Another trusted officer of a publicly traded company was arrested this week, nabbed in Texas while changing planes. No, he isn’t from Enron or WorldCom and is not accused of cooking the books or embezzlement. In fact, until his arrest 2006 has been a dandy year for shareholders of his company. But this has all changed. The man’s name is David Carruthers, he is the CEO of the UK-based Bet On Sports and the US government is charging him with racketeering, conspiracy, and fraud. This could be a bell weather case for things to come as Washington attempts to assert some control over the online gambling habits of American citizens.
The feds are using both old laws and new legislation to take down the big business of illegal gambling. And, let’s be clear about this, it’s a big business. Bet On Sports alone may, according to the indictment, be responsible for unpaid federal wagering taxes of $3.3 billion handled by the firm. $3.3 billion and that’s just one company, a company with grand plans; Bet On Sports just bought two Chinese sports betting businesses for Asian expansion this May. Additionally, three other gambling outfits have been indicted, as well. Perhaps Washington wishes to nip online gambling in the bud.
US Attorney Catherine Hanaway said, “Illegal commercial gambling across state and international borders is a crime. Misuse of the Internet to violate the law can ultimately only serve to harm legitimate businesses.”
Fair enough. But the existing laws supporting Ms. Hanaway’s public statement outdate the Internet they cover by decades. They are federal statutes enacted in the 1950s and 60s in order to stem the enormous influence of organized crime. Sometimes we see movies or read stories of an age when gangsters were above the law. Well, until overreaching laws (such as the Wire Act of 1961, the Travel Act, the Illegal Gambling Business Act, and the Interstate Transportation of Wagering Paraphernalia Act) were on the books, many gangsters were above the law, but this is no longer the case.
These laws, known as RICO statutes, give prosecutors extensive powers and leverage with which to proceed; these sites are not being pestered by trifling statutes. In the wake of long arm of the law, plucking Mr. Carruthers from the tarmac unannounced, well, if I have a wager on his acquittal, my money is on the government. Washington’s mood demonstrates a hostile attitude towards illegal gambling. This is in stark contrast to the relative indifference shown in the past decade. I think the feds mean business and want to make an example of this man and his company.
This past February the Internet Gambling Prohibition Act was reintroduced in Congress. Now, this bill serves to update the laws needed to prosecute the gamblers. Some recent interpretations of those older laws are interesting, but in need of updating. For instance, the Interstate Transportation of Wagering Paraphernalia Act was designed to nab the transport of betting slips and record books. Today the interpretation is that this law is violated when a US resident downloads gambling software onto his PC over the Internet. And then there’s the Wire Act that was designed to not use phone lines to conduct gambling over state lines. The Internet is considered “wire” enough for the law, that’s for sure.
This year’s legislation contains a provision that exempts horse racing. You will be allowed to bet the ponies online. Horse racing is an American activity that is regulated (in theory) and there are a few states, like Kentucky and Florida, that are considered “horse” states and are well represented by Washington lobbyists. Antiguan sports gambling sites and online casinos that don’t pay a cent in tax revenue and have no impact on local economy have no pull for legislative exemptions.
There are cynics among us who may view our government’s efforts in stemming the off-shore gambling and online casinos as protective policy of vested interests, like the race tracks which enjoy a special exemption to the rule, and are not really any better than the groups being squeezed. Others still, may see this prosecutorial aggressiveness as an encroachment onto the Interactive space or an extension of a Puritanical White House. But, the fact is, that online gambling has been growing at a breakneck pace and some estimate that, left unchecked, the illegal handle would double by 2010. This would have nothing but a detrimental effect on our country, no question about it, and since it’s our government’s basic job to protect its citizens, I feel that quelling of these sites is a public good.
Compare the Bellagio in Las Vegas with an online casino. The Bellagio has bills and overhead. It pays loads of taxes, employs thousands, spends millions in promotions and is a part of the larger vacation destination that is Las Vegas. And with all its payouts and takeouts it still has enough left over to buy some of the greatest (and most expensive) art on earth. It is left with astounding profit margins.
Those margins are multiplied with online casinos. Only the Internet could deliver a dealer who can show up at a moments notice to deal hands of unregulated blackjack as fast as your fingers can click them. The sites pay no taxes, employ no citizens, contribute nothing to society but extract much. And, if this isn’t enough, online gambling preys on the problem gambler like no casino could even hope. They live in the problem gambler’s living room, while he has a living room.
There are roughly 4,000 off shore gambling sites using the Internet to take all they can from American gamblers, be they weekend warriors or problem gamblers, to the tune of $12 Billion yearly. They do this at the expense of legitimate American businesses here, at the expense of our tax base, and at the expense of the quality of untold thousands of lives. In my opinion, our government is doing the right thing in neutralizing these parasites.
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