Online Gambling Site Stops Taking Wagers From State’s Residents
Internet gambling company Youbet.com Inc. said it has suspended service to California residents because of an ongoing investigation of the company’s operations by the Los Angeles County district attorney’s office.
Robert Fell, chief executive of the West Los Angeles-based company, said in a written statement that the service was halted “in cooperation with the district attorney’s office.”
The investigation centers on whether Youbet, which allows its 11,500 subscribers to place wagers on horse races at more than 30 tracks across the country, is violating state anti-bookmaking laws. Youbet’s offices were raided by local authorities last month.
The company did not say how much of its revenue comes from California consumers or how long the suspension of service would last. The company’s stock closed at $5 a share Thursday, down 6 cents on Nasdaq.
The district attorney’s office was closed Thursday in observance of Veterans Day, and officials could not be reached for comment.
In California, it is illegal to place bets on sporting events except at licensed horse-racing facilities. The investigation of Youbet could hinge on whether prosecutors can show that the company is accepting and placing bets on behalf of California residents in violation of that law.
Youbet executives have maintained that the company does not actually accept or place any wagers, but is merely a conduit for information flowing from bettors to licensed facilities.
But the company also indicated in its news release that it plans to open a second location outside California. Youbet executives were not available to explain the move, which could be designed to insulate the company from local authorities by moving beyond their jurisdiction.
“Youbet was already in the planning stages of a redundant data center outside of California,” Fell said in his statement. “And we are now implementing these plans to move computer equipment that records and stores data.”
Online gambling has surged in popularity in recent years, accounting for an estimated $651 million in revenue last year, according to a federal commission that studied the issue. But the legality of Internet gambling remains unclear.
A federal bill proposed by Sen. Jon Kyl (R-Ariz.) would update federal anti-gambling laws specifically to prohibit online wagering. But that bill exempts wagers on horse racing.
Youbet.com is one of the most prominent companies in the industry, with revenue of $733,262 for the quarter that ended June 30. It charges users $5.95 a month for membership, and also keeps a commission of 2.5% on every wager it transmits, according to company spokesman Christopher Katis.
