A Different Kind of March Madness

Feuds between operators and software suppliers, the shutting down of two sports books and continued problems with credit card processing made March one of the darkest months for the online gaming industry in recent memory.

The black eye started to show itself in mid-February when, two weeks after the Super Bowl, the Aces Gold sports book filed for bankruptcy. The site, based in the Netherlands Antilles, had been operating since the mid-1990s and was seen as one of the more stable offshore sports books in the industry.

The site folded owing customers an estimated $10 million to $12 million. Its operators also owed employees back wages.

The Aces Gold debacle was followed a couple of weeks later by the folding of Bet Camelot, a site based in Belize. Unlike Aces Gold, Bet Camelot's owner, Mark Del, took part in an insolvency plan that allowed some of his site's accounts to be rolled over to Olympic Sports. The insolvency procedure allowed Bet Camelot customers who had a balance of less than $2,000 to roll their accounts over to Olympic Sports. Customers who had an account balance of more than $2,000 were left out in the cold.

Neither Del nor owners of Aces Gold could be reached for comment. Both sites are offline, and the Bet Camelot URL directs visitors to the Olympic Sports site. While published reports say the amount owed to Aces Gold customers was in the $10 million to $12 million range--a figure that was substantiated by a former employee--it is unclear how many customers were affected by the Bet Camelot plan. It is believed that the majority of customers were spared in the insolvency plan and only a handful of customers were owed more than $2,000.

Accounts that were owed more than $2,000 will be credited for $2,000 but nothing more. All accounts that are transferred to Olympic Sports must be rolled over 10 times before a pay out can be requested, according to terms of the insolvency plan. Account holders have until April 15, 2002 to roll their accounts over to Olympic Sports.

While Olympic Sports does everything it can to accommodate the former Bet Camelot account holders, the online gaming industry continues to maintain customer confidence.

Neither sports book was part of the Interactive Gaming Council, the leading trade association for online casinos and sports books. The group's deputy director, Keith Furlong, said such collapses are why the IGC lobbies governments around the world for I-gaming regulations.

"This is why the IGC has a commitment to strict government regulation," he said. "It is only going to be through proper regulation that we can prevent something like this from happening."

Had either operation been running in a tightly regulated jurisdiction, Furlong said it would have been forced to go through regulatory procedures and due diligence before starting business. Those checks would have included financial background research ensuring the operators had the wherewithal to cover any bets placed on the site.

The problem Furlong and other IGC officials face is trying to convince operators that just because a jurisdiction has a low tax rate, or sometimes no tax rate at all, that doesn't necessarily mean it is the best place to do business.

"What we are trying to do is get the operators to understand what regulation is all about," he said. "If an operator goes to a highly regulated jurisdiction they won't only have the honesty, integrity and good character to operate a casino but they will have to have full probity done to get licensed in a good jurisdiction."

Financial stability is the key to any business, Furlong said, but it is vital to gaining and keeping customers' trust and confidence in the online gaming industry.

A longstanding relationship between Microgaming Systems and Sunny Group Casinos came to a crashing halt in March as well.

Sunny Group operates three online casinos and abruptly dropped Microgaming as its software supplier amid allegations of poor service and rigged random number generators. Microgaming responded to those claims with allegations of Sunny Group not paying its licensing fees on time.