On May 7, 2014, a news article published by Jinghua Daily brings to light a situation that may materially impact WBAI’s daily business.  We have found no related press release in the U.S.

The China Sports Lottery Administration Center (“the Center”) said that, to date, it has not yet authorized any sports lottery websites.  The news article further states that, based on the “Implementing Rules of Regulation on Administration of Lottery”, online lottery sales are illegal without prior authorization.

The major business that 500.com (NYSE: WBAI) conducts is that of online sports lottery sales. If the Center forbids and/does not authorize the online sports lottery sales in China, WBAI’s business may be subject to suspension.

That’s why we find it interesting that in its April 2, 2104 F-1, WBAI states:

In October 2012, we were notified by China Sports Lottery Administration Center that we were one of the two entities that had been approved by the MOF to conduct online sales of sports lottery products in China on behalf of China Sports Lottery Administration Center. However, since the operation of online sports lottery sales services by China Sports Lottery Administration Center itself is in a pilot phase and is subject to further approval by the MOF, our operation of online sales of sports lottery products may be subject to suspension if China Sports Lottery Administration Center fails to obtain such further approval from the MOF. We are currently awaiting approval from the MOF to provide sales services for welfare lottery products.

Apparently, the claim in the newspaper contradicts the statement in WBAI’s SEC files.  Now we need to wait to see how the company would respond to this information from China Sports Lottery Administration Center.  We will also keep tracking the progress on this issue.