What Happens When a Casino Site Goes Out of Business? Is Your Money Safe?
How many times have you heard the phrase; “the casino always wins”?! Odds are; probably too many to bet on, right?
A gambling company going bankrupt should be unthinkable on the face of it, especially considering the amount of customers there are around the world and the sheer size of the industry, which according to Statista will have a market capitalisation of $94 billion by 2024.
However, the Titanic sunk was “unsinkable” and Donald Trump became President, so the unthinkable can happen, although in the gambling industry closures are more likely to be down to bad business practices rather than anything else, at least historically.
There is a considerable amount of competition these days though, not to mention tighter regulation, and new online gambling companies often find that a struggle, especially if they are independent or don’t have the backing of bigger fish. In this industry, initial investment is a huge factor in whether a new entity will be successful or not.
When an online casino does fail though, its’ customers might well be confused and maybe even worried about what happens next, especially if they had money resting in their casino account. This should all become clearer by the end of the article, but first, lets look at why closure might happen in the first place.
Why do Online Casinos Fail?
There isn’t necessarily a right answer to this question; the fact is that businesses fail for a wide range of reasons and often a multitude of factors will be at play.
One of these could be a lack of investment from the start, which is why most new online casinos are owned by major gambling companies who have numerous brands under them, a significant track record in the industry, and most crucially the right amount of funding.
Another mistake that some new gambling companies make is trying to compete too heavily with each other on their welcome bonus and not factoring in what could happen if this backfires. Beyond having a good welcome bonus to attract new customers is the need to keep those players coming back, so it is essential to have an array of strong products, while the site needs to be easy to navigate and well designed.
The marketing strategy can also play a part in the failure of new gambling companies, with some not really formulating a realistic plan and often resorting to overspending before they have really started to gain substantial traction as a brand.
Being able to handle an influx of customers off the back of a successful marketing campaign is another reason why some small online casinos fail; all of a sudden, they have too many customers for their site to handle and as a result, the performance of the site can slow down and the customer is left feeling frustrated and leaves. Things like this can have a detrimental effect on the online casino and sometimes be the start of a more underlying problem.
Not having effective partnerships in place with notable enough software providers can also lead to a lack of customers. Most successful online casinos have slots and games from at least 12 software suppliers while some boast even more, and this can make a huge difference. Customers in the gambling industry love variety and like to have a choice; sites which do not provide this run a serious risk of losing customers and seeing sign up rates drop off.
If one or more of these factors are at play, an online casino could be at risk.
UKGC Deposit Protection
The United Kingdom Gambling Commission, for those who do not know, is the regulatory body for the industry. Any online casino that wants to operate legally in the country needs a license from the UKGC and that means abiding by certain rules.
One of these rules pertains to customer deposits. Until you have spent and lost the money in your account, it has not technically been ‘earned’ by the casino, so it needs to be held in a separate account than the one used for running the business.
This is good news, but not great news, because despite this separation there are circumstances where a customer’s unspent deposit money could be lost in the case of insolvency. This is all down to the level of protection each individual casino has and you can find this info in their terms and conditions.
It works like this:
|Basic||Money in accounts would be seen as assets if the company went bust and used to pay creditors rather than going back to customers.|
|Medium||There may be insurance or something similar in place to give customers a fighting chance of getting their money back.|
|High||Customer’s money is held in an account with no link to the company, sometimes an external auditor, so customers will get their money back.|
The majority of operators which have gone out of business over the last few years have only had a basic level of customer protection, which means that the majority of customers weren’t refunded the money sitting in their accounts. This is not always the case though.
In many cases, a failing gambling business will be bought out by another more successful business before it can fully collapse. The benefit for the company making the acquisition is that they get all of the failing business’s customers ported over to them as well as any assets, and at a bargain price too since the sale is distressed.
It’s good news for the customer too, because if this happens then the new company will also inherit any debt so the deposited funds aren’t needed to pay off creditors, and will show up in the account with the new casino.
This happened when Betfred bought the insolvent MoPlay in March 2020. MoPlay customers had to wait a few months, but eventually they had a shiny new account at Betfred along with the money they had left in their MoPlay accounts, ready to spend.
Signs That an Online Casino is Struggling
It pays to be cautious in this world, and online casinos don’t usually close down overnight, so learning the early warning signs and getting your money out fast can save you sleepless nights should things go belly up where you play.
Here are a few things to look out for:
- Withdrawal times start to slow down
- Withdrawals rejected or delayed for bogus reasons
- Support is not so readily available
- The casino is less responsive to queries
- Marketing suddenly stops
- Social media goes quiet (if it was previously active)
- Any unusual change in behaviour; for example, if new games are usually added weekly and this suddenly stops.
If any of these red flags pop up at your casino then it would be wise to withdraw your funds as a precaution, search for news on the company, and monitor the situation until you are confident enough to deposit again.
It might not always be an ominous sign – sometimes marketing might stop because they are changing their strategy, for example – but any change in the processing of withdrawals is almost always an early warning sign, so be vigilant on that one.
Online Casinos That Have Gone out of Business
Over the years there have been a number of instances where it has not worked out for certain gambling companies, and the reasons behind these failures have been varied. We’ve covered a few of the better known examples below, providing detailed insight into what happened and the response.
Slotobank was founded in 2014 as a project by Every Matrix Casinos Ltd, with an emphasis on providing a site that was as user-friendly as it could possibly be on a wide variety of devices. In its pomp, Slotobank boasted in excess of 400 slot games and 40 video poker games courtesy of a host of providers - indeed some of the biggest in the industry including Microgaming and NetEnt – but one area where it could have been more effective was in offering live casino/dealer games.
Granted a license by the Malta Gaming Authority (MGA) and often having a great selection of bonuses on show, it is perhaps initially unclear as to why the site shut down. However, there were reportedly issues relating to dissatisfied customers concerning response times and payouts which led to significant disharmony from a management perspective, eventually causing the company to fold. The company lost the trust and respect of too many of its customers and this was the stumbling block which led them to fall.
Owned by 24hPoker Casinos, this aptly named site was founded in 2006 and had a brief 10-year run in the business launching with the unique idea of focussing solely on female casino players - though this attempt at standing out ultimately proved to be their downfall. It isn’t the first time that a company has decided to aim at specific demographic and fallen flat either, although it could be argued that there is more data available in today’s market to be able to make a site like this work, so perhaps timing had something to do with it.
Designed by women for women, this was a site powered by industry giant Playtech, and that in itself should have acted as a major selling point. With only 80 games at the height of their powers though, there is no doubt that the site lacked substantial content, and by only marketing to female players they put a lot of people off, and couldn’t gather enough interest from the demographic they were chasing. In this case, it was the initial idea that killed them.
Double Star Casino
Founded in 2015, owned by Double Star Ltd, and subsequently granted licenses from the Malta Gaming Authority and the Government of Curacao, Double Star Casino had an excellent selection of games and slots from a variety of the industry’s top software providers. The site was well designed and functional and new players were joining, but there appeared to be one major strategic business decision that they got wrong.
It appeared that they gambled on getting instant results and invested heavily in marketing and promotions as well as special offers and bonuses from the start. Rather than building a solid brand that gathered fans gradually, they were trying to compete solely on price. As a result, players became confused as to the identity of the site, felt no loyalty towards it, and simply used the special offers and went elsewhere. This clear lack of consistency, but also lack of faith in their core product cost them severely in the long term. Just two years after opening, the site discontinued and shut down due to a lack of players and the inability to function as a company.
With a run of a decade, there could be a number of reasons attributed to this company going out of business, though usually in cases like these it is down to a failure to adapt to the market or recognise industry trends.
Founded in 2007, during what was one of the worst global financial crises the world had ever faced, DOXXbet Ltd was still able to get its fair share of customers. However, as time went on they remained loyal to just a single software provider; Novomatic. This was at a time when variety was becoming more and more important in the industry, and customer expectations were getting higher. This though, is just one contributing factor to their closure, with other sources citing ‘unexpected financial reasons’. Essentially, Doxxbet stood still in a fast moving market.
Owned by Aragon International Ltd this brand entered the gambling industry in 2011, though just six years later it had ceased operations, though it had its hand forced. Quite simply, the Dutch authorities deemed the casino illegal under Dutch law. However, there was some controversy surrounding this situation with the business claiming that it had a license from the Malta Gaming Authority, however, this attempt to stay operational was quickly quashed.
Offering more than 100 casino games from a diverse number of top software providers including NetEnt and Play’n Go, plus a host of table games and video poker games that added to an ample portfolio of products, Casino Rijk had everything in place to make a go of it. Apart from that tiny little detail of operating outside the law…
Lasting only a single year, this could well be one of the shortest lived online casinos ever. Tom’s is another example of a casino trying to aim at too niche a demographic and failing spectacularly as a result.
It could have been applauded for being the only casino in the world to target gay players (straight players were also welcome), but there simply wasn’t the demand. Although it had a great design, met all the necessary licensing requirements, and a vast selection of slots and games from notable software providers, it just wasn’t a sustainable business model.
Another casino to fall victim to strict Dutch regulations, Klaver Casino actually had a nice product, and even although it was licensed by the Malta Gaming Authority this didn’t hold water with the Dutch authorities.
Established in 2012 and owned by Glimmer Ltd, it had considerable popularity across Europe, with a range of online slots and table games courtesy of industry giant NetEnt, as well as a highly professional outlook and appearance. Upon being told to shut down the casino immediately stopped accepting players and was able to pay any outstanding bets and wagers thatnks to being acquired by L&L. It seems like Klaver where doing everything by the book, but the Dutch regulation changes were too much for them, so in this case it seems as though closure was more to do with the government than the casino.
Having been founded in 1995, this casino is one of the oldest to have lost it’s way, with a 19-year history by the time it was forced to close with debts of more than $1 million. One of the earliest independent online casinos, Canbet was firmly established by the turn of the millennium and had started to gain a significant amount of traction in the marketplace. However, during the mid-2000s the company started to lose its way, with the failure to adapt with the industry and offering unrealistic bonuses to new players being ultimately to blame.
Essentially, the bonuses that they offered didn’t make much sense; the kicker being complicated wagering requirements which were designed to confuse and ultimately rip players off. Furthermore, Canbet players then started to experience late or non-existent payments on their withdrawal requests and cancelled bets for no specific reasons.
The company was even sold twice so all the signs were there, but operationally the new management didn’t appear to make much of a difference. Finally, in 2014 after many failed attempts to solve deep rooted problems which essentially just papered over the cracks, nothing more could be done and the company closed its doors. This one was all down to negligence and bad management.
Arguably one of the most notable betting and gambling brands to close in recent years, 666Bet was founded in 2014 and gained considerable exposure and media attention when it appointed Harry Rednkapp as brand ambassador. Owned by the Hexagon Contracts Ltd, this site enjoyed great success in its first few months and accrued a vast number of customers. Although focussing firstly on UK-based players as their primary target audience, the company also had a presence around the world and this led to swift brand growth.
However, at the start 2015 the wheels began to fall off when it was discovered that director Paul Bell had spent most of the operating capital, which consequently meant that customers were not receiving payments for bets and wagers. Bell was eventually arrested for fraud and the company had to close despite it having all of the foundations in place to be a successful gambling company. A fraudulent boss is never going to lead to a successful online casino, and this one even put a clue to his devilish intentions in the name.
Vegas to Macau
Founded in 2016 and closing later the same year, this casino is up there with Tom’s (above) for one of the shortest lived ever. While the casino had a promising start, with great graphics and animations coupled with a well designed site that was easy to navigate, problems soon arose. Arguably the biggest problem that they encountered was that they didn’t create profitable enough bonus promotions; in this industry, getting the balance right with promotions is key.
This meant that new players would simply use the bonuses and move on to other, more established brands. The downfall of many a new casino is their lack of faith that they can ride out the first year and build their reputation based on delivering a great player experience rather than cheap offers that cause them trouble later down the line.
Furthermore, the casino also dealt in Bitcoin and this was something that cost them later. The change in the value of the currency was dramatic and this had an impact on their bottom line. Perhaps trying to do too much too quickly was the overall issue here.
Owned by Qualibou Solutions, this online operator hit our screens in 2015 and attempted to differentiate itself from the competition by offering a very diverse range of products, including casino games, virtual games, table games, slots, and a range of jackpots. As a result of this, it was quick to gather new players who were looking for something alternative. Focused and geared towards mainly European players, this was a welcome addition to the market.
However, it quickly became clear that the company was badly managed, with decisions made that did not make much sense at the time; such as bonuses which did not work economically and spending too much on advertising instead of growing organically. From early 2016, reports of unpaid withdrawals were the first sign of trouble, and this would eventually lead to the casino going out of business. The guys at 1X2 paid the price for too much spending on advertising up front and they seriously underestimated what it would take to run an online casino.
Is Tighter Regulation Needed for Online Casinos?
Looking at the number of online casinos that have gone out of business in recent years, including some fairly well known names, it begs the question whether more needs to be done to protect the customer from such eventualities.
Should the commission insist that every company has the highest level of deposit protection as a condition of trading, or should they perhaps insist that those with a basic level of protection clearly advertise this in a jargon-free way so that customers know what they are getting into?
Under the ASA (Advertising Standards Authority), all online casinos are required to be clear in all of their communications, although the wording of this is open to interpretation – it’s a little vague. If this information truly was clear, then why would customers take the risk of depositing with casinos that have one a basic level of protection?
While starting an online casino might seem like it could be an easy undertaking, especially operationally with so many resources available such as companies offering white label solutions; the fact is that substantial investment needs to be available to get new casinos through at least 12 months. Too many new companies concentrate on trying to make a quick buck rather than focussing on long term sustainable profit, and tighter regulations could help to dissuade them from this.
To sum up then, it is rare for an online casino to go bust because the games are set up in such a way that they are fairly well protected from every angle, but the rise in competition along with stricter regulation can make things difficult for newer brands, and those that are badly managed or have a flawed business plan are doomed from the start.
Luckily there are warning signs that you can act on if they come up, and if you have researched the deposit protection level of your chosen online casino you are at less risk in the first place. Even then, a bigger company can swoop in and save the day, so as long as you are clued up and vigilant as a player you should be able to look after yourself out there.
In the future, it would be good for the UKGC to better protect players from failing gambling businesses so that their deposited funds are never at risk, although there is no buzz about this in the industry at the time of writing.