The SVB collapse has been the subject of a lot of activity for federal financial regulators lately. Similarly, many companies that made significant deposits into the now-closed bank have been active in trying to navigate the situation over the past few days.
While a lot of the depositors were technology companies, it so far doesn’t look like any of the pertinent providers of US online gambling tech were affected. That doesn’t mean the experience for online casino players will be completely immune going forward, however.
What happened to trigger the SVB collapse?
In simple terms, it was a bad, ole’ fashioned run on the bank. In greater detail, the demise of the former Silicon Valley Bank began years ago.
- SVB accepted billions of dollars in deposits from tech startups in 2020 and 2021
- SVB then used those to buy government bonds
- Those bonds lost value as the Fed raised interest rates to combat inflation
- At the same time, private investors scaled back their funding for those tech startups due to that inflation
- Those SVB depositors pulled out their cash reserves to cover costs
- SVB had to sell its bonds at a steep loss to try to meet demands for withdrawals
- That news prompted even more withdrawal requests that snowballed
An analysis of the situation could point to two fatal flaws on the part of the executives at SVB. First, you could argue that SVB put too many of its eggs in one basket. Had SVB taken deposits from a more diverse array of customers, it might have been able to survive when private investors stopped providing cash to tech startups.
At the same time, it’s difficult to turn down a potential customer who wants to hand you millions of dollars. Secondly, hindsight says that by the time depositors started withdrawing cash, the hour was already too late. SVB bet that the bonds it held would regain their value if they held on.
Had they sold them earlier, they might have had enough cash to satisfy the first batch of withdrawals and been able to avoid the run. As any gambler knows, risk often leads to undesirable results. At this point, it doesn’t look like there will be any immediate, obvious effects for regulated US online gambling operations, though.
Were US online gambling companies involved in the fallout?
Some publicly traded companies have filed reports with the US Securities and Exchange Commission explaining the deposits they made in SVB. Ellen Chang of The Street reports that such companies include Fubo and Roku.
Not all of them have done so yet. Additionally, not all of the former SVB depositors are public companies. For those privately held companies, they may never share what if any deposits they had at SVB when California regulators shut the bank down last week.
Thus, it’s currently difficult to ascertain whether any US online gambling companies were affected. Even if some had uninsured deposits (the standard FDIC limit is $250,000), it seems the unavailability of such funds was a temporary situation.
According to Bobby Allyn and David Gura of NPR, the US Dept. of the Treasury has waived insurance limits for SVB depositors as of Sunday evening. Perhaps as early as today, depositors will have access to all of their available funds.
There was an online petition circulating urging the federal government to do exactly what it did. The over 5,000 signatories do not include any major online gambling companies or their service providers. Even if that had been the case, however, that would not have meant those companies had uninsured deposits at SVB. They could have simply signed on to show support.
Thus, for the moment, it appears your favorite online casino app should continue to work as if SVB was still chugging along. The possible ramifications of this situation for the gambling industry could be visible down the road.
Possible future impacts on the gambling industry
Ken Sweet of the Associated Press says SVB was the 16th-largest bank in the nation. Additionally, it was among the largest regional banks in the United States. Among the long-term impacts of this situation could be eroded confidence in banks of that scale.
That could mean there are fewer such banks. A possible negative effect of that is diminished competition that makes affordable financing less available to companies like tech startups. Fewer such companies getting off the ground could mean less innovation.
That could mean better platforms with new features for US online gambling would come at a slower pace. That might apply to a wide range of aspects from the actual gameplay to payment processing.
Gamblers might not notice that impact, as it’s hard to ascertain how much sooner products might have improved if not for these circumstances. Entrepreneurs looking for the cash to get their projects off the ground and improve gamblers’ experiences could feel the strain of the SVB collapse, though.