The chips are down for principals in online gambling operations, and the cyberspace scenario is probably going to get worse. That’s because federal officials, already incensed over billions in gambling revenues leaving the U.S., are trying to link Web gambling to terrorism.
“The reason why a lot of land-based casinos have backed away from the Internet and offshore enterprises is because of the Patriot Act,” said Saverio Scheri of WhiteSand Consulting. “Investigators believe some of that money is being laundered and is ending up in the hands of terrorist groups.”
SOUND FARFETCHED? CONSIDER:
The prosecutor leading the charge against online operations is David Litterick, 45, the U.S. attorney for the Southern District of New York who has built a reputation as an expert in terrorism. He prosecuted some of the terrorists involved in the 1993 bombing of the World Trade Center. His prosecutions of the bombings of the U.S. embassies in Kenya and Tanzania earned him death threats, as well as a position at the Department of Homeland Security.
All U.S.-based casinos with annual gambling revenue of more than $1 million are classified as “financial institutions” by the Patriot Act and subject to strict government regulations, including adopting money-laundering programs, identifying the identity of foreign nationals and filing a Suspicious Activities Report to the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). Online operations skirt all these rules.
Law enforcement has arrested several principals of online gaming companies’ subsidiary operations in recent weeks. On Jan. 15, federal agents arrested Stephen Lawrence and John Lefebvre, former directors and founding shareholders of Neteller. Their company is a publicly traded Internet-payment processor used by many online gambling sites, one of which continued serving American players after passage of the Unlawful Internet Gambling Enforcement Act. BusinessWeek magazine estimates Neteller made nearly $850 million in fees during the first half of 2006 — the bulk of it from American bettors.
The U.S. is seeking the extradition of Gary Kaplan from Costa Rica. Kaplan is the former owner of BETonSPORTS, which has ceased taking sports bets from Americans. David Carruthers, former CEO of the company, was arrested in the Dallas last July and is currently under house arrest at a hotel in St. Louis, awaiting trial. Carruthers, a food connoisseur and wine expert, appeared in court in leg irons.
Last week, subpoenas were issued to at least four Wall Street investment banks to hand over details of their dealings with online gambling companies. The firms reportedly are HSBC, Credit Suisse, Deutsche Bank and Dresdner Kleinwort, which have underwritten public offerings of some of the most popular and profitable online gambling sites, and have offices in London, a city that is the fundraising center of the online gaming industry. Shares in European online gambling companies, which already had been hit hard in recent months, fell as much as 14 percent after news of the subpoenas broke.
SCARE TACTICS
“There certainly have been a lot of scare tactics but they’re working,” said Sue Schneider, president of River City Group, which monitors the online gambling industry. Schneider says federal investigators are trying to link online gaming operations to terrorist groups.
“They’ve been saying that since 9/11,” Schneider continued. “At some point it gets to be ridiculous and, more probably than not, what they’ll do is drive the business underground.”
One who agrees is Anthony Cabot, a Vegas-based attorney who specializes in Internet-gambling law. “After a while, it becomes a self-fulfilling prophecy and frighteningly similar to Prohibition,” Cabot said. “By forcing them underground, you increase the potential for less-reputable sites.”
Another gaming expert, who asked to remain anonymous, was more succinct: “(Terrorism is) a smokescreen thrown up by the right-wing Christian lunatics in the government who want to control every facet of human behavior from birth to death. As far as I know, there isn’t a scintilla of evidence there’s any link between online sites and terrorist groups.
“With the new legislation, though that is ironically more likely to occur,” the source continued, “since Russian mobsters and others are likely to see unregulated, rogue sites as a way to raise untaxed money.”
REGULATION & TAXATION
It’s hardly news to Cabot that investigators believe there is a link between online gambling sites and terrorist groups. “This argument has come up before,” he said. “There are probably 2,000 online gaming sites. Can you say that all of those have no relationship whatsoever to terrorism? No, but what you can say is that the larger companies operating out of the United Kingdom are completely transparent. They have public shareholders and dividends, and audited financial statements.”
Allyn Shulman, corporate counsel at Card Player magazine, added, “to specifically link terrorism to online gaming is disingenuous.” She believes that, rather than prosecute operators of online gambling operations, the federal government should investigate how to regulate and tax the industry.
“This is just another example of the benefit of regulating and taxing online gaming, as they do in Antigua, where the online gaming companies must open their books to independent auditors who report back to the government,” Shulman said.
But other industry observers note it doesn’t look like that’s going to happen … at least not in the immediate future.
“You would think that officials would look at (the potential for tax revenue),” Schneider said. “This is an industry that has been advocating regulation and it would not be averse to some sort of tax structure. But this isn’t about regulation and taxation. It’s about control and (being) anti-gambling.”
http://www.lvbusinesspress.com/articles/2007/02/05/news/iq_12303811.txt

It’s a tough call, sports fans.
Will Peyton Manning complete two more passes in the Super Bowl than Zydrunas Ilgauskas’ combined points and rebounds during today’s Cavaliers game against the Detroit Pistons?
Or will Tiger Woods’ fourth-round score in the Dubai Desert Classic be higher than Bernard Berrian’s total receiving yards?
Welcome to Super Bowl Sunday, the biggest day of the year in sports and sports betting. Counting so-called “proposition” bets like the two mentioned above, there are more than 300 different wagers being offered for this year’s big game – the Indianapolis Colts against the Chicago Bears in Miami’s Orange Bowl. You can bet on how long it will take Billy Joel to sing the national anthem, the outcome of the pregame coin flip and an array of individual and team performances.
It’s no wonder folks who normally wouldn’t bet on whether a traffic light will change from red to green will gamble on the Super Bowl.
“For the professional bettor, it’s just another game,” said Las Vegas-based gambler Andy Iskoe.
“For the public at large, it’s the only game they’ll bet all year,” Iskoe said. “It’s sort of like an excuse for a New Year’s Eve party a month later.”
Nevada sports books are expected to accept more than $100 million in wagers for this year’s Super Bowl, topping last year’s record handle of $94.5 million. Worldwide, between legal sports books, offshore Internet gambling sites, hometown bookies and office pools, Super Bowl wagering is estimated at more than $1 billion.
“Punters” in Ireland and the United Kingdom are expected to bet $16 million on the Super Bowl at Paddy Power Plc’s 250 betting shops.
“It’s our biggest American sport of the year,” said Paddy Power spokesman Darren Haines. “For an event that takes place in the middle of the night here, that’s quite exceptional.”
Early last week, about 80 percent of Paddy Power bettors had put their money on the Bears, a seven-point underdog.
“People who know more about it than me think they’ve seen enough in Chicago that they can pull off an upset,” Haines said.
Five thousand miles away in Las Vegas, professional sports gamblers also think the Bears taking the points is a smart bet.
“I like the Bears’ defense more than the Indianapolis offense,” said John Kelly, who hosts a weekly radio show devoted to sports gambling. “With the seven-point head start, I think you’re obligated to take the underdog.”
(The point spread is not a prediction of a game’s outcome. Instead, it is a number that sports books hope will split wagering evenly between the two sides, minimizing their risk.)
Kelly said oddsmakers are acutely aware of professional bettors during the NFL’s regular season when setting point spreads and other odds. But Super Bowl betting lines are made with the general public in mind because casual bettors are much more likely to pick the favorite.
Jay Kornegay, executive direc tor of the race and sports book at the Las Vegas Hilton, said the Colts would be favored by only 4 or 4½ points if the game were played at a neutral site during the middle of the season.
“There’s no doubt the Colts are the better team,” Kornegay said. “But I don’t know whether they are going to win.”
By the middle of last week, most bettors at the Hilton also were putting their money on the Bears, Kornegay said. He expects – and hopes – that Colts money will pour in this weekend.
(For what it’s worth, the team picked by oddsmakers as the favorite in the previous 16 Super Bowls has “covered” the point spread 11 times. The favorite failed to cover three times, and twice the game resulted in a “push” – a tie on the point spread that resulted in bettors getting their money back.)
Steve Fezzik, who runs a Las Vegas-based sports betting syndi cate, also thinks the Bears will “cover” – lose by fewer than seven points. But the Dayton native thinks the real value is in the proposition bets.
Fezzik – a pseudonym he uses to protect his identity – said he’ll have as many as 100 wagers on the game. Oddsmakers often treat proposition bets as a “nuisance,” which can lead to mistakes that sharp players love to exploit, he said.
“There are a lot of proposition bets that have a lot of value if you’re a savvy pro and know what you’re doing,” Fezzik said.
One of those proposition bets Fezzik said he always makes is whether there will be overtime. There has never been overtime in the previous 40 Super Bowls played. (You would have to bet $1,200 at one online sports book to win $100 on a no-overtime wager.)
“I know one of these years I’m going to get burned,” Fezzik said.
Just in case you’re interested, Ilgauskas, the Cavs center, is averaging a combined 20 points and rebounds a game this season; Manning is averaging 22 completions a game.
Good luck. Chances are you’re going to need it.
Source: Cleveland Plain Dealer

Super Bowl Sunday is a good time to examine the federal government’s hypocritical relationship with gambling. Betting at Native American casinos on federal land is fine. Wagering in Nevada and New Jersey is OK, too. State lotteries are great. So is the stock market.
As long as the government is in on the action (taxes), placing a C-note on the Bears or the Colts is as moral as eating apple pie.
But don’t dare use your BlackBerry or laptop to visit an offshore gaming Web site. If you do that, you lock the Internal Revenue Service out of the take and offend the “legitimate gaming” lobby.
It’s time to sack the online gaming ban, which makes criminals out of people who may not always have the best judgment but aren’t doing anything that hurts others. There are, of course, gambling addicts, but the vast majority of players aren’t. Banning online gaming for that reason is about as wise as banning pinot noir because some people sip too much of it.
Like other pronouncements against “sin,” the government crackdown is creating crime where it shouldn’t need to exist. The prime beneficiaries of the assault on computer wagering appear to be local bookies and illegitimate Web sites run by organized crime, according to The Wall Street Journal.
Apparently some of those who want to place bets on the big game are too scared to do so from their computers, which are easy to trace, but they don’t mind risking a call to a guy who looks like one of “The Sopranos” and collects in person (scary). Some Americans are still taking chances; some gaming sites in Costa Rica and other countries are still accepting action from the United States.
Americans last year bet $94.5 million on the Super Bowl in legitimate Nevada casinos. That’s just a fraction, considering what went to offshore and into office pools. This year, the Silver State expects to take in more than $100 million from rollers high and low.
People clearly want to bet on sports, and they are increasingly using computers to direct their money to where they want it to go, the right of anyone in a free society. Gambling is a form of speculating, and if someone thinks he can get a greater return on the Super Bowl than he can on Ford stock, why not let him?
The best bet would be for the government to lift the online gaming ban and instead license, regulate and tax Web sites that seek American bettors. Under this system, online firms would have to obtain proof of age, not just accept credit card numbers, and audits could single out those who need counseling.
Gambling is governed by an unbeatable market force. Whether it’s illegal, tolerated or legal, online gambling should not be subject to an unrealistic blanket ban by the government.
Source: Daily Breeze

Nevada basketball fans will bet on their 15th-ranked Wolf Pack against just about anybody, but they won’t get a chance this weekend to pit their star players against the Chicago Bears.
At the request of school officials citing NCAA rules, a Reno casino discontinued a wagering proposition Wednesday on who would score more points – Nevada star forward Nick Fazekas in Saturday night’s game against Hawaii, or the Bears in Sunday’s Super Bowl against Indianapolis.
Wacky Super Bowl propositions are a way of life at Nevada sportsbooks, which raked in a record $94.5 million from last year’s big game. Among this year’s props:
• Colts quarterback Peyton Manning’s total passing yards vs. Phil Mickelson’s four-round total at the FBR Open in Scottsdale, Ariz., where even par is 284.
• The Colts’ total score vs. Lebron James’ total points in the Cavaliers NBA game against the Pistons on Sunday.
• The Bears’ total touchdowns vs. goals scored in Sunday’s English Premier League soccer game between Manchester United and Tottenham.
The Club Cal Neva Hotel-Casino decided to add a bit of local flavor to the pot by adding wagers involving the Wolf Pack, who were 19-2 entering Wednesday night’s game at Louisiana Tech.
In addition to Fazekas, who is averaging 20.2 points per game, they offered a bet on whether the Bears and Colts combined would score more in the first half than Wolf Pack sharpshooter Marcelus Kemp, or whether guard Kyle Shiloh would have more assists than the number of field goals made on Sunday.
The problem is, NCAA rules prohibit the use of student athletes to promote a business in any way, shape or form.
“They were just trying to generate some local interest and had no idea that what they were doing was a violation of NCAA policy,” said Jean Perry, the school’s special assistant to the president for athletics, academics and compliance.
“As soon as it was brought to their attention, they immediately withdrew the bets,” she said Wednesday.
Perry said she already has reported the situation to the Western Athletic Conference and was preparing a formal report for the NCAA.
“In a nutshell, the NCAA bylaws say you can’t use a student athlete’s name or picture without his or her consent and you can’t use it in any commercial way,” she said.
“If we as an institution finds out someone has done that, we have the burden of asking them to stop that, which is what we did.”
The Reno Gazette-Journal first reported the wagers on its Web site Tuesday afternoon, which is where university officials first learned of it.
It was not immediately clear whether bets made prior to Wednesday would be honored or if gamblers would receive a refund. Cal Neva officials did not immediately return a call seeking comment.
Sportsbook manager Tony DiTommaso told the newspaper on Tuesday that he “wanted to do some more of the local stuff.”
“One of the things I wanted to do this year was capitalize on UNR,” he said.
Perry doesn’t expect the incident to result in any penalties against the school.
“This is a thing that was not instituted by us.
The student athletes that were involved had no idea about it,” she said.
Source: North Lake Tahoe Bonanza

Super Bowl Sunday at the sportsbook often looks like this: Frenzied betting starts in the morning and continues up to the 3:25 p.m. kickoff. Experienced bettors lay down their greenbacks, knowing who is injured and who is favored. Novices scratch their heads over the spreads and propositions, some even over the basics of football.
This is the game that attracts old-timers and newbies. It’s the culmination of a season for the avid fan. For those who aren’t so obsessed, it’s a social event highlighted by commercials. It’s all about fans who have an opinion who then spice up the game by putting money on the line, said one local sportsbook manager. And that’s what makes this the most profitable day of the year for sportsbooks. Nevada sportsbooks collected a record $94.5 million from last year’s game.
“The thing about the Super Bowl is, it brings out people who never bet on anything, making it the highest-grossing vetted game in the U.S. – that’s legal,” said Steve Napoletano, sportsbook supervisor for Leroy’s Race & Sportsbook in the Carson Nugget. “We take more Super Bowl bets than anything else.”
Using sports knowledge and luck, a gambler can walk out with a heavy wallet. Or not.
Louie Sanchez, of Carson City, has bet on Super Bowls since Joe Namath won Most Valuable Player in 1969, that was Super Bowl III. The game takes on a greater meaning when you have money on it, he said.
The most the 57-year-old has ever won on a game was $420, which may still be a comfort when he thinks about how much he’s bet and lost.
Cathleen Allison/Nevada Appeal Ed O’Donnell, of Minden, holds his Super Bowl betting tickets Tuesday at the Carson Station.
Browse and Buy Nevada Appeal Photos
Sanchez made his picks this week at the Cal Neva Sports Book inside the Carson Station with his friend Freddie Melendez, a warehouse manager from Carson City. They eyed the special “in-house” props, which are bets specific to the Cal Neva sports books. Sometimes the props can get a little odd.
This week, the Cal Neva pulled its bets that included members of the Wolf Pack basketball team. University of Nevada, Reno officials said the wagers violated an NCAA rule that prohibits the use of student athletes to promote a business.
That’s unfortunate for Sanchez and Melendez, who believed they could win money favoring a star on the 15th-ranked Wolf Pack over the Super Bowl.
The special prop: Kyle Shiloh, a Pack guard, total assists during the Saturday game against Hawaii vs. the total number of field goals made in the Super Bowl.
They’ll have other options, such as: total goals scored at this morning’s Manchester United soccer game vs. the Bears’ total touchdowns.
Vince Carter’s total points scored today during the Hawks and Nets game vs. Colts-Bears total points in the first half.
To grab a greater share of gamblers, sportsbooks offer these creative props for basketball, golf, soccer, NASCAR and hockey fans.
“It’s crazy,” said old-time sports bettor Allen “Ozzie” Osborn, 77, who then laughed at the unusual props.
He’ll place a bet on Sunday, probably for the Colts (who are favored) after watching the newspaper for the injury report. It’s not his favorite game on which to bet. The most he’s ever won is $1,000. It can be difficult to pick between the two best teams in the league.
Osborn, who divides his time between home and the casino, said he’ll probably watch his pick from home.
“It can get nuts here,” he said.
There’s an even stranger bet at Casino Fandango, but it’s for those who have the patience.
At Fandango’s sports book, fans can place a bet on whether the highest-scoring game will be in 2007 or 2008.
“It doesn’t matter which side you bet on, you’ll have to wait a year to find out,” said Jason Kolenut, Casino Fandango race and sport book supervisor.
Just don’t lose your winning ticket.
Source: Nevada Appeal

By the time the coin is flipped for Sunday’s Super Bowl XLI between the Chicago Bears and Indianapolis Colts, the game’s first record will have already been broken.
In Las Vegas.
It’s estimated that fans in Nevada casinos will wager more than $100 million, shattering the old mark of $94.5 million for the biggest betting day in football.
But if you place your bet online, there’s no guarantee you’ll ever collect.
Gambling experts estimate total wagering on this Super Bowl could top $6 billion — mostly in cyberspace and almost all illegal.
A federal crackdown on financial companies and Web sites that process online bets has cut people off from their money, causing consternation among both bettors and overseas investors.
Still, it hasn’t been enough to stop people from placing bets online.
“This genie is way too big to put back in the bottle,” said national radio host Tom Trushel, the nation’s top-ranked football handicapper and CEO of the betting information site sportsmemo.com. “People love to gamble and they like the convenience of point and click.”
Since the Unlawful Internet Gambling Enforcement Act became law last October, the federal government has made a show of shutting down related companies. Because the United States has no direct authority outside its boundaries, the act targets money-moving mechanisms needed to make bets, such as credit cards and wagering accounts.
Inserted into an unrelated homeland security bill, the act was pushed by then-Senate Majority Leader Bill Frist (R-Tenn.). Although the new law gave companies 270 days to comply, authorities used other regulations to make arrests and reinforce an anti-gambling campaign.
“Internet gambling is a multi-billion dollar industry,” FBI assistant director Mark Mershon said in an official statement last month. “A significant portion of that is the illegal handling of Americans’ bets with offshore gaming companies, which amounts to a colossal criminal enterprise masquerading as legitimate business. … The FBI is adamant about shutting off the flow of illegal cash.”
Two weeks ago, two Canadian directors of British-based NETeller were arrested in Malibu and the U.S. Virgin Islands on money-laundering charges. NETeller, which processed payments for an estimated 2,500 offshore gambling operators, promptly pulled all its U.S. business. NETeller turned an annual $750 million profit while processing more than $7.3 billion a year for gambling Web sites, authorities said.
The Justice Department then issued subpoenas to 16 Wall Street investment banks that had underwritten initial public offerings for popular online gambling sites. Their demands include e-mails, telephone records and other documents so the government can build cases against those who profited from online gaming in the United States.
Earlier, authorities arrested top executives of online gambling giants BetonSports.com and Sportingbet, two publicly traded companies that saw their shares crash on the London Stock Exchange.
“It’s an interesting and somewhat arrogant strategy for the U.S. to be taking,” noted William Eadington, the director of the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada. “But I have a strong suspicion people will find a way around it.”
The fear factor worked. Curacao-based giant Pinnacle Sports cut off its U.S. customers. Several other companies followed suit.
“Public companies have pretty much went out of business (in the United States),” said world champion handicapper R.J. Bell, the co-founder of Pregame.com, one of the first sports betting information sites. “It thinned the playing field.”
But the new law didn’t clarify the illegality for the average bettor, Bell said. Those bettors are his customers. Some 50,000 visitors a day consult Bell’s Web site, which distills statistics into “information worth betting.”
“All it did was set everything back five years,” Bell added. “If people were motivated enough to bet with their local bartender, they’ll find a way to get money offshore into their account.”
Trushel and Bell witnessed firsthand how the Internet changed the gambling world. Information — the most valuable commodity in sports betting — became widely and almost instantaneously available to everyone.
“When I first started in 1993, I didn’t even have a computer,” recalled Trushel, who launched his first Web site in 1996. “I had a fax machine and a network of friends who sent me newspaper articles from around the nation. I thought I was cutting-edge.
“A few people started using computers to collect information and they were bringing down the house. By 1999, the Internet just exploded. Now, information is everywhere, but its shelf life is extremely limited. You have about 12 minutes before your inside tip is out around the world.”
Said Bell, “The Internet changed gambling on two levels. It allowed some guy sitting at home in the Midwest to play 10 different sports books and get the best line. Competition brought down prices across the board.”
Initially, the Internet allowed those at-home bettors to become instant wise guys. But that edge quickly vanished as more people went online.
“Information now moves at the speed of light,” Bell added. “You’re only a wise guy if you’re smarter than the masses.”
Nevada casinos — the only legal place for Super Bowl and most other sports wagers — saw a spike in business as large bettors brought back their business. In November, the sports books saw a 336 percent increase in football betting compared to the same month in 2005. Wagering on sports parlay cards jumped 229 percent, according to gaming reports.
Nevada sports books had not been too concerned by the Internet competition.
“If we did lose people to the Internet, we gained a lot more with the growth of Las Vegas,” said Micah Roberts, the sports and race book director for Station Casinos’ 10 properties. “This city has almost doubled in size in the last 10 years. That’s a lot of new customers.”
Some experts speculate the current crackdown on Internet wagering could bring back neighborhood bookies, who were virtually put out of business by offshore online companies.
“That’s going to take some time, if at all,” Eadington said. “The Internet created a quasi-legal environment that people trusted. These were companies that had reputations. (Customers) were much more likely to be paid for big hits. With illegal bookmaking, that’s always a question.”
Poker — which bloomed online and attracts as many as 70 million American players — has taken a major hit. Partypoker.com, the best-known online site, pulled out of the U.S. market.
“Partypoker was the market leader with 55 percent of the action and they just disappeared,” Bell said. “In addition, poker had reached its saturation point. TV ratings (for poker shows) have slipped back to where they were two, three years go.”
As super-size as Sunday’s betting totals sound, those amounts actually represent a small slice of the gambling pie. Americans spend an estimated $80 billion a year on all forms of gambling.
“The fact is Americans gamble, they gamble a lot and they bet on all sports,” Trushel said. “It’s part of our culture’s fabric and history. We’re in a transitional phase right now, but it won’t stop people from betting. We were here before the Internet and we’ll still be here after it’s gone.”
Source: Sacramento Bee

If the U.S. government gets its way on Super Bowl Sunday, all bets will be off — all online bets, that is.
Federal prosecutors and agents in the FBI’s organized crime unit have been mounting a large-scale crackdown on Internet gambling, with indictments against executives at gaming Web sites, arrests of foreign businessmen who process payments, and subpoenas to investment banks that may have helped bankroll the operations.
The aggressive campaign has gathered steam in recent weeks, as Americans prepare to wager more than $5 billion on tomorrow’s game between the Chicago Bears and the Indianapolis Colts, the biggest betting day of the year, according to industry experts.
The arrests in California and in the U.S. Virgin Islands last month of two board members of Neteller, a British company that facilitates online money transfers, is spurring overseas executives with even modest gambling connections to avoid traveling to the United States lest they be nabbed. And it is leaving legal analysts and bettors crying foul about the government’s approach.
“This escalation or, no, we should say surge, in this war of intimidation Justice is waging right now really has had an effect,” said I. Nelson Rose, a professor at Whittier Law School in California and author of a textbook on gambling law.
Justice Department officials have long been on record as saying that Internet gambling breaks the law. They cite the long-standing Wire Act, a statute making it a crime to use telephone lines to place a bet within the United States or overseas. The 1961 law, which applies to businesses instead of individual bettors, was designed to eradicate the Mafia from the gambling arena.
But after the 2000 wire-fraud conviction of sports betting entrepreneur Jay Cohen for operating a Web site in Antigua, federal prosecutors enforced it only sporadically. The campaign heated up last year, after the government indicted two popular sports betting Web sites: Antigua’s WorldWide Telesports Inc., and London’s BetOnSports PLC. Both companies have announced they will no longer accept wagers from U.S. clients.
Then Congress dealt in. At the last minute, lawmakers inserted an online-gaming measure into the port security bill that chokes the flow of money by barring the use of credit cards, checks and fund transfers to make and settle bets. President Bush signed the bill into law in October.
But it has been the wave of criminal charges against individual executives and businesses that prompted a real exodus from the U.S. market. Americans bet nearly $6 billion online in 2005, but the flood of public companies out of the country has made it difficult to estimate current amounts, said Eugene Christiansen, who tracks such spending.
Meanwhile, U.S. authorities show few, if any, signs of folding, even in the face of rulings by the World Trade Organization that the United States cannot put foreign rivals at an economic disadvantage on the Internet gambling issue.
“Criminal prosecutions related to online gambling will be pursued even in cases where assets and defendants are positioned outside of the United States,” Michael J. Garcia, the U.S. Attorney for the Southern District of New York, said last month.
Yet legal experts say there are questions about whether Internet gaming is a crime worthy of extradition in most foreign jurisdictions, and whether the executives meant to break the law, given that their operations are legal in their home countries.
Moreover, although the Justice Department has suggested that all forms of Internet gambling violate the law, analysts say that online horse racing, poker and fantasy leagues may be exempt. Gambling in some form, from state-sponsored lotteries to race tracks and slot machines, is legal in a majority of the 50 states, which collect billions in tax revenue from the enterprises each year.
A. Jeff Ifrah, a defense lawyer in the District office of Greenberg Traurig, said the Justice crackdown is confounding some legal analysts because “it is unclear how the government randomly targets members of this industry for prosecution, and why it is doing so on the heels of legislation that only recently prohibited facilitating certain gaming activity.”
Neteller, which had provided payment services to more than 80 percent of worldwide gaming merchants, watched its business swell after PayPal and parent company eBay agreed to leave the business and forfeit $10 million to settle civil charges three years ago over financial transfers to offshore and online gambling firms.
Now, however, with the arrest of two of its founders, the British Web site is scrambling to exit the U.S business. Neteller is besieged with requests from frustrated bettors who want to recoup billions in deposits and winnings. The money is being held in trust accounts while the company holds conversations with the Justice Department about the status of its executives and other board members.
“The answer is, it’s a bit confused at the moment,” Neteller spokesman George Cazenove said. “I’m sure they will get their money back. You’ve got to give Neteller a bit of space.”
Prosecutors have increased efforts to force advertising companies and Web sites to reject paid ads for Internet gambling sites. They also sent subpoenas to at least three investment banks, HSBC, Dresdner Kleinwort and Credit Suisse. Richard Lindsay, spokesman for HSBC, said the subpoena it received late last year requested information “pertaining to some Internet gambling companies.”
The crackdown against public, regulated foreign businesses has left small private companies to fill the void, an issue that worries industry officials and consumer groups who say the smaller entities are less subject to oversight and more difficult to police. In essence, they argue, the government drive could turn into another prohibition, and have the perverse impact of fostering underground, illegal activity.
“The net effect of this is, responsible people are out of the business,” said Frank J. Fahrenkopf Jr., president of the American Gaming Association, a casino industry trade group.
But federal officials disagree. Mark J. Mershon, FBI assistant director, last month cautioned that companies handling Americans’ offshore bets “amount to a colossal criminal enterprise masquerading as legitimate business.”
Source: Washington Post

law prohibiting U.S. financial institutions from processing payments to online gambling sites hasn’t stopped U.S. employees from visiting sports betting sites, according to cybersecurity vendor ScanSafe.
Attempted visits to online gambling Web sites by employees of ScanSafe’s U.S. customers were up 77 percent in the week between Jan. 23 and 31. The Super Bowl, the National Football League’s championship game, is Sunday.
ScanSafe provides a Web-blocking service to large businesses, and it examines 6 billion Web requests a month.
In October, President George Bush signed into law a measure prohibiting financial institutions from processing payments to gambling sites. The government has until mid-July to develop the processing regulations for financial institutions.
But some online gambling sites have begun telling U.S. customers that financial institutions are already distancing themselves. On Wednesday, PokerRoom.com told U.S. customers to cash out.
“The remaining companies that process cashouts from PokerRoom.com to our players in the United States have contacted us to say that in the near future they will no longer facilitate these transactions,” said a message on PokerRoom’s home page. “As such, we would advise all American players who have not cashed out already to do so immediately.”
The gambling provision, amended by Congress onto a ports security bill in late September, has had no impact on the number of people visiting gambling Web sites, said Dan Nadir, vice president for product strategy at ScanSafe. ScanSafe doesn’t track whether those people completed bets, he said.
“We suspected [the law] wouldn’t have much of an impact,” Nadir said. Some gambling sites will develop alternative payment mechanisms, he said.
ScanSafe didn’t provide the raw numbers of visits to gambling sites this past week, but gambling represented about 3.4 percent of the content it blocked for clients in 2006. By comparison, 15.1 percent of the blocked content was chat or instant messaging, 14.6 percent was advertising, 7.2 percent was Web mail, and 3.9 percent was pornography.
Visits to sports betting sites such as Bodog.com were common this past week, Nadir said. About 53 percent of the U.S. visits to gambling sites ScanSafe observed this past week were to sports betting sites as opposed to casino or lottery sites. Bodog didn’t immediately respond to an e-mail asking if its business has been hurt by the U.S. law.
About 84 percent of ScanSafe’s customers blocked employee access to gambling sites. Companies block employees from gambling sites for a couple of reasons: because they don’t trust that gambling sites are safe, and because they don’t want employees playing games on company time, Nadir said.
Source: Infoworld