Online gaming in fresh turmoil after arrest of Sportingbet chief

Online gambling stocks took a hammering yesterday after US authorities arrested a second internet gambling director, Sportingbet's chairman Peter Dicks, amid a crackdown on what they regard as an illegal activity.

The 64-year-old Briton was held on internet gambling charges at New York's John F Kennedy International Airport late on Wednesday as part of an ongoing investigation into Sportingbet. The move came two months after the surprise arrest of the BetonSports chief executive, David Carruthers, in Texas. Sportingbet shares were immediately suspended at the company's request, while other sector stocks plummeted on the news.

An arrest warrant for Mr Dicks and others was issued by Louisiana in May, said Senior Trooper Dwight Robinette of the Louisiana State Police. The arrest warrants are sealed and there are no indictments, he said. Mr Dicks was due to appear in state court in Queens, New York, yesterday evening. He was being held by Port Authority police in New York, awaiting transfer to Louisiana. Sportingbet said he had travelled to the US on non-company business.

The surprise arrest of Mr Carruthers and the indictment against him, BetonSports and a dozen executives on charges of illegally running an online and telephone sports betting operation, immediately triggered fears that US authorities would clamp down on other companies in the online gambling industry. Most are listed in London while they get the bulk of their business from American punters, and have been careful to base themselves offshore to escape possible prosecution for what is a legally grey area in the US.

BetonSports' much larger rival Sportingbet has seen its market value halve from nearly £2bn at its peak earlier this year in the wake of the indictment against BetonSports, which was targeted by the US authorities mainly for its telephone sports betting operation. This is explicitly banned under the 1961 Wire Act, although rhetoric from the US Department of Justice suggests it regards all internet gambling as illegal.

Mr Dicks' detention fell on the same day that the US National Football League starts its season, lucrative business for Sportingbet. The company gets three-quarters of its revenues from US sports with bets taken over the internet or the telephone, and has advertised in the country for many years, although it does not have any assets there.

Mr Dicks became Sportingbet's non-executive chairman in January 2000 and also chairs the financial services firm Daniel Stewart Securities.

Meanwhile, Mr Carruthers remains under house arrest in St Louis, Missouri, awaiting trial after being released on $1m (£530,000) bail. BetonSports fired him soon after his 16 July arrest and shut its US operations, which made up the bulk of its business.

Mr Dicks' arrest overshadowed a separate announcement from Sportingbet that it was in talks with World Gaming about an all-share takeover which would value World Gaming at £107m.

Shares in PartyGaming, the online poker giant, were knocked down by 10 per cent to 105.75p, despite buoyant results. It reported a 47 per cent jump in half-year underlying profits to $380m (£200m), with revenues up by 51 per cent to $661.9m. The company stressed that revenues outside the US had leapt by 151 per cent to $149.8m and made up 77 per cent of the total, compared with 86 per cent a year ago. The group's aim is to reduce its dependence on the US to below 50 per cent.

PartyGaming said its directors, led by the Canadian chief executive Mitch Garber, had no plans to travel to the US as other areas such as Europe and Asia demanded all their attention. The company continues to advertise in the US but has boosted its marketing budgets elsewhere. Mr Garber said an anti-gambling bill, which has passed the US House of Representatives, faced hurdles in the Senate and time was running short before congressional elections in November. "Time is in short supply, and the bill continues to face opposition, but this is politics and we are not complacent, and the outcome remains uncertain," he said.