Now that legal online betting is on the rise, will Virginia ever see another epic crackdown on illegal online gambling sites?
PokerStars, Full Tilt Poker and UltimateBet/Absolute Poker rode the online poker craze a dozen years ago.
But bets at those sites came to a sudden stop after gambling’s Black Friday. On April 15, 2011, federal prosecutors unsealed indictments and seized the internet poker domain names.
The DoJ charged companies and executives with:
- Bank fraud
- money laundering and
- illegal gambling.
Imagine logging on that day to check your account, only to see a Department of Justice logo in its place.
At the time, FBI Assistant Director in Charge Janice Fedarcyk said:
“These defendants — knowing full well that their business with U.S. customers and U.S. banks was illegal — tried to stack the deck. They lied to banks about the true nature of their business. Then, some of the defendants found banks willing to flout the law for a fee. The defendants bet the house that they could continue their scheme, and they lost.”
The difference a decade makes
Betting isn’t just for Vegas anymore. Now, a growing number of states have online casino offerings. Even more states — including Virginia — have online sports betting apps and sites to place a wager.
Roy Pollitt was part of a Sept. 20 online gaming forum hosted by iDEA (iDevelopment and Economic Association). The former special agent with the FBI talked about how illegal betting enforcement tailed off as legal online betting became mainstream.
“Certain states took the position that, ‘OK, we’re going to legalize this’ and at that point, I think it fell off,” he said of enforcement.
Pollitt said investigators have to juggle competing priorities so illegal betting investigations fell “off the radar of law enforcement to a certain extent.”
“Getting it back on the radar is critical. And, how do you get your arms around it? That’s the question. We keep bringing it up and I think you do it in bite-sized chunks.”
Can legal sites help stop illegal online gambling?
Pollitt sees legal online gaming and sportsbook companies with talented technicians. He thinks they can help establish a trusted relationship with law enforcement.
“You can go online and in 10 minutes find a site in a state like Maryland, where it’s not legal, where you can gamble.”
He called for a more concerted and centralized effort from legal operators to help law enforcement track illegal gambling operations.
“Show the scope and the scale and the size of this and all the different places in which this illegal behavior can impact the US financial system — from the crypto world, which is getting more and more heavily regulated, to probably still financial institutions, etc.”
Illegal sportsbooks dodge red tape
Danny DiRienzo, Sr. Director of Government Relations for GeoComply said legitimate regulated books work at a disadvantage. They incur taxes and fees as they maintain standards set by various states.
“They’re competing against sites that don’t have that overhead,” he said. “It’s hard to measure what that financial impact is. People often ask us, can you give me an analysis of how many people are being geo-located to illegal sportsbooks? And the answer is ‘no, we don’t support illegal sportsbooks.'”
“When regulators are enacting legislation or promulgating rules, they need to keep in the back of their minds that, yes, we want to regulated markets, but we need to create an environment where legal books can be competitive.”
DiRienzo urged states not to make online betting so prohibitive and restrictive that legal companies can’t compete with the black market.
Online gambling isn’t new, even if the laws are
Jonathan Michaels, the Sightline Sr. VP of Strategic Development and Government Affairs agrees. He sat in on some recent conversations about online gambling. The option is new in Massachusetts.
“Last week, they did a really wide sweeping discussion on responsible gaming. And a lot of these folks are saying: ‘This is going to be new to the state.’ … No, it isn’t,” he said. “I would guess that the majority of people in Massachusetts who want to make a sports bet have made a sports bet. Whether that’s going to another state or using a bookie or using an offshore site, this isn’t something new.”
Michaels thinks responsible gaming safeguards will certainly help support and make sure people are able to wager responsibly. From there, states should “follow the money.”
“We don’t know where these funds are going,” he said. “Whether they’re going to criminal organizations, whether it being used for money laundering — any of those things.”
“As the legal market continues to grow in additional states, it’s really important for legislators to understand: This isn’t new in your state. It’s a question of, do you want the safeguards that are put in place by the legal regulated market? Or do you want to just push people to these offshore sites?”