Would Funds Targeting Offshore Sites Work as Congressional Compromise?

One of the interesting tidbits that came out of Tuesday’s Cromnibus budget bill was the talk of funding and language that would be used to target unlicensed gaming sites operating in the U.S. That reported proposal did not make it into the final Cromnibus. Its wording has yet to make it to the media.

This was an interesting potential compromise. There is certainly reason to pursue sites that are operating illegally in the U.S., at least at first glance. Several problems arise by allowing this type of bill to move forward.

Online Gaming Opponents Have Been Less Than Honest

It is one thing to oppose gambling based on personal belief. It is another to disseminate false information on the topic. Former Senator Blanche Lincoln posted one of the most misleading performances in the industry’s history on the Mike Huckabee show in November, a segment proudly displayed by the Coalition to Stop Internet Gambling on its website. That should not be a surprise as the website is full of misinformation on the topic of online gaming.

Focus on the Family has also been known to distribute misleading information about online gaming.  At least their motives are more sincere as the group is against all gambling.

The point is that our opponents resort to deception and outright lies.  They cannot be trusted and taken at face value, even in compromise.

If the online gaming community were to support such a bill that would try to remove offshore sites, there would need to be substantial scrutiny to ensure that it did not affect the existing regulated sites. Opponents may try to take it as an opportunity to present burdensome regulations that would essentially make it impossible to operate. Regardless, there would be massive opposition to such a bill from players in the 47 states that do not have access to regulated poker.

Enforcement Not Always Successful

Black Friday was a day of celebration for the U.S. Attorney’s Office in the Southern District of New York. Several factors played into that success. One was the complete cooperation of PokerStars. Another was that Full Tilt Poker and Absolute Poker were not properly capitalized. Full Tilt players benefited from the shotgun marriage with PokerStars, making it a blessing in disguise for some that were affected by the action.

On the other hand, two attempts to enforce unlicensed internet gambling provided no results.

Calvin Ayre and other executives at Bodog were indicted by the U.S. Attorney’s Office for the District of Maryland. The Bodog.com domain was seized, but the U.S.-facing business was already moved to Bovada by that time. Ayre is still at-large and remains on the ICE 10 Most Wanted list.  It is business as usual for the company.

A different Maryland case targeted other sports books. It was dubbed “Blue Monday“.  Some of these companies also operated online poker rooms. The parent company and skins on the Winning Poker Network were among the sites mentioned in the indictment. While some funds were seized, only BetEd closed up shop.

Bovada and the Winning Poker Network are consistently number one and two in terms of cashout speeds among U.S.-facing sites.  This shows that indictments and criminal actions are not going to stop determined companies from operating in the U.S.

Payment Processing Already Targeted

Strangling the flow of cash is the best way to rid the market of these sites.  This has proven to be nearly impossible.  The unregulated sites still operating in the U.S. market have extensive experience processing payments.  The methods used are difficult to track as bank accounts and cash transfer offices from other countries are often used.  The UIGEA already addresses this issue, as well as other banking laws.  Pouring more regulations on top will not get to the root of the problem.

Regulating Online Gaming Everywhere Only Way to Close Black Market

As long as there is money to be made, unlicensed sites will operate.  A poker-only regulatory model will still allow sports books and casino sites to have enough incentive to keep taking bets.  It is impossible to put an end to through legislative and law enforcement efforts.  The only longterm solution is to open up all markets to state licensing.