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Why the Crown Resorts share price sank lower on Monday

The Crown Resorts Ltd (ASX: CWN) share price had a disappointing start to the week on Monday.

The casino and resorts operator’s shares fell by over 4% before closing the day just over 3% lower at $12.26.

Why did the Crown Resorts share price sink lower?

Investors were quick hit the sell button on Monday after the company was the subject of a series of reports published by The Age, The Sydney Morning Herald, and 60 Minutes.

According to the reports, the company has been accused of using junket operators (middlemen who bring high rollers to casino) with links to drug traffickers.

Crown Resorts has denied these accusations and stressed that it is not in breach of Chinese law and advised that it has not been charged with an offence in China.

A spokesperson told 9News that the company “refutes any suggestion that it knowingly exposed its staff to the risk of detention in China. Crown has a robust process for vetting junket operators with whom it deals and undertakes regular ongoing reviews of these operators in the light of new or additional information that comes to its attention.”

What now?

According to Bloomberg, there have been calls for the government to establish a parliamentary committee, which could hold public hearings into the allegations raised in the report and require witnesses to testify.

Independent lawmaker Andrew Wilkie said: “This has reached a point where the Australian government has to pay attention.”

Adding: “There is a very unhealthy nexus between Crown casino and the political establishment, and the law enforcement and other establishment. We have a systemic and a cultural problem, it will only be dealt with by a very high level review of the situation.”

This may have sparked fears of another Royal Commission-style enquiry into the industry, which could weigh heavily on investor sentiment.

Elsewhere, the Star Entertainment Group Ltd (ASX: SGR) share price dropped almost 1% lower on Monday and the SKYCITY Entertainment Group Limited (ASX: SKC) share price bucked the trend with a rise of almost 1%.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Crown Resorts Limited. The Motley Fool Australia has recommended Sky City Entertainment Group Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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