Death, Taxes and Gambling Online

Last week I posted an article regarding the legal ramifications of betting online. 
That article focused exclusively on the acts of betting and the ensuing transactions that occur, whether those acts could be considered illegal, and if so, who is in legal jeopardy.
My opinion was that Americans who choose to bet online are not, in fact, breaking any American federal laws but might be in jeopardy depending on individual state laws (check your local listings). However, sites that accept those wagers from Americans are breaking American laws, and therefore if they transfer their money through the American banking system, they might be accused of money laundering. Therefore my recommendations were that if you wanted to gamble online, try not to put your money in jeopardy of seizure by using the banking system. Instead use alternate payment methods that skirt the system altogether.
Fine.
Unfortunately, there is more to life in America than just gambling and getting paid. Anytime there is a transaction of money between two parties, the American government wants to know about it, so they can decide whether or not this is a taxable transaction. Furthermore, if you are one of the few lucky gamblers who actually wins a lot more than they lose and therefore regularly requests payouts from your sportsbook, then the American government really wants to know about those transactions, because it conside... [More]

The New Realities for American Sports Bettors, Part I

This is a message for all Americans out there who like to wager on sports.
First of all, let me apologize. We at Covers have been doing this for 16 years now, and we often forget what it’s like to be relatively new to this activity. We tend to assume that everybody knows the “basic” information regarding customary practices and legalities and whatnot, when it really isn’t so. 
This lack of common knowledge hasn’t been a huge problem for the last few years, because the industry has evolved to serve newbies in a way that they didn’t need a lot of information to participate. Not to mention a few dirty secrets that were easier to sweep under the carpet.
But now that there has been a huge industry disruption, players are realizing that they don’t necessarily know what they have gotten themselves into and what the repercussions could be. They want to know the realities.
Well, one reality is that a lot of people are putting their heads in the sand right now. Not to mention a lot of misinformation and disinformation put out by people with personal and commercial agendas.
Because there are still a few US-facing sportsbooks out there, people assume this means it is business as usual. It isn't. There has been a sea-change in the industry and to ignore it is stupid.  The fact is more than half of the US-facing companies have left the market, one way or another, over the past couple of months. Maybe these changes are not affecting you directly, but you have to adm... [More]

The New Realities for American Sports Bettors, Part II

Continuing from Part I...
2 - This isn't going to change anytime soon.
Last week, I attended the IGaming Conference in Dublin, where Frank Fahrenkopf Jr., head of the American Gaming Association, was a keynote speaker.
Fahrenkopf has been a gaming lobbyist for decades. He knows the landscape. He knows how to straddle a fence while keeping both ears to the ground. 
This is a guy who has managed to maintain the completely untenable political position that the AGA supports online gaming legalization and regulation because Americans should be allowed to spend their money where they please, while at the same time promoting that all current online operators are criminals who should be hunted down and prosecuted to the fullest extent of the law. Consistency is apparently not a requisite for lobbyists.
Regardless, what does Fahrenkopf think about the future of online gambling?
He predicts that a bill legalizing online poker will be launched by the fall and that it will pass. He thinks that this will be a nice gateway to eventually legalize other online casino games within a few years.
Great! What does he think about the possibility of legalizing sports gambling?
I'm going to paraphrase him here, but his quote was something along the lines of, "Uh-uh. No way. Not gonna happen. Fuhgeddaboudit."
The current American laws sports gambling are so solid against the activity that it will take years just to get those laws unraveled, let alone get the practice l... [More]

The New Realities for American Sports Bettors, Part III

Continuing from Part II...
3 - It is illegal for American banks to knowingly assist in the transfer of money to offshore gambling companies.
That is the basic gist of the much-hated UIGEA law of 2006. 
Banks are not allowed to process any financial instrument (ie. credit card transaction, wire transfer, checks, ACH transfer, e-wallet transfer, ATM withdrawal, gold, clams, cows, beads, etc.) that they believe to be related to offshore gambling.
That's the gist of it. And while the law happens to be very fuzzy about what constitutes "gambling", and exactly how these laws are to be enforced, it is very clear that banks are not allowed to process gambling transactions. That part is clear.
You probably were aware of the general idea that banks aren’t allowed to process credit cards. But most people don't go to the next logical step and realize the widespread effects of this law. They think, "Well, once those offshore guys figure a way around it, it'll be business as usual."
Well that would be correct, and is exactly what has happened since 2006, but nobody really considers what it entails when "those offshore guys figure a way around it".
What it means is that, in order to get money moving between them and you, they need to find a way to transfer funds so that the American banking system is unaware what is happening, otherwise the banks are obliged to block it.
Now, there are old fashioned ways of transferring money which are not directly affected by t... [More]

The New Realities for American Sports Bettors, Part IV

Continuing from Part III...
4 - What this means is that your money is in the hands of people who are considered money launderers by the US government. 
Again, you can choose to believe that your sportsbook operator of choice is really just rebelling against the tyranny of the US nanny state and is doing nothing wrong by simply supplying the demand that is the American sports bettor. Fighting an unjust law, and all that. 
I sympathize with that position, and even support you in your quest to spend your money where you want. I hope that these offshore operators fight the good fight and find every way imaginable to stick it in the face of the DOJ.
But the fact is that the US government takes a different view, no matter how stupid. And the brilliance of this latest move by the DOJ is this money laundering angle because it's a tough one to beat.
You see, money laundering is a special kind of crime in the international world. Money laundering can be used to hide the proceeds of narcotics sales, arms sales, and terrorism funding. Mostly though, it’s about taxation and finding out where rich Americans are hiding their money, but you'll never get the American government to admit that.
Anyway, over the past couple of decades the American government has gradually been bullying all of the other governments in the world to share their banking information with the USA. Basically, what they say is, "Hey Panama! Either you start cooperating with us, or we will blo... [More]

An Official Message from Covers Regarding betEd

I will start with the news that many people have already suspected: betEd is closed and will not be reopening.
But there is more news: All of the player funds have been seized. 
That is not a typo. There is no money left. The American government has it all.
Now, this isn't the first time sportsbooks have gone out of business, so you might be wondering why Covers feels the need to make an official statement about the status of betEd.
It is simple. They were at the top of our Top Sportsbooks list, and this is the first time in 16 years that we have ever recommended a sportsbook that went out of business without paying their customers.
And it is a damn shame.
It wasn't their fault. They got entrapped by a sting run by the American government, and now the American government has seized all of their bank accounts and holds your money.
I've already heard people complaining that betEd must have been shitty businessmen to lose the player deposits.
Nope. That was all accounted for. They ran a small, but very professional shop. They intentionally tried to stay below the big government radar. They made business decisions based on the idea that sometimes it was a good idea to leave a little bit of profit on the table if it meant that they would be more secure.
None of that mattered. The money was seized.
That is scary.
But I will end this post on a positive note. And by "positive" I mean, I am positive of one thing: Anybody owed money by betEd will g... [More]

A High Point for American Justice

First off, let me offer a word of congratulations to the fine people at the United States Attorney’s Office for the District of Maryland.
Nice work, folks! Thanks for going to bat for us! U-S-A! U-S-A!

If you haven't heard yet, this crack team has just unsealed the Indictment of the Century.
“It is illegal for internet gambling enterprises to do business in Maryland, regardless of where the website operator is located,” said U.S. Attorney Rod J. Rosenstein. “We cannot allow foreign website operators to flout the law simply because their headquarters are based outside the country.”
He's right, you know. I mean, other than the fact that he's COMPLETELY WRONG, since the WTO has ruled against America for its stance against online gambling and America has been defying international law for the better part of a decade.

Yeah, other than that part, he's right.
After all, what those guys at Pimilico Race Track in Baltimore have been doing is beyond the pale. Just by going to their site you get connected to online betting operations like Xpressbet and Magnabet and can place bets on races happening at a Maryland race track. I am shocked - shocked! - to find out that gambling has be... [More]

The NFL reaches a new low

Here's something that slipped under the radar last week, an excellent column by Tim Dahlberg of the Associated Press. Y'know, I completely forgot that the AP was still around, but I guess writers like Dahlberg are still trying to stay relevant by, well, staying relevant.

Anyway, in the above column, Dahlberg clearly outlines NFL's latest foray into hypocrisy - and this one doesn't even pass the laugh test.

The National Football League, which has very publicly adopted a self-appointed role as the scourge of all things gambling, has now licensed it's logos to appear on scratch-n-lose lottery tickets.

That's right. The NFL, which has aligned itself with anti-gambling organizations as Focus on the Family in the past, is now going to be getting a commission on the sales of NFL-licensed lottery tickets.

But without even cracking a smile, the NFL is still organizing a lobby effort to put a halt to Delaware's plans to allow betting on sports.

See. This is the type of crap that really drives me insane.

But other than Dahlberg, it doesn't seem like anybody in the mass media has noticed this completely indefensible act of hypocrisy by the NFL.

But there is one small bright spot here. ... [More]

New online gambling legislation introduced... here are the details

Well, it took long enough, but it's finally here.

On Wednesday, we finally saw the introduction of some long-promised online gambling legislation... but it just wasn't the legislation we were expecting.

It was actually much, much more, and not necessarily in a good way.

For the last few months, we've been expecting and waiting for Barney Frank's bill to overturn the much-despised UIGEA, and that's what we were waiting for on Wednesday.

Instead, we were treated to two different pieces of legislation from Barney Frank, as well as a companion piece  by Rep. Jim McDermott.

So, let's go through these bills, shall we? I'll even issue my own arbitrary Pass / Fail judgement for each.

Bill: Internet Gambling Regulation, Consumer Protection, and Enforcement Act
Sponsor: Barney Frank

It starts out with a few pages describing how established gambling and online gambling already are in America, and how there is a need for regulation in order to protect customers and children.

OK, good so far.

Then, after some of the usual legalese, we get to the basic outline for a licensing program for operators, which are sufficiently vague enough to probably eliminate most, if not all, current offshore operators.

This is not so good if you are a fan of ... [More]

Barney Frank's Legislation Coming Next Week

Barney Frank is a busy guy, and he looks to get even busier.

As Chairman of the House of Representatives Financial Services Committee, Frank is right in the middle of the financial crisis, so he can be forgiven for the repeated delays in his long-promised bill to overturn the much-hated and useless UIGEA.

But the delay may finally be coming to an and.

Frank was speaking today at the Reuters Global Financial Regulation Summit and when asked about his planned bill he said, "We'll be introducing it next week and I plan to move on it."

Things are about to get interesting.

With the economy in tatters and the financial industry being particularly hard-hit, it would seem to make sense to repeal a law that handcuffs financial institutions with ridiculous and unclear enforcement duties.

Furthermore, overturning this bill would please America's allies, such as the UK, who has been complaining about how the UIGEA is contradictory to WTO regulations.

So, this should be a slam-dunk, right?

Not so fast.

As far as I can tell, Frank's planned legislation sounds like a simple overturning of the UIGEA, and does not include any plans... [More]

Zombie Attack! Bodog.com flickers back to life

Once again, I leave the office for a few days, and therefore the industry lights up with interesting, if not overly important, news.

It looks like the bodog.com domain is once again in the possession of Bodog, er, the Morris Mohawk Gaming Group (MMGG).

Currently, it is still redirecting to their bodoglife.com domain, but I imagine that will be changing shortly.

The domain has been in dispute now for at least two years, after Bodog failed to respond to a patent lawsuit and had the domain seized as part of the default judgement in favor of the patent-trolling plaintiff, First Technology LLC.

As of yet, MMGG is not releasing how much it cost to get the domain back, but a couple of stories (here and here) describe the deal as a "domain licensing agreement", which indicates to me that MMGG still does not own or control the domain, but rather is leasing it from First Technology.

Even this seems kind of murky to me. If First Technology is an American company, then are they even allowed to license the domain to a gambling company? Either way, I don't care.

But this news is definitely good for Bodog, which has managed to stay afloat for the last year despite a flood of negative publicity and the ... [More]

Big News... PartyGaming Settles with DOJ

This just in from the "Let's Make a Deal Department", the newswires are buzzing with the story that PartyGaming PLC has reached a non-prosecution agreement with the US Attorney's Office for the Southern District of New York.

The amount of the bribe fee? Only $105 million. To be paid in installments up until 2012.

Now, you might ask yourself, "Did he just say only $105 million? There's nothing only about $105 million."

You may be right, but we also have to put this in perspective.

As the Wall Street Journal notes: "The sum is broadly in line with market expectations."

That being said, only last December, one of Party's founders, Anurag Dikshit, agreed to pay $300 million to avoid prosecution.

So... one of the founders personally has to pay almost three times what the company has to pay? That doesn't seem right.

It appears Mr. Dikshit forgot the wisdom of Wade Boggs... never swing at the first pitch.

A Wider Perspective

I can't get over how fast things are suddenly moving in this industry.

Just last week, the US Attorney Catherine Hanaway caved  ... [More]

Breaking News: BetOnSports CEO Pleads Guilty

I don't know if this is an April Fools joke or not, but today former BetOnSports CEO, David Carruthers, pleaded guilty to federal racketeering conspiracy charges.

This news is definitely a surprise. I'm still digesting the information right now.

This timing is confusing... it's almost as if our backwards friend, U.S. Attorney Catherine Hanaway, is using this as some sort of odd response to the European Commission's report this week, stating that America's stance against online gambling was contradicting WTO agreements.

Either way, as the news indicates, it looks like Carruthers agreed to a bargain that will see the prosecution recommend a 33-month sentence.

Seeing as he has been in jail since the summer of 2006, that sentence sounds an awful lot like "time served" to me, and is definitely a far cry from the "20 years in prison and/or fines up to $250,000" which Hanaway claims in ... [More]

Greater Evil: Gambling or the Markets

Here are a few business news stories...

Bloomberg.com - December 31, 2008 - "Journal of a Plague Year: Faith in Markets Cracks Under Losses"

"It has been a year of record misery: the largest bankruptcy, bank failure and Ponzi scheme in U.S. history; $720 billion in writedowns and losses by financial institutions; $30.1 trillion in market valuation wiped out."

Timesonline.co.uk - February 11, 2009 - "Global stock market losses total $21 trillion"

"When equities bottomed on 21 November 2008, the MSCI World index had fallen 55 per cent since 31 October 2007. This worked out at a global loss of $21 trillion, or $ 21,000 for every individual in the developed world."

Foxbusiness.com - March 09, 2009 - "Internet Gambling Yield Passes US$20bn: Online Gambling Shows Resilience in Face of Recession"

"The total global interactive gross gambling yield surpassed US$ 20bn for 200... [More]

European Commission uncovers the obvious

Well, the European Commission completed an investigation recently and realized that America's stance against online gambling is, in fact, contradictory to WTO rules.

In other blockbuster findings, the Commission was astounded to find out that sub-prime mortgages are bad investments and that it just might someday be possible for a black man to be elected President of the United States.

Wow. How much did they pay for this investigation? Hopefully not a lot, because they could have found most of this out simply through browsing my archives.

Anyway, this is obviously the EU's polite way of reminding the incoming Obama Administration that there are some easy ways for America to make friends with the international community.

It'll be interesting to see if this topic gets raised during Obama's first official trip to Europe as prez.

Isn't a vacation supposed to be relaxing and refreshing?

Well, I just got back from a few weeks of vacation and I already need another.

I took the family down to Cancun for a week, and I can't really complain about that. It was warm, and that's what I was looking for.

Unfortunately, I was also looking for some relaxation, and when you are vacationing with two spirited kids (aged 3 & 6), it just is never as relaxing as it looks in the brochures.

Our trip to the local market took months off my life, but I'll leave that for the autobiography.

Anyway, the topper was returning to Nova Scotia and having to wade through a snowdrift in my driveway, wearing flip-flops no less, just to get to the door.

I don't know if it's my age or what, but I'm getting really tired of winters. Granted, getting this much snow this late in the winter spring is rare in Nova Scotia, but I'd rather if it was NEVER, instead of just rare.

Well, either way, I guess I'm back on the clock, so I'd better start blogging.

USTR Nominee Might Approve Online Gambling

President Obama's nominee for the office of US Trade Representative, Ron Kirk, seems to have already painted himself into an online casino corner.

No sooner had he agreed to pay his back taxes - I didn't realize there was a choice - than Kirk stated in his confirmation hearing that the Obama administration wanted to ensure "the strongest possible enforcement" of trading rules.

Hmmmmmm. That should spell good news for online gambling, no?

After all, the WTO has already ruled that the USA is violating international trade rules with regards to its stance against online gambling.

Now to be fair, when Kirk made these comments it was in the context of trade deals with Asian countries and not in respect to online gambling.

But if the Obama Administration truly wants to be viewed by the world as a principled and honest government, well, then it can not pick and choose which trading rules it wants to enforce.

No, it would have to follow ALL of the rules.

And that means that A... [More]

Missing a $50 billion opportunity

Fifty billion dollars.

That's what America is leaving on the table by not legalizing, regulating, and taxing online gambling right now.

Fifty billion dollars.

According to a report by PriceWaterhouseCoopers (PWC), America could raise over $50 billion by repealing the UIGEA and taking online gambling.

Fifty billion dollars.

Now, y'all might remember that last year I wrote about a similar report by PWC that stated potential online revenues of only $42 billion.

So, what changed in the meantime?

Nothing. In fact, that is the most startling part of this report.

Last year's analysis factored in the likely effects of the UIGEA and its then-probable dampening effect on the online gambling industry.

This year's analysis realized that the UIGEA, in fact, has done very little to stop the growth of the online gambling industry, and therefore PWC increased the upper limit of the industry's potential by another 20%, given that the industry obviously is stronger than they originally expected.

So there you go.

As this report underscores, the UIGEA represents the worst kind of legislation. ... [More]

Responsible gambling is a two-way street

As a biased industry observer, I admit that I generally try to put a positive spin on gambling news, while pushing for industry and legal changes that I think will help grow and improve the industry.

But sometimes I feel like a PR guy on Wall Street. It gets tough trying to defend your position when you have no control over some of the stupid decisions being made around you.

Early last year, I took William Hill to task for it's part in allowing an obviously sick individual to lose £2.1m, including a single wager worth £347,000.

I also chided UK regulated gaming companies when the news came out that they were not volunteering their financial support to charity.

In my opinion, when you operate a gambling enterprise, it is just plain bad business to NOT do everything in your power to be socially responsible.

Especially when you rely on the whims of politicians for your livelihood. The best way to get your industry legislated out of business is to act in a manner that creates recurring news stories about people losing their jobs and life savings because somebody in your industry took advanta... [More]

North American jurisdictions racing for sports betting dollars

BANG! The race is on!

The dust is settling after the Presidential race, and now another race is beginning... which North American jurisdiction will be the first to fully embrace sports gambling - and take it online?

Of course, it all begins with first making sports betting legal.

Already in America, there are several jurisdictions that do NOT outlaw sports betting. Those are Nevada (of course), Montana, Oregon, and Delaware.

In Canada, most provinces already allow betting on sports lotteries offering poor odds - including online betting.

But now comes the interesting part... these jurisdictions have to decide whether that are going to sit on the fence or if they are going to attack the market.

Oregon has already hosted sports betting in the past, but was bought off by the NCAA, which is hosting basketball games in Oregon during next month's tournament.

Already, interesting things are happening in Delaware, as USAToday reported last week. While there is expected anti-gambling lobbying to come from the NFL and other leagues, it seems pretty likely that Delaware will soon be offering a sports lottery similar to the Canadian model.

That means that, very soon, there will be legal sports betting within a half-hour drive from Philly, Baltimore, and Atlantic City. I think it is safe to say that the states... [More]

Marketing Online Gambling to Politicians

HEY AMERICA! Looking for a SURE-FIRE way to fight the RECESSION BLUES?

Why not take a look at the HOTTEST TREND IN EUROPEAN BUDGET FASHION?

ONLINE GAMBLING!

STOP relying on FLAWED PRODUCTS like ECONOMIC STIMULUS PLANS* or COMPLICATED FINANCIAL BAILOUTS  to clean up your MESSY BANKING SPILLS and LEAKING BUDGET PLANS!
 
Those just get STOLEN, EMBEZZLED OR DIVIDENDED to RICH FAT-CAT CEOs!

NO MORE BREAKING INTERNATIONAL TRADE RULINGS, that just throw INTERNATIONAL TREATIES INTO QUESTION, while RUINING YOUR COUNTRY'S REPUTATION!

SMART EUROPEAN JURISDICTIONS have an additional tool in their belts... And that is REVENUE FROM LEGAL AND REGULATED ONLINE GAMBLING!

But don't take our word for it... Listen to the ISLE OF MAN!

Isle of Man: "I love ONLINE GAMBLING! I used to be a forgotten little piece of rock in the Irish Sea who was only known for mustaches and being the birthplace of the Bee Gees. Then I found out about ONLINE GAMBLING!

Now, despite the world being mired in a RECESSION, I can still table a ... [More]

How is the recession affecting the gambling industry?

As I mentioned earlier, upon entering the conference floor at the International Gaming Expo, one is immediately inundated by sensory overload... noise, colors, sex... it's all here.

What isn't here? Any sign of the looming recession.

This is an alternate universe, where down means up, excess means restraint, and the recession means opportunity.

In fact, there are only three types of people here:

- Those who pretend the recession doesn't exist.
- Those who will only talk about the recession in hushed tones, quietly accepting that there is an actual recession but it doesn't seem to be affecting them.
- Those who accept the recession with comments such a, "It's awesome! When the economy goes down, my sales go up!"

In reality, the recession seems to be affecting different industry segments quite differently.

On the one side are the companies servicing the land-based casino industry. These are the exhibitors who talk to you with uneasily broad smiles as they tout their latest amazing inventions, not knowing for sure if they will ever be able to sell it to actual casino operators. They've seen the news. Las Vegas ... [More]

Welcome to the International Gaming Expo

Well, here I am in London, attending the International Gaming Expo, which might also be known as the "ICE Show", the "ICEi Exhibition", or my personal favorite... "A Gaming Conference in a Place Where it Isn't Freakin' Snowing or ICE Cold".

Unfortunately, while it might not be snowing, it's still pretty miserable today. Drizzly, and maybe one degree above freezing. Too warm to wear a parka. Too cold to wear anything lighter. Welcome to the UK.

While I am here for wider reasons than simple blogging, the event does give me a chance to catch up on industry happenings and disperse it to those lucky enough to read my posts.

So, what have I seen so far?

Well, my first day was greatly marred by the disorganized nature of the conference.

Despite my online registration, I still had to suffer a lengthy wait to get my conference pass.

First, we waited 15 minutes in one line before somebody told us all to go wait in another line. Then, somebody else told us to go back to the first line, where a third person told us it would be faster to go back outside and walk around to another entrance where the line would be shorter... but it wasn't. After finding a third entrance, we finally made it in.

Time elapsed... one hour. I hate conferences.

Once inside, people are greeted by a sight that can only be described as the offspring of an u... [More]

Playboy Poker shuts down

Wow, I'm impressed with myself.

I actually suppressed my desire to title this post "Playboy Poker Goes Tits-Up".

I'm growing up.

Anyway, a bit of bad news here. According to Gaming Alerts, Playboy Poker has notified its users that it will be shutting down.

I don't know what is more surprising to me. The fact that Playboy couldn't make this work, or the fact that Playboy actually had a poker site and I didn't even know.

Thinking back, I guess I do vaguely remember the news that Playboy was opening a poker room, but they have been so irrelevant for so long that I just forgot about them.

This latest news marks the third time Playboy has unsuccessfully waded into the gambling business.

A few decades ago, I believe they tried to open a chain of land-based Playboy Casinos, which never found a market.

Then they tried to open an online casino in the late 90's, but got scared away by Senator Kyl's war against online gambling.

And now this.

Poor Playboy. The last decade has seen Playboy go from being a dominant publisher with bags of money, to an also-ran brand with a diminishing subscriber base that may-or-may-not b... [More]

Could the world be flat in Kentucky?

It's been a while since I've blogged, so forgive me.

The worst part about taking time off from blogging is knowing how to get back started. If a story breaks during your hiatus, then you are torn between re-hashing old news or looking like you missed the story completely. At least I've been helped by the fact that the last month has been a generally slow time for news surrounding the online gaming industry.

The biggest news of the last month has generally been coming out of two issues...

The settlement between the DoJ and PartyPoker founder Anurag Dikshit, and the seemingly never-ending saga  in Kentucky regarding the domain seizures.

Since I've already discussed the Dikshit situation, I should probably forget about it for now, although I must admit that I love typing the word "Dikshit".

Dikshit. Dikshit. Dikshit.

OK, that's enough. Let's jump right into the Kentucky story, shall we?

In case you were not aware, it all started back in September when the governor of the backwards state of Kentucky decided that he was also the governor of the Internet. Without any provocation, he filed a legal request to ... [More]