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FINAL BLOW FOR ONLINE CASINOS?

Sportech is to relocate its online casino, littlewoodscasino.com, from the Isle of Man to the Netherlands Antilles.

The move, which follows the departures earlier this year of MGM Mirage Online, Kerzner International and Action Online, is the final nail in the coffin for the Island's ambitious attempt to house the online casinos of the world's gaming giants.

The significant difference in the case of Sportech is that whereas its competitors shut down their internet casinos, it is transferring the operation to another jurisdiction.

Regulatory issues in the Isle of Man are behind the decision. Sportech wants to broaden the range of games to include poker and an integrated jackpot product. In terms of Isle of Man regulation, to have upgraded its software suite Sportech would have had to undergo a recertification process. Also, there is a limit on how much money customers can withdraw from Island-based gaming accounts. And operators in the Island are not permitted to advertise services in jurisdictions in which online gaming is illegal.

Colin McGill, managing director of listed Sportech, said: 'Transfer of the site to the Netherlands Antilles will enable us to develop a broader range of games and provide our customers with an enhanced gaming experience.'

Littlewoods has for some time said it was reviewing its operation in the Island. Suzanne Judge, a spokeswoman, said the company had been in discussions with the Isle of Man Government prior to the decision being announced. She said the casino had traded 'very successfully' in its first six months.

She said the relocation would be completed by the middle of this month. Littlewoodscasino.com only employs one person in the Isle of Man, who is to transfer to the Netherlands Antilles.

Littlewoods Gaming has more than 1.7 million customers. Its portfolio of products includes football pools and football games, sports betting, charity lotteries and casino and entertainment games.

The Manx Government awarded gaming licences to MGM Mirage, Kerzner International (formerly Sun International) and Sportech in September 2001.

When MGM Mirage pulled the plug on its online casino in June, Terry Lanni, chairman and chief executive, said the 'legal and political climate in the US and several countries around the world' was too unclear for the operation to continue.

In announcing the closure of its Island business in February, Bahamas-based Kerzner International said it appeared unlikely that internet gambling would be legalised in the United States. 'Without the potential for expansion into other markets, including the US, the outlook for new business has substantially decreased and achieving profitability is unlikely in the short to medium term,' said the company. Commenting on the withdrawal, USB Warburg analyst Robin Farley said at the time: 'We believe that the company's shutdown of its online gaming operations does not bode well for the profitability of internet gaming operated from tightly regulated jurisdictions.'

It was reported that Kerzner International had difficulty in running its online casino operation in a highly regulated jurisdiction in direct competition with hundreds of sites that operate in far more lax regulatory environments.

Ironically, the high level of regulation in the Island was a prime attraction for the big players who could not afford to allow an online scandal to jeopardise their land-based casino operations.

Despite an online gambling ban the US accounts for the largest share of the world market, which is expected to generate between $3 billion and $6 billion this year. Market commentators believe the world's casino giants set up internet operations in anticipation of the US restrictions being lifted.

At a press conference held in the Island last week to announce the findings of a review of the government's e-commerce initiative, Tim Craine, the e-business director, said online gaming still provided opportunities to attract inward investment.

He blamed the demise of online casino operations in the Island on the US ban. 'It was worldwide development which perhaps prevented that business from developing in the way that we had hoped,' said Mr Craine, speaking prior to the Littlewoods announcement.

Asked if he believed regulatory levels in the Island were a problem, Mr Craine said: 'Because the Isle of Man was a pioneer in this area, was setting up a whole new regime, obviously it was very keen to create a regulatory environment which would protect its reputation.

'(But] you may find that as initiatives develop there may be some modification of the regulatory requirements, which are not lowering standards but at the same time are recognising some commercial realities which exist out there.

'Government is still committed to developing the industry. We have a very successful player in the Island in the form of betinternet, which has developed a very successful sports betting business. I think government may wish to try to copy that model by attracting other similar players to the Island.'

 
 
 

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