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Pinnacle - will it survive?

In terms of sportsbooks that bigger or smarter punters love to play at, Pinnacle is right up there - tight margins and willingness to take seriously big bets. None of this sorry sir, your business is not economical for us, you can have no more than £5 on (if you're even that lucky), which annoys with modern-day "bookmaking". Tennis punters in particular are really going to take a hit if the fallout from this weekend's events is serious.

In case you missed it, there was a big roundup of sportsbetting identities in New York this week....



The allegation from the Queens County District Attorney in New York is that the individuals involved were acting as agents for Pinnacle, a firm who had exited the US market back in 2007 after heavy attention from New York police. That they didn't exit the US market quite as completely as they told everyone is likely to have further implications on this case down the track.

Read the press release from the Queens County District Attorney here.

Pinnacle's statement in response was as expected, stating they weren't employees of the firm and thus it does not affect the business at all. Of course they weren't employees, they'd be agents if they were based in another country. But the link to the firm means they will again be under intense heat from various US investigative bureaus, and a big chunk of their US sports turnover will disappear. Pinnacle's business model relies on sharp action (move the prices according to who is betting on what, also known as 'playing heads' in other circles), high volume to match the low margins and the underclass known as arbitrageurs, middlers and scalpers who come in to balance up the book when heavy action on one selection moves the price on the other. Take away any or all of those options and Pinnacle's business model may have to change.

Pinnacle will also have problems with their licence in Alderney. After the Full Tilt Poker debacle, Alderney will need to play ball with the US so that licence is likely to be suspended if not torn up. The value in that licence is the avenue to advertise in the UK (Curacao is not a white-listed jurisdiction, but it's not as if they do much advertising in the UK anyway) and the option to switch operations quickly if they needed to get out of the Caribbean.

I think Pinnacle are too big and too versatile to disappear off the map - but when you are dealing with US authorities, never rule anything out....

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