FreedomAtStake's Blog

Where's my damn money?

By FreedomAtStake | View all Posts
Posted Wednesday, July 30, 2008 02:18 PM   28 comments
Yes, I know it has taken me a while to jump into this fray.

I really have no excuse other than:

a) I have been taking some vacation.
b) I honestly hoped that this would take care of itself before I had to get involved.
c) I am a notorious procrastinator.
d) This post took a whole lot longer to write than I thought it would.

I know those are pretty shitty excuses, but that's the best I can give you.

Also, I should mention that during this post I am not going to bother trying to defend some of the despicable customer service stories that I have read on the forum recently. To that end, we are working diligently on our end to try to mitigate some of the complaints, but as you will see it is usually not a matter of a casino intentionally trying to screw over their customers, rather it is a mostly unavoidable situation that they are scrambling to deal with - and they might not have an immediately "acceptable" solution that pleases everybody.

Anyway, the point of this post is really to give people a short bit of background on how payment systems work online, how they can get messed up, where the government interference hurts, and hopefully a few ideas on how to mitigate their exposure.

I'm not going to delve too deeply into the methods that a lot of companies use - mainly because I don't know a lot of it - but I will try to give you all a good overview of the situation that your average online gambling company has to deal with on a daily basis.

Question: How come sites seem to have no problem accepting my money, but then can't seem to pay me?

This is a great question, as it cuts to the very nature of the problem.

First of all, the methods companies use to accept your deposits are completely different from the methods used for payouts. I think this should be pretty obvious to anybody who has ever requested a payout. Simply put, they can't just dump your money back onto your credit card. That won't work. So they have to use different methods for payments.

But let's go into a bit of detail.

Question: How do deposits work, and why are they more reliable then withdrawals?

Let's assume that credit cards are the the foundation of all ecommerce, because they are. Thirty years ago, most people paid for stuff with cash. Now, most people use plastic. And the Internet has only made credit cards more important.

So given that assumption, you realize that virtually every commercial site on the 'Net has the ability to accept credit cards in one form or another. They might be selling clothes, furniture, music, services, whatever - but they accept credit cards. In short, there are literally millions of sites online that are willing to accept your plastic.

That sheer volume of ongoing online businesses makes it very easy to disguise online gaming deposits from being detected by American authorities.

How?

It's very easy. It goes something like this:

1) Open up a company in, say, Panama and call it "Miguel's Cool Panama Hats", or better yet "Panama 1234 S.A.".  While you are at it, open up like five more companies too, each in different business sectors and with preferably different owners listed.
2) Get a credit card merchant account for those business.
3) Use one of those companies to accept your credit card charges for your online gambling business.
4) Make sure you empty out the account every morning, in case the US government tries to get your company closed.
5) If the government does shut that company down, immediately switch your processing to one of your other companies.
6) Go to #3.

This round-robin of businesses makes it virtually impossible for the US authorities to keep on top of all of the deposits. It's a waste of time. In the time it takes to shut down one company, online gambling companies can create and set up two more replacements.

But paying customers is a completely different beast.

Question: How do withdrawals work, and why are they more prone to problems?

The one thing that separates online gaming from those millions of other online businesses is the fact that gaming sites need to be able to pay back their customers, which is something that the average company only rarely has to do - and credit card companies do not look kindly upon chargebacks and refunds.

And customers do not look kindly on being paid in goods and services, rather than cold hard cash, so there is only one option that pleases everybody... checks.

And that is where the trouble starts.

Firstly, the UIGEA has made it illegal for American banks to deal with online gambling companies, so it's not like your online casino can simply cut you a check from its account at Citibank Panama.

Why? Because any basic US Department of Justice investigation will work like this:

Step 1: Sign up and deposit at a casino.
Step 2: Trace that deposit and get that company closed. This is not a big problem for the casino, as described above, but it's still part of the process..
Step 3: Request a payout.
Step 4: Trace the check, and get that bank account closed. Also try to get the issuing bank officially reprimanded for breaking the rules of the UIGEA. If happens often enough, the bank may lose its privilege to do business with American financial institutions. This is a time-consuming and political process, but if it happens, it could be devastating to the bank involved.
Step 5: Repeat.

Now, any company needs a bank account to do business, so it is imperative that online companies keep one bank account clean and free from suspicion. And as Step 4 illustrates, it's not always easy for online gaming companies to find local banks willing to have them as customers. The risk is too high. Once you find a bank, you protect it and do nothing to jeopardize that relationship.

So in order to handle payouts, they need to find a bank or a third party willing to take this risk.

Also keep in mind that this is not just one transaction. Your average online gambling company needs the ability to cut thousands and thousands of checks per year. And the bigger the company, the more checks that have to be cut. At certain periods, like say after the SuperBowl, they might have to cut literally hundreds of checks per day.

The only way to do this efficiently without putting your banking in jeopardy is to involve a third party... the payment processor.

Question: What is a payment processor?

What these payment processing companies do is basically print checks for a living. They receive a printout each day from your casino, listing the names and amounts for all outgoing checks. They print and send them off. If all goes well, you get your check in a few days and nobody is the wiser.

Now, I'm not sure exactly how these payment processors manage to avoid the pitfalls involved in issuing checks, because everybody does it a bit differently. They might be officially listed as payroll processors, or maybe they are affiliated with banks (or certain bank managers) that are more willing to take risks. Suffice to say, each company has it's own secret sauce that it uses to sneak around the rules - it's a highly secretive business, as you might imagine.

With great risk, things naturally become very costly. If you are a processor with a method that works, you can charge exorbitant fees to casinos for each check. Plus, what these processors do is request a huge security deposit before ever cutting a single check. It really is an extortion-based business model, because the casinos have little choice but to pay up.

But in the processor's defense, they are taking a big risk too. And not to put too fine a point on it, but as Step 4 illustrates, sooner or later these processors are probably going to get shut down. And when they do, it's pretty certain that they will never be able to do business in that manner ever again. Plus, all of the money sitting in the processor's bank account will probably be seized as well.

The bottom line is that these payment processors are involved in a very short-term business, and need to protect themselves too.

But I digress... Depending on the size of the casino, this security deposit might be anywhere from $100K up to literally millions of dollars. Plus, the casino needs to constantly be transferring funds to this processor to handle the day-to-day issuing of checks. In the event of a meltdown, that is a LOT of money that can go down the drain very quickly.

So what we have here is a very risky, but very lucrative, short-term business. You can imagine what kind of entrepreneur is involved here.

In short, there are two types of payment processors. The honest guys who try to put together a good process and avoid getting caught for as long as possible, and then there are the guys who talk a good game but really are more interested in receiving as many security deposits as they can before mysteriously disappearing and claiming to have been shut down. And from the casino's standpoint, there really isn't any reliable way to tell the good guys from the bad.

Question: How does the processing get messed up?

Once the inevitable happens and a processor has gotten shut down, the left over rubble is nearly impossible to sort out.

Since it is involving a third-party, the casino is out of the loop. They really have no immediate way of knowing which checks got cashed, and which checks bounced. It isn't easy to fix a problem when you have no immediate information.

- Is the problem with the processor?
- Is the problem with the customers' bank?
- Are we being scammed by the payment processor?
- Are we being scammed by a syndicate of players (it happens) trying to imitate a meltdown?
- Is it an isolated case involving one particular bank, or is it a wide-spread issue involving a change in American government regulations?

All the casino can do is try to isolate which people are complaining, and try to verify their story - which isn't easy when the third-party processor may or may not be even answering the phone.

The casino doesn't know which players are being honest about the situation and which are trying to capitalize on the confusion to receive an extra payout. Not to mention the fact that the casino has just lost hundreds of thousands of dollars - perhaps millions - and needs to find a new and reliable processor ASAP.

In short, there's a lot going on and the only thing that can sort it out is time and patience.

As I mentioned above, I can not defend any of the terrible customer service stories I have heard, but I can also imagine how frustrating it is for the poor customer service agents who are suddenly dealing with some very pissed off and distrustful customers - and meanwhile their managers still don't even know what the problem is yet or how to fix it. And as a general rule, nothing will ever please everybody.

So, now you can see where some of the payment problems stem.

Question: How come some casinos seem to have more problems than others?

Simple. It is a matter of visability.

The online gambling issue in America, at its heart, is a political issue. The DOJ is only really interested in this industry simply because of companies such as Bodog, who made their name by rubbing their business in the face of the American authorities. And the authorities are naturally going to try to first target the operations that draw the most attention.

So you can consider companies like Bodog to be a primary target - again and again. If I was a DOJ employee, I would probably dedicate my Mondays to signing up at Bodog, and my Fridays to shutting down their payment processors. In fact, there probably is somebody at the DOJ with that exact job description. This probably explains why Bodog has recently issued a warning that it could take up to 40 days for some customers to get paid.

Then there are companies like Sportsbook.com, who everybody knows are still huge even if they don't spend as much time trying to piss off American authorities. They are going to run into occasional problems, but they aren't going to get targeted nearly as much as the true publicity hounds. But when a company the size of Sportsbook runs into problems, it will affects hundreds or thousands of customers, instead of just a few dozen.

Question: If a company is having processing problems, then why don't they mention it on their site before I sign up?

This is a great question, and one for which I really don't have a satisfactory answer.

Processing problems are sporadic. Things can be working perfectly today and completely broken tomorrow. And once an alternative processor is found, it can be fixed up again in hours. And this fact applies to EVERY operation that accepts American customers. So really, every casino might be only a matter of hours away from having major processing problems.

And if they have an existing problem, they might be only hours away from fixing the problem, which wouldn't affect new players anyway. Who knows? They might have already fixed the problem, twice, only to have it pop up again?

So, if it were up to me, EVERY online gambling company should have a message on their site explaining this situation, and noting that at any given time their payment processing system might break.

But they don't. And they won't. Bottom line, it is a stupid business move. Why should one site put a warning on their site and cause themselves to lose customers when their competition won't do the same thing?

So I have no answer to that question other than to say, "Good luck finding a company in any business that would publicize such a problem."

Maybe you think it is unethical to operate a business in that manner, but in that case ALL online casinos accepting American customers are acting unethically. And that situation won't change until the UIGEA is repealed and the industry gets regulated.

I'm sorry, but all I can say is: Get over it.

Question: So what can I do?

Well, first of all, get your head out of the clouds!

You are participating in an activity that the American government - rightly or wrongly - considers illegal. You have to understand that sooner or later, processing problems are going to happen to your favorite casino. It is just a matter of time. No matter what sportsbook you use, sooner or later they will get jammed up by a processor. In that situation, they will lose hundreds of thousands of dollars at a minimum, and they will also bounce a few checks too.

When it happens, you can choose to kick and scream and promise to never do business with that operation again, but that won't do anything to get your money any quicker. It is a bad situation for everybody. Especially at this time of year leading into football season, no company wants their name plastered all over the posting forums as a slow-paying company. They want you to get your money, believe me. It just takes time. Yelling about it won't fix it. It might make you feel better for a few minutes, but that is about it.

Another common attitude that needs adjusting is the idea that you are somehow entitled to the most perfect service in every situation. This is not Walmart where the customer gets whatever he wants if he yells loud enough. Again, if you are American, then remember that you are technically breaking the law!

Yes, these companies are making money off of you, but they are also providing you with a service that you otherwise could only receive from a guy named Bobby Fingers, who can usually be found in the corner of a very dark bar. If you want to avoid the potential of processing problems, go deal with Bobby. If you want to avoid the potential problem of broken thumbs, then you will have to accept that sometimes there will be periods during which your online gambling experience is less than optimal.

Question: So what is better? Big attention-seeking operations with deep pockets, or smaller operations that stay under the radar?

This is the key question, because each has their positives and drawbacks.

Bigger companies are definitely going to draw more attention from authorities, and therefore have more frequent processing problems. But they also are more able to shrug off a period of bad press without so much as a blink. Plus they are more likely to have a wider range of services and features that make the day-to-day use of their site more enjoyable during the good times.

On the other hand, smaller operations might be a lot less likely to suffer major processing problems, but when they finally do get hit, it might be a lot more likely to cause a major financial meltdown that, combined with the bad publicity, could put their entire company in jeopardy.

Let's face it. Sportsbook.com is suffering some bad publicity right now. But they are big enough to know that it will eventually all get settled, and they'll just keep rolling along. There is zero chance they are going out of business. On the other hand, if a smaller operation started suffering the problems and bad press that Sportsbook is getting right now, it could be fatal. But the smaller operation is less likely to run into that situation.

Big or small? It's a tough choice with no correct answer, and not a choice that anybody should have to make, but to paraphrase Hyman Roth, this is the hobby we have chosen.

Unfortunately, until the laws get changed, this is a situation that we will have to live with. It might even become more common in the future.

NOTE: When I use words like "big" and "small", I am not referring to companies that advertise on Covers.com. I consider ALL of the companies on the Covers Top Sportsbooks List to be strong and resourceful enough to withstand a processing snafu, but I acknowledge the fact that there are other operations out there (not on our list) that people consider to be viable alternatives.

I also accept that some of the operations on the Covers list are large enough to attract more attention from authorities. I will leave it up to the reader to decide which companies fall into the high-risk category, since that really is a subjective opinion.

Now matter what your opinion is, nobody wants to get stuck in a bad situation and should do their utmost to avoid being in that position in the first place.

Question: So how can I minimize my vulnerability?

If you want to play online, you have to accept the fact that the American government is going to do its best to persecute these companies and try to make you lose your money. The American government is NOT interested in protecting you.

Personally, I think the best remedy is to simply try to avoid requesting payments by check. Sure, checks are easiest, quickest and cheapest, but it is also the method that is most likely to get jammed up. So why bother, especially when there are other methods such as ACH or bank wires or e-wallets?

If you are not willing to cough up a couple of extra bucks or take a few minutes to ensure that your payment is getting some special attention, then you are a lot more likely to get your check caught in the net.

Take the initiative, folks!

These companies already deal with enough bullshit trying to keep their business going in this legal environment. If you are going to put in zero effort on your side to protect your money, then you can't expect them to be 100% culpable when things go wrong along the way. And if something does go wrong, you have to accept that it was YOU who chose the cheap payment method.

So try to deal with companies that have "alternative" payment methods, and once you get your money deposited, immediately get yourself signed up with one of their alternatives. That way, even if they do get jammed up by a check processor, it is a LOT less likely to directly affect you.

That's about all I can think to say right now.

I need a drink.
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28 comments
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cmo1037 says:
07/30/08 03:04PM
hell of a fine write up my good man, fine job!
donnyguru says:
07/30/08 03:31PM
Great work. The books should link this on their banking page.
Lippsman says:
07/30/08 04:57PM
Very good arrticle.
KingSerf says:
07/30/08 07:49PM
This article should be mandatory reading for anyone using an online sportsbook. I once had to wait nearly a month for a payment to arrive, so I understand the frustration and anger often displayed by members in the Covers forum. But it is not like any American player can file a complaint with the Better Business Bureau or, even more ill-advised, write a letter to their state representative. In other words, if you want to make a living solely from online sports wagering you must have multiple online sportsbooks...and, of course, be a gifted capper.
Jasontc says:
07/30/08 08:10PM
Im curious to know if it's only American customers having problems getting payouts..does anyone know?
goodpal says:
07/31/08 09:22AM
Excellent article. It is so frustrating that these companies aren't permitted to act legally, when everything they do is legal in other countries. I have to give them credit for solving their problems creatively.
FreedomAtStake says:
07/31/08 10:13AM
jason,

As far as I know, non-American's don't have a lot of these problems, simply because there are WAY more payment options available.

Rizzo says:
07/31/08 10:54AM
Great information.
KidKanada says:
07/31/08 12:13PM
I know the US is a whole different bag of cats when it comes to getting paid - but I have found that Instadebit works like a charm.

My book is SIA, and yeah ... I know they seem to get hammered on the odd review, but their customer service has really improved and withdrawals now seem to happen at the close of business each day and are then instantly transferred to your Instadebit account. It may take approximately 48 hours and then your cash is back in your wallet. As well you can see the process on-line from the funds being sent by the book to you and then credited by your personal financial institution.

Works for me ... and seems to be the cheapest way of doing business with deposits or cashing out.

Word,

KK

HMoney says:
07/31/08 01:53PM
Very insightful Freedom. We can have Indian casinos everywhere, bet on the horses but can't put a few bucks on a TV game to make it "more fun." Doesn't make sense- I know the govt is trying to "protect us." I like the Spitzer photo do you think he bet on his Jets or Giants?? Stay w/ a reputable book the bigger ones probably will not go broke Thx for the info
JROCK1966 says:
07/31/08 01:55PM
Excellent information! Thanks! But, I'm curious...can you travel to one of these casinos and get paid your money?
FreedomAtStake says:
07/31/08 02:56PM
JRock,

I think that, depending on the book, it probably could be arranged.

However, be prepared to travel to a foreign destination, and whatever you do, don't accept any meeting at midnight down by the waterfront.

Sucram says:
07/31/08 03:02PM
FreedomATStake...Great Article, you really hit the nail straight on the head with regards to the current situation of US Online Gambling. All is safe, but with the meddling of the US Government, it just takes some time to get things done.

For Jason, non-US players do not have problems getting payouts. Being in Canada, I receive my payouts within 1-2 business days without issue, whether it is through Check or back on to my CC.

And for JRock, just take a left on the information super highway and you'll find the Casino..j/k..

In all reality, if you play with one of the bigger European books such as PaddyPower, William Hill or, you can go to one of their brick and mortar betting shops to receive a payout from the online account which you have with them. However, you would have to go to Jolly Old England to get that done.

Once again, Kudos to FreedomAtStake...Seeing that you are from Nova Scotia, enjoy that drink...Im guessing it is Scotch based.

JJWeezer says:
07/31/08 06:03PM
Hmoney, "Stay w/ a reputable book the bigger ones probably will not go broke Thx for the info"

Have u tried getting your money from Sportsbook??? I have been getting the runaround for weeks (few months ago) and I now refuse to use ANY of them. If you were the FEDS, who would u target? The big ones.....GL

Jasontc says:
07/31/08 07:06PM
Football is coming up and i dont feel safe playing at any book anymore, dont know what the hell im going to do, this crackdown on internet betting is Fuc$ing rediculous..i can bet horses at an OTB site, play keno, virtual horse racing all day long and lose my pay check but God forbid i should want to bet a football game..the fricking feds make me sick.
BetToWin says:
07/31/08 07:24PM
Jason, stick with WSEX, BetJam, Bookmaker and you'll be fine. Stay away from Bodog.
Jasontc says:
07/31/08 07:42PM
Hope you're right bettowin..im at bookmaker now and have been for quite a while but it scares me a little thinking they might be on their hit list sometime soon.
FreedomAtStake says:
07/31/08 07:45PM
More good news... according to the forum today, some people are finally getting paid at Sportsbook.
DiverRon says:
07/31/08 10:15PM
FreedomAtSake:

Awesome article. Just Superb and sooooo informative!

Thank You!

Hear of any problems at all with matchbook by the way?

lanastasis says:
08/01/08 02:19AM
Freedom, good stuff and I definitely appreciate all the hard work you do discussing important details of the industry on a daily basis. That being said, I have a question and a comment.

The question is: You paint these processors to be borderline illegal in their practices and suggest they are inevitably doomed. Why do you say this and if it is true, are you referring to an individual processor or to the industry of processors as a whole? This is all news to me because I have always heard processors mentioned as legit operators who engage in a necessary activity. No? Don't these same processors cut checks for doctors, lawyers, etc? How would this be a risky/illegal endeavor?

Finally, and don't take this personally, but I take exception to the following statement:

"Again, if you are American, then remember that you are technically breaking the law! "

This isn't true. I assume you know wagering online is not illegal in the US and that this was just a slip on the keyboard. If not, what were you trying to say with this because you can really misinform some clueless newbies with a statement like this.

I look forward to your response. Keep up the good work.

mikeirvin says:
08/01/08 05:28AM
This should clear up alot of questions....... Thanks
FreedomAtStake says:
08/01/08 08:49AM
lanastasis,

I can answer both questions with the old saying, "If it walks like a duck, and talks like a duck, it's probably a duck."

Hey, I agree with you that these companies are operating completely legally in their jurisdiction, but when they issue checks from online gaming companies that are destined for Americans, then the UIGEA kicks in, saying that this transaction is illegal.

Then the American government can threaten the issuing bank that they will not be able to deal with any American banks in the future (a death sentence) if they don't stop the activity.

So, yeah, they might be operating legally, but for all intents and purposes, they suffer the repercussions of American laws.

Ditto for the quote you mention... you really are splitting hairs. Maybe the act of wagering online isn't technically illegal, but the act of transferring money is, so if you want to effectively gamble online, you really are breaking some laws along the way.

This is kind of like the medical marijuana laws in California. It is legal in the state, but since federal laws take precedence, it is still technically illegal.

mabst38 says:
08/01/08 01:02PM
Freedom or any one else,

I am new to online betting and only bet a little bit a game. I have over a $100 profit on bodog right now. I read in the news today that the feds are after Bodog. Should i attempt to cash out? I dont think it will be a problem because its only $100. Or should i risk it and leave my money in there? What would be the best gambling website with a good rep if i wanted to switch?

Jasontc says:
08/01/08 01:11PM
mabst,

I think i would get my money out of there regardless of the amount..I play at bookmaker and have nothing but good things to say about them so i would recommend them. I have heard others recommend bet jamaica and the greek.

jones2020 says:
08/01/08 06:02PM
My friend you are obviously not a lawyer correct?

As a lawyer, perhaps you should consult one before writing a long article full of mistatements. I could write pages and pages about what you said that was wrong, but I wanted to briefly focus on one thing.

If you read the UIGEA you would see that UNLAWFUL TRANSCTIONS are defined by STATE AND FEDERAL LAW. The only FEDERAL LAW applicable is the WIRE act which has proven in a US COURT OF LAW to apply only to SPORTS BETTING. Therefore it is NOT ILLEGAL for a bank that is not in the few States that have specific laws to deal directly with a casino or poker site that is not associated with a sportsbook. However the banks would still not do that as it would make more sense fror them to deal with a third party that is not related to an online casino or poker site. This gives them a step of seperation that totally protects them as they are NOT dealing directly with a gambling site (which UIGEA says is what the violation is IF an UNLAWFUL transaction is proven).

Therefore a processor or bank dealing specifically in Poker for instance is not breaking any laws. Especially if it is dealing on the payout side.

The UIGEA regs are also not out so the bill does not even apply to banks at this point as they have no rules to follow. They COULD NOT be prosecuted currently under the UIGEA but they certainly could under the Wire Act if they work directly with a Sportsbook.

Lastly, UIGEA carves out SKILL GAMES and Poker has not in a federal court of law been determined NOT to be a skill game. Therefore POKER has two strong things going for it.

The bottom line is there has never been a case directly against a pure poker processor or site. Every single indictment, arrest and issue has been Sportsbook related due to the Federal Wire Act.

The legal situation is very complicated and you should be more careful in the future about making blanket statements such as "Hey, I agree with you that these companies are operating completely legally in their jurisdiction, but when they issue checks from online gaming companies that are destined for Americans, then the UIGEA kicks in, saying that this transaction is illegal."

Lastly, UIGEA does not even cover payout checks back to customers and therefore DOES NOT make the transaction suddenly illegal. Have you even read the thing?

lanastasis says:
08/04/08 01:01PM
Freedom, thanks for your response.
eric63078 says:
08/16/08 03:47PM
I will say that I use sportsbook.com and in April I made 2 seperate withdraws, both around $400 and one day apart. this first withdraw I recieved about 12 days later, the second never came, in June they put the money back in my gaming account and told me to withdraw it again, so I did. I received that check the first week of July, put it into my account and it bounced, bounced my account and everything. I sent them my bank statements and all that like 3 times telling them they needed to take care of the charges. They ended up put the amount of the check in my gaming account so I played with it and won $1400 playing blackjack in a few hours. They also put the amount of the charges into my account, and I am from America
mooseydee says:
10/31/08 08:47AM
has anyone experienced having their book ask them to provide a valid id and bill to prove their addresses to the processor and to comply with UIGEA before they can issue a check to you
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User: Freedom@Stake
Joined: July 1995
Location: Nova Scotia
Team: Florida State Seminoles
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