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Online Gambling Feels the Heat

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Mar 16, 2004 10:54 AM PST    Text size: 
WASHINGTON, D.C. – The federal government flexed its legal muscle this week by putting out a warning to U.S. companies that promote offshore gambling websites. The feds are particularly wary of the promotion of Internet casinos and sports betting operations that operate outside of the U.S.

According to reports, federal prosecutors are warning American businesses with involvement with offshore gambling companies that they could be tagged with 'aiding and abetting' charges if they continue to promote gambling sites.

Prosecuting U.S. companies as the tip of the online gambling empire could also provide an inroad for the U.S. to prosecute outside of its jurisdiction against offshore companies, the New York Times reports.

Feeling the heat from the feds, several big media conglomerates, including Infinity Broadcasting and the Discovery Networks, put the kibosh on advertising campaigns several months ago that promoted offshore gambling enterprises.

The warning that a wave of prosecutions could be imminent comes on the heels of March Madness, which runs from March 16 through April 5, and typically brings in hundreds of millions of dollars in online betting activity surrounding the college basketball national championship.

However, business owners in the direct line of fire, like David Carruthers of Costa Rica-based BetonSports.com, one of the largest online gambling companies in the world, feels that taking legal action against gambling companies and their promoters is an extreme action that should be enforced on a state level, not a federal one.

"Congress can no longer ignore the fact that consumers are driving the popularity and growth of the online gambling industry," said Carruthers. "March Madness brings acute attention to the fact that responsible legislation needs to become a top priority in order to protect the interests of millions of consumers who will bet on this year's tournament. Prohibition is not the answer."

Carruthers argues that similar to current regulations on lotteries, horse racing, and casinos, states should be responsible for laws that govern online gambling, not the feds.

"The effort by the Justice Department to prevent media companies from accepting advertising from online wagering companies is the first step towards prohibition and the wrong one," said Carruthers. "There's a long tradition in the U.S. of commercial free speech and I expect that basic American constitutional principles and rights will prevail once again."

In July of last year, the U.S. Attorney for the Eastern District of Missouri, Raymond W. Gruender, announced that PayPal, Inc. and eBay, its parent company, entered into a $10 million settlement agreement to settle allegations that PayPal aided in illegal offshore and online gambling activities.

Some legal analysts are saying that Gruender's pursuit of PayPal was just the beginning of a widespread crackdown.

Gurender's office would not comment on whether the States Attorney for the Eastern District of Missouri is persisting in similar cases against U.S. companies that aid the offshore gambling industry, although his name has been mentioned in close association with the recent federal push to curb online gambling.

“Offshore sportsbooks and online casino gambling operations which do business in the United States generally do so in violation of federal criminal laws," Gruender was quoted as saying in July. "Therefore, we will continue to investigate and pursue such activity.”

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