AGA remains patient in the fight against offshore sports betting

Almost a year has passed since the American Gaming Association sent a letter to the US Department of Justice, urging the department to expedite efforts to crack down on unregulated offshore sports betting.

In the letter to US Attorney General Merrick Garland, AGA President and CEO Bill Miller outlined a number of actions that could be taken to reduce the influence of unregulated sports betting sites targeting US customers. Two years ago, Americans wagered more than $63.5 billion on illegal sports betting, according to AGA research, potentially robbing states of about $700 million in tax revenue.

Since then, the Congressional Gaming Caucus has followed suit, urging the Justice Department to make a more concerted effort to crack down on offshore books. Last fall, federal prosecutors named former MLB All-Star Yasiel Puig as an alleged bettor in an illegal sports betting ring. Then, weeks later, Miller redoubled his efforts, expressing optimism that an offshore sportsbook could be indicted in the US in the not-too-distant future.

🚨🏀 NEW: A quarter of American adults (68 million) plan to bet $15.5 billion in this year’s NCAA Men’s Division I basketball tournament, according to the latest AGA poll.

Check out fully #MarchMadness Betting trends ⤵️ ➡️ pic.twitter.com/2gz6OO4ptV

— American Gaming Association (@AmericanGaming) March 12, 2023

“Since submitting our letter to the Department of Justice, AGA has continued to meet with the FBI, policymakers and other law enforcement agencies to educate them about the dangers of offshore websites and to emphasize the need to address these bad actors,” Miller said sports grip. “Feedback from these discussions has been very positive, and while the Department of Justice is managing a variety of ever-evolving priorities, illegal gambling certainly has its attention.”

Now that the NCAA tournament is nearing its first weekend, the AGA is focused on pushing bettors out of the offshore market. According to AGA estimates, 68 million American adults plan to wager $15.5 billion on the tournament over the course of March Madness. With legal sports betting now available in more than 30 states, amounts wagered in the legal market are expected to exceed illegal ones. Still, WalletHub predicts about $4 billion will be staked in the unregulated markets in the March Madness, an amount that the AGA is hoping to curb.

The reach of unregulated books

In the letter to Garland, Miller noted that unregulated websites enjoy numerous competitive advantages, most notably in the form of favorable quotas because the offshore websites do not have to pay taxes to US jurisdictions. Unlike their US counterparts, the sites have few consumer protections and are not required to adhere to responsible gaming standards, he added. As a result, the offshore sites have far less gambling compliance costs.

While the legalization of sports betting was intended to reduce the impact of offshore books, in some cases the opposite has happened. In a subsequent letter from the Congressional Gaming Caucus, Nevada Rep. Dina Titus wrote that internet searches for offshore sports betting increased nearly 40% in 2021, surpassing searches for legitimate sports betting. About half of the offshore searches were made through Bovada, a Costa Rica-based website that can be accessed in most US states.

“Companies operating in the United States that are licensed and regulated will be held accountable under United States law for the treatment of player funds,” said Sharon Cohen Levin, attorney at Sullivan & Cromwell LLP. “To the extent that AGA is urging law enforcement to focus on shutting down as much as possible of the offshore gaming operations operating illegally in the United States, I think that is a laudable goal.”

Last week, the role of the offshore market in the US sports betting ecosystem was the focus of two major industry conferences. Bill Pascrell III, lobbyist for Princeton Public Affairs Group, speaking at the iGaming Next NYC ’23 conference in Midtown Manhattan, loudly questioned why the offshore market wasn’t getting more scrutiny. Days earlier, Pascrell participated in a panel at Seton Hall Law School’s Gaming Bootcamp, which was attended by current and former members of the US Treasury Department’s Financial Crimes Enforcement Network, better known as FinCEN.

In the presence of dozens of senior gaming compliance officials, the panel speakers presented a case study of anti-money laundering and compliance failures that arose during a multi-year fraudulent scheme by CG Technology, a former Las Vegas sports betting financial services subsidiary of Cantor Fitzgerald. The “Jersey Boys,” an illegal gambling operator named in the case, recruited runners to take a specific site for a bet, allowing the Las Vegas book to shed some of its risk.

Largest fine in Nevada gaming history. So what happens to CEO Lee Amaitis, who was in charge?

— Roger Gros (@GlobalGamingBiz) January 14, 2014

According to a federal indictment, a CG customer placed more than $300 million in wagers through his Cantor Gaming account over a four-year period ending in 2013. The unnamed customer, referred to only as “AM” in the indictment, obtained its funding source from multimillion-dollar offshore booking activities and proxy gaming arrangements with customers directing funds into its CG account, it said in the indictment.

In addition, according to the indictment, CG did not file a suspicious activity report (SAR) about the customer for a period of two years ending in January 2013. Casinos) must submit a suspicious transaction report if they suspect money laundering or fraud.

During the presentation at Seton Hall, panelists documented the operator’s history of shabby records, including evidence that hundreds of accounts at CG had no accompanying social security numbers. Eventually, CG Technology agreed to pay a $22.5 million fine in 2016 to clear the charges.

Since then, offshore books have remained in the news. Puig reportedly placed nearly 900 bets in 2019 at a sports betting ring run by Wayne Nix, a former minor league player with the Oakland Athletics organization. The bets were made through Sand Island Sports, a Costa Rica-based company, according to court filings.

Last month, federal prosecutors announced charges against seven people in Rochester, New York, in connection with operating an illegal gambling ring. Among the charges, the defendants allegedly conducted illegal sports betting through sport700.com, a website registered in Costa Rica.

time of indictment

The length of the multi-year investigation into CG Technology’s illegal activities underscores the challenges of investigating sports betting outside the United States

On the one hand, a full-scale indictment against an offshore sports betting company to mark the fifth anniversary of PASPA in May could signal that federal authorities are serious about cracking down on illegal activity in the sports betting world. As Miller notes in the letter to Garland, the Justice Department is the only law enforcement agency that can “credibly” address illegal activity perpetuated by offshore sports betting.

On the other hand, there are numerous challenges in conducting a cross-border investigation, particularly when it comes to securing records located abroad.

Cohen Levin, one of the nation’s top white-collar crime prosecutors, helped secure a $731 million settlement against PokerStars and Full Tilt in 2012 when she was the US Attorney’s Office of Money Laundering and Confiscation headed the Southern District of New York.

“As someone who has spent a very long time at the Justice Department, it’s always difficult to know when to file a lawsuit, especially when you, as a prosecutor, see the damage out there,” she said sports grip. “The prosecutor’s office and law enforcement are working on the case. The desire to go public with the charges is to protect people from further harm. For the same reason, the government is on guard when an indictment is brought. You have to be ready to go to court.”

Complicating matters further, a prosecutor may need to go through official channels to obtain records from the foreign government where the offshore books are located, she added. In some cases, prosecutors may need to file a Mutual Legal Assistance Treaty (MLAT), an agreement between two countries to share information to enforce criminal laws. The MLAT process, she stressed, can be time-consuming.

The illegal, offshore and unregulated sports betting market remains a major enemy for legal operators, AGA President Bill Miller told a conference of state lawmakers. He urges policymakers to work with their federal representatives to urge other nations to take action against illegal operators.

— Ryan Butler (@ButlerBets) December 13, 2021

Upon reaching sports grip, a spokesman for the Justice Department declined to comment on the story. However, there is evidence that illegal sports betting-related activities have made it onto the radar of federal law enforcement agencies. For its part, the FBI has begun to fight illegal sports gambling through its Integrity in Sport and Gaming initiative, Erin Leifer, the FBI’s management and program analyst, said in an interview with InvestigateTV and the Arnolt Center for Investigative Journalism at Indiana University.

Some proponents of the offshore market claim that books are offered outside of the United States would like to comply with the regulations in the States if given the chance. They point to efforts in Canada, where Pinnacle launched a legal sportsbook after being licensed in Ontario. Pinnacle has completed the transition from the Canadian gray market after all pre-launch pre-launch bets have been settled.

Miller, meanwhile, made no fewer than half a dozen references to the importance of restricting the offshore market during AGA’s industry presentation and subsequent conference call with reporters in February. Although PASPA’s fifth anniversary is less than two months away, the AGA will remain patient in its fight against offshore books.

“This is a fight we are in for the long haul. We recognize that it takes time to create these cases and we do not expect this to be resolved overnight,” Miller said.