Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of 500.com (BTCM 5.84%) were down as much as 17% Wednesday on word of legal controversy after the company reported first-quarter earnings this morning.

So what: It was a strong quarter for the Chinese online sports lottery site, as sales jumped 127.3% to $14.4 million, ahead of the $12 million estimate. Earnings per share hit $0.15 against the consensus of $0.08. The company's active user base grew 28% sequentially in the period, but investors were turned off by a report that the China Sports Lottery Administration Center said it had not authorized any sports lottery websites, jeopardizing the company's ability to do business.

Now what: The report added that online sales in China are illegal without prior authorization. 500.com said in a filing that it had received China Sports Lottery Administration Center permission in October 2012 to operate as an online lottery as part of a pilot program. Still, the site could be suspended without further approval from the Ministry of Finance. 500.com has not yet responded to the report, but clearly a suspension would be damaging to its business. You can stay on top of this developing story by adding 500.com to your Watchlist by clicking right here.