Web Gamblers Have Little to Fear From Crackdown on BetOnSports By DAVID KESMODEL Wall Street Journal
July 25, 2006 http://online.wsj.com/article/SB115374581708215293.html?mod=technology_main_promo_left In its recent high-profile criminal case against a major online gambling company, the U.S. government has taken its most aggressive step yet to crack down on Internet gambling. But prosecutors have left untouched some key players: the gamblers themselves. The Justice Department contends three federal laws make it illegal to operate an online gambling business, and U.S. officials have at times made statements suggesting it is also illegal for Americans to place bets on the Web. Yet federal prosecutors, as well as states that prohibit the activity, have largely left bettors alone. Last week, federal authorities charged David Carruthers, the chief executive of BetOnSports PLC, and 10 others with racketeering and fraud for taking sports bets from Americans. Prosecutors alleged BetOnSports, which is based in Costa Rica, took wagers "almost exclusively" from U.S. gamblers. The government won a court order to temporarily shut down BetOnSports.com and other sites, but didn't file charges against any bettors. Instead, it asked BetOnSports to return funds held in their accounts. The case raises the question: Why hasn't the government pursued U.S. gamblers? They accounted for roughly half of the estimated $12 billion in annual world-wide revenue for offshore casinos last year, according to research firm Christiansen Capital Advisors. Some gamblers are fearful they might soon become entangled in the government's widening probe, but legal analysts say there's no federal law that explicitly bars individuals from placing bets online, and few state laws that do. For its part, the Justice Department said it is focused on the online gambling businesses, not individuals. "There is certainly not a law that expressly prohibits a bet by a casual bettor," said a Justice Department official in a phone interview. "We think that is more for state law to decide." Catherine Hanaway, the U.S. attorney for the Eastern District of Missouri, who brought the indictments against BetOnSports, said she didn't consider pursuing charges against the company's customers. "There are limited resources, and we are trying to go after the worst first," she said. "Just like in the arena of gun dealers, we go after the biggest gun dealer we can find first." Tough Talk The primary anti-gambling law relied upon by the Justice Department is the 1961 Wire Act, which forbids companies from taking bets on sporting events over state or international lines. Legislation pending in Congress would amend the Wire Act to include online companies that take bets on poker and other casino-style games, but it doesn't target individual bettors. Still, on a number of occasions, the Justice Department has suggested it considers the actions of the gamblers illegal, too. In 2002, John G. Malcolm, then a deputy assistant attorney general, said in a briefing on online gambling in London that the Wire Act applies "to those who send or receive bets." At a 2003 Senate committee hearing, he said the abundance of advertisements for offshore casinos "misleads the public in the United States to believe that such gambling is legal, when in fact, it is not." Moreover, the temporary restraining order the government won against BetOnSports said the company must display a message on its Web sites saying, in part, that "it is a violation of United States law to transmit sports wagers or betting information to this Web site from the United States." The Justice Department official said any implication that it considers casual bettors' actions illegal under federal law was "probably unintentional." BetOnSports, which trades on the London Stock Exchange, plans to appeal the restraining order. The company has stopped taking bets from the U.S., but its sites do not contain the message proposed by federal authorities. In the 12 months ended Feb. 5, BetOnSports handled $1.77 billion in wagers from more than 84,000 customers. Fear of Prosecution Many Americans are confused by the government's stance on online gambling, and the BetOnSports case has been a hot topic on several Internet discussion sites. After the charges were announced, Ken Weitzner, who runs Eye On Gambling, an online forum, said he received more than 50 emails and phone calls from gamblers concerned they may be prosecuted. "There is a lot of fear and panic, and I think they are afraid of the unknown," Mr. Weitzner said. Bo Mastykaz, a 23-year-old Lawrence, N.Y., resident who participates in the forum, said he decided to stop placing bets online following the BetOnSports indictments. He fears he might be prosecuted. "I don't want to be the example," said Mr. Mastykaz, who for the past five years has wagered about $3,000 a year on sporting events on the Web. He hasn't used BetOnSports' sites. Mr. Mastykaz has no reason right now to fear prosecution by authorities from his state. While New York law prohibits a business from accepting bets from its residents online, it doesn't bar citizens from making online wagers, said a spokesman for Attorney General Eliot Spitzer. Other online gamblers said they weren't worried. Juan Cifrian, 26, a Sunny Isles Beach, Fla., resident, said he would continue to place bets on football games, and expects others to be undeterred. "Maybe this is the first high-profile [company] that gets taken out of business, but almost immediately online gamblers will find the next site," he said. Mr. Cifrian likened the situation to what happened with online music file-sharing companies. While Napster and others were shut down for violating copyrights, new free music-swapping sites have popped up, and people keep using them. Mr. Cifrian has used BetOnSports' site in the past to gamble on such things as which color of Gatorade would be doused on the winning Super Bowl coach. Few State Laws Legal analysts said it is unlikely federal prosecutors will target individual bettors, in part because the government prefers to leave prosecution of such cases to the states. And, like New York, few states explicitly bar the casual bettor from wagering online. Even in Washington state, which recently made it a felony for a person to gamble online, state officials said it's unlikely they would prosecute casual bettors. Gambling experts said one of the few reported cases of an American being prosecuted for online gambling involved Jeffrey Trauman, a North Dakota resident. In 2003, Mr. Trauman, a professional bettor, pleaded guilty to a misdemeanor for violating a state law that limited legal gambling to wagers at a tribal casino or sanctioned charity. He received a $500 fine and one-year deferred sentence. "It is politically difficult or unwise to go after consumers if they're not significant gamblers," said Bill Eadington, a professor of economics who runs a gambling-research institute at the University of Nevada, Reno. "One can make a case that if an individual bettor is moving hundreds of thousands of dollars, he may be a target." Arresting gamblers would bolster the federal government's efforts to curb the activity, said Lawrence G. Walters, a Florida attorney who represents offshore casinos. However, he said, "there could be Constitutional problems with attempting to regulate a local activity, such as the placement of individual bets by people in their own home." ================================ George Antunes, Political Science Dept University of Houston; Houston, TX 77204 Voice: 713-743-3923 Fax: 713-743-3927 antunes at uh dot edu Reply with a "Thank you" if you liked this post. _____________________________ MEDIANEWS mailing list [email protected] To unsubscribe send an email to: [EMAIL PROTECTED]
