Online gambling sites don't back down

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July 20, 2006

Washington - United States authorities are raising the stakes against Internet gambling with their biggest prosecution effort to date, but backers of online wagering are not yet ready to fold.

An indictment unsealed on Monday charges the operators, British-incorporated BetOnSports, with illegally taking bets from US residents and failing to pay US taxes on 3,3-billion (about 23,6-billion) in wagers from the United States.

Prison possible

Some named in the indictment, including British national David Carruthers, chief executive of the group, who could face years in prison if convicted.

Analysts who follow the industry say the indictment marks the most ambitious effort to prosecute operators of offshore gaming websites.

However, they noted that authorities were taking advantage of a quirk in US law that clearly makes sports betting on the Internet illegal but is much more ambiguous about other forms of online gambling, such as casino-style games and lotteries.

"Confusing and sometimes conflicting state and federal laws have left room for a range of legal interpretation," said Ben Macklin, a senior analyst at the research firm eMarketer.

"However, there has been a renewed push from the government to curb online gambling activity."

Only sports betting

"The Justice Department has said [all] Internet gambling is prohibited, but most legal experts would say they are wrong, that this only applies to sports betting," said Joseph Kelly, a legal scholar at the State University of New York College at Buffalo, who has consulted the government of Antigua and others on US law.

Kelly said it was an unusual coincidence that the indictment - which was handed down in June but unsealed this week - came after the House of Representatives passed a new bill banning most forms of web gambling in the US.

"Why would Congress try to make something illegal if it is already illegal?" he said.

Some estimates show that online gambling globally is a $12-billion business, with nearly half of the revenues coming from US residents.

Are gambling website operators quaking over the prospect of US crackdown, with the long arm of the law stretching abroad? Kelly and others say this is not happening yet.

"If they've got good legal counsel, they would be told there is a risk, but the risk is minimal," he said.

"None of the other countries that license Internet gambling is going to allow the US to extradite their licensees."

However, Kelly said that following the latest indictments and arrest of a British national during a plane change in the United States, "My advice to anyone in the business is, 'Don't come into the United States, even to change planes.'"

"Meanwhile panic is also spreading amongst operators," said the Online Wire, a website that follows sports betting.

"The vast majority of online gaming operators are on a cautious wait-and-see mode."

"Why stop now?"

Some who follow the industry say the US may try to up the ante further by seeking charges against other high-profile operators, including Calvin Ayre, a Canadian-born billionaire who founded the gaming website Bodog.com and is ranked by Forbes magazine as 746th richest person in the world.

But Ayre was quoted by the website Eye on Gambling (eog.com) that he planned to attend a Las Vegas conference for the site next week.

"Why stop now?" he told eog.com.

Some watchers of the industry expressed disdain for the latest US crackdown.

"The best way to provide consumer protection is licensing and regulating," said Keith Furlong, vice president of the Interactive Gaming Council, a Canadian-based group representing the industry.

The US ban "is are hurting the most responsible gaming companies."

"The US will never catch Osama Bin Laden, but they got their big fish, David Carruthers, CEO of previously unknown terrorist group BetOnSports," wrote eog.com's Joe Duffy.

"Thank you, Department of Justice, for making the world safer for democracy."

Source: IOL

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