposing a moratorium on new online gambling services retrospective to last May 19.

Directors of virtually every casino group in the country are now huddling with lawyers over the legislation. On their minds is possible legal action seeking compensation for past investments and foregone future earnings.

The first online operation to shut its doors will be Southern Cross Casino, which was granted an interactive gaming license by the Tasmanian state government in 1998. It will cease operations on Friday, said Greg Farrell, CEO of its owner, Federal Hotel Group.

Southern Cross didn’t start operating until 12 days after the May 19 date. Under the new legislation, it is exposed to potential fines of A$1.1 million (US$603,000) per day on the corporate body and A$220,000 per day on individual executives. Farrell said the group “will be taking every action we can to recover our substantial investment in a legal business which has been retrospectively ruled to be illegal.”

Development costs for the online operation to date have been A$20 million. On top of that is the likelihood of lawsuits related to loss of projected future profits over the next 20 years if the moratorium becomes a permanent ban.

The main target of the suits would be the federal government but Farrell did not rule out the possibility of taking aim at the Tasmanian government as well. “Our chosen target is the feds but sometimes you need to go through somebody else to get at somebody.”

Another online site reportedly ready to pull the plug on cash-based gaming is Tatts Casino, owned by Tattersalls and licensed by the Australian Capital Territory government.

Meanwhile, GoCorp, which operates the AusVegas online site under a Queensland government license, on Thursday asked the ASX to suspend trading in its shares. AusVegas began operations a few days before the retroactive May 19 deadline; however, GoCorp directors are still studying the legislation to determine its impact. They have scheduled an announcement about AusVegas’ future for Monday.

The impact of the moratorium could spread beyond the online industry to affect land-based casino companies, some observers suggest. Land-based companies sit behind most online casinos. A successful prosecution of online operators under the new legislation might result in criminal convictions, which would violate the license conditions of their parent companies.