A Big Day for Football, a Big Day for Internet Gambling

January 29, 1999

By CARL S. KAPLAN

A Big Day for Football, a Big Day for Internet Gambling
his Sunday's Super Bowl contest between the Atlanta Falcons and the Denver Broncos promises to be the greatest sports event of the football season. But it's also high tide for a related pursuit: Internet sports gambling.
Just last week, for example, Global Sports Connection, a sports betting operation based in Costa Rica that has accepted online and telephone wagers since the 1996 football season, sent out an e-mail solicitation to gamble. "Meet me in Miami," the message said. "Global Sports Connection would like to invite you to try our Sports Betting Services on Super Bowl XXXIII." A quick look at the company's Web site revealed that it was taking bets on everything from the game's winner to whether the first player to score would be wearing an odd- or even-numbered jersey.

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Not everyone is happy to see such invitations. Critics say the promotion illustrates the blossoming of offshore Internet gambling sites that continue to solicit sports wagers from U.S. citizens. Especially worrisome, some critics say, is that Internet sports betting entices youthful gamblers into potentially costly losses.
"Internet sports gambling appeals to college-age people who don't have immediate access to a neighborhood bookie," said Kevin O'Neill, deputy director of the Council on Compulsive Gambling of New Jersey. "It's on the Net and kids think it's credible, which is scary."
Various state and federal law enforcement authorities have tried to put a stop to Internet sports gambling in the past few years, but results have been poor, legal experts say. Many observers expect a renewed effort in Congress this year to pass a law banning all forms of Internet gambling, with stiff sentences for players and operators and requirements that Internet service providers shut down illegal sites. A similar proposal last year by Senator Jon Kyl, an Arizona Republican, passed the Senate but did not reach a vote in the House.
But experts in gambling law say that stamping out online gambling will be a difficult task owing to the global nature of the Internet.
At present, there are about 280 gambling sites on the World Wide Web, according to Sue Schneider, editor of Interactive Gaming News and chairman of the Interactive Gaming Council, a trade group that supports regulation of Internet gambling, not prohibition. Two years ago, there were 15, she said. Of the total, about 90 to 100 sites accept sports wagers, she estimated. Most of them are clustered in Caribbean and Central America countries where online gambling operations are legally licensed by the local authorities.
The revenues of online gambling are growing at a fast clip. Last year, total worldwide revenues for the industry were $631 million dollars -- about double the level in 1997, according to Sebastian Sinclair, an analyst with Christiansen/Cummings, a gambling market consultant in New York.
About half the states have laws against gambling that might apply to Internet wagering, said I. Nelson Rose, a gambling law expert at Whittier Law School in Costa Mesa, Calif. Perhaps more important, under current federal law it is illegal to own or operate a sports betting business that accepts wagers on sporting events over interstate telephone wires, he said. That law, known as the Wire Act, probably applies not only to U.S.-based operations but also to offshore online sports betting companies that use phone wires in the United States, he said. He added, however, that the thinks it is an open question whether the law applies to Internet casinos that offer non-sports games.

If a gambling entrepreneur sets up a business in say, Antigua, to offer Internet sports betting, how can he be reached by the long arm of the law?

The main problem, however, is one of enforcement. If a gambling entrepreneur sets up a business in say, Antigua, to offer Internet sports betting, how can he be reached by the long arm of the law?
The answer is: With difficulty.
"As a practical matter, unless [the offshore entrepreneur] voluntarily comes back on U.S. soil to face charges, the law cannot be enforced," Rose said. "There are no extradition treaties that cover gambling," he added later.
Some offshore defendants who are U.S. citizens might come back to the United States to face the music if indicted, lest they be effectively banned from their homeland. But others may choose to live the life of a rogue, safe in the Caribbean and without ties to home, some lawyers said.
"If you like it in paradise and have no intentions of ever coming back to the U.S., you can stay away from U.S. jurisdiction and basically be a pirate," said Anthony Cabot, a lawyer who specializes in gambling law for the Las Vegas firm of Lionel Sawyer & Collins.
For that reason, Cabot said, U.S. law and its prosecutors will never completely stop Internet gambling on the Super Bowl or other games. The real question, he said, is how big will the industry get? Growth will be limited if the United States passes laws, like the Kyl bill, that target bettors and Internet service providers, he said. At present, the federal Wire Act does not prohibit the placing of sports bets, only the reception of bets.
"If it becomes illegal to bet on the Internet, and not just accept a bet, then all you have to do is set up a well-publicized sting operation" and demand will dry up, Cabot predicted.
Whether the federal government will choose to enter a new era of prohibition and spend its resources going after $5 betters is still an open question.
In the meantime, the federal government proceeds to enforce the existing law, with mixed results. Last March, for example, the United States Attorney for the Southern District of New York filed criminal complaints against more than 20 owners and operators of offshore Internet sports betting sites, charging conspiracy to violate the Wire Act. The highly publicized case was the first federal prosecution in the nation of sports betting over the Internet.
The case and the underlying investigation are continuing, a spokesman for U.S. Attorney Mary Jo White said. Of the many defendants, several have pleaded guilty to the main charge or lesser crimes, one was dismissed from the case and others are involved in litigation.

Internet links of interest to Cyber Law Journal readers

But at least four defendants are fugitives who have never re-entered the United States to answer the complaint, according to an assistant U.S. attorney involved in the litigation. Moreover, of the nine targeted sports betting Web sites, at least one -- World Sports Exchange in Antigua -- was still up and operating this week in time for Super Bowl wagers.
"I don't believe [the federal lawsuit] had an effect on those in the business, though it may have an impact on those thinking of entering the business," said Kenneth A. Freeling, a lawyer with Kaye Scholer Fierman Hays & Handler, a New York law firm.
"All you have to do is look around the Net and you'll see plenty of sites to engage in online gambling. If anything, the market is proliferating," he said.
CYBER LAW JOURNAL is published weekly, on Fridays. Click here for a list of links to other columns in the series.

Related Sites
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The Council on Compulsive Gambling of New Jersey
Senator Jon Kyl
Interactive Gaming News
Interactive Gaming Council

Carl S. Kaplan at kaplanc@nytimes.com welcomes your comments and suggestions.

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If a gambling entrepreneur sets up a business in say, Antigua, to offer Internet sports betting, how can he be reached by the long arm of the law?