Internet Operators Arrested
Copyright © 1998 By I. Nelson Rose All Rights Reserved

All of the sports books claim their online businesses were licensed by foreign countries.  All were operating openly, even taking out ads in Pro Football Weekly and other magazines.  There is no allegation of any connection with organized crime.   But the federal prosecutors spent months gathering evidence, choosing only the most vulnerable defendants and framing their Complaints to make the strongest possible case

• The only people charged were Americans, some living in the United States.  This avoids the extremely sticky question of whether this country can arrest a citizen of another country, who claims to be licensed by his own government.  There is little dispute that the U.S. can charge American citizens with certain crimes, no matter where in the world they may live.
• The only form of gambling involved was sports betting.  The Complaints are based on the Wire Act, a statute so poorly worded that nobody knows whether it covers standard lotteries, let alone online casinos.  But, if the Wire Act covers anything, it is sports betting.
• The defendants were not charged with violating the Wire Act, but rather with conspiracy to violate the Wire Act.  The difference is significant.  A conspiracy to commit a crime is a crime itself.  In fact, conspiracy is a felony with a possible five year prison sentence, even if the conspiracy fails to break any other law.  Prosecutors do not have to prove the defendants transmitted any bet by wire to another country, only that they agreed to do so and one of them did an "overt act" in furtherance of the conspiracy.
• Only operators and others involved in the business of gambling were charged.  The Wire Act is expressly limited to gambling businesses;  federal law is after organized crime and has no interest in bettors.  As a matter of public relations, it would have been awkward to explain arresting players, when the whole point of the anti-gambling laws is supposed to be to protect the public.
• The government only charged individuals who made the mistake of conducting part of their operations within the U.S. 

The major fights in an Internet gambling case should be 1) Where does the bet take place? And 2) Can one government make it a crime to do what another government has licensed?

Here, the FBI has evidence that various defendants sent envelopes with return addresses of Costa Rica, Curacao and the Dominican Republic, but with postmarks from Florida, Texas and Nevada and carrying U.S. stamps.  Telephone records show the 800-numbers used for sports betting had been given to US, not foreign, companies.

The defendants wrote checks on banks in this country.  They sent money by Federal Express from New York and North Miami Beach.  One undercover agent even received a $400 U.S. Postal Money Order with a handwritten note that it was sent from Las Vegas.

The immediate impact of these criminal charges is virtual panic among cyber-bettors.   For good reason.  Foreign sportsbooks that accept bets by phone or online are barring Americans -- or closing their doors completely.  And apparently some operators are disappearing with the loot.

The Las Vegas Sporting News reported that a sportsbook located in the Dominican Republic has folded, leaving at least one player unable to retrieve $10,500 from his telephone-betting account. 

How is this all going to play out? 

The Department of Justice ("DOJ") has pulled off a great public relations coup.  Federal prosecutors had been criticized by state attorneys general and Congress for not doing anything about Internet gaming.  Now, by striking at only six companies (and the safest six to go after from a law-enforcement point-of-view), the U.S. Attorney General has shown that her U.S. Attorneys and FBI agents can put the fear of God into the entire industry -- using laws already on the books.

Perhaps this was the secret agenda behind these headline-grabbing arrests. The DOJ has made it clear that it does not support proposals being considered by Congress, like the Kyl bill, which would make it a federal crime to make a bet on the Internet.  The DOJ has stated that it does not want to go after first-time $5 bettors.