Monday, August 14, 2006

A Sucker’s Bet

There’s no easy way to send the following message to those who may hold sports wagers with – the shop is closing (allegedly moving to parts unknown, sounding like the birthplace of many masked professional wrestlers). Good luck in recovering any money you may have bet or good forbid won with the sports betting site looking for a home in cyberspace. (a self proclaimed “sports betting resource”) seized the moment declaring in a headline on its site Friday – “Bettors Panic over BETonSPORTS Shut-Down”.

According to published reports, BETonSPORTS stopped processing payouts July 19; two days after the United States Department of Justice secured a temporary restraining order against the company. Anyone who had any money with BETonSPORTS hasn’t seen their money (and likely never will) since July 21.

"[Paying staff, creditors and customers] will take time and their successful completion will depend upon the Company’s ability to persuade banks and cash processors to release its funds. It also will depend on the Company’s ability to realize further and sufficient funds from its assets and operations outside Costa Rica and Antigua and to earn sufficient profits from operations which are not US facing." BETonSPORTS Board of Directors announced Friday morning to the London Stock Exchange.

"The Department of Justice is not taking or confiscating funds. I get 5 to 10 calls a day from clients that think the US Department of Justice made them close. I think this should be made clear to the gambling community." a respected bookmaker who wishes to remain anonymous told Friday. "Just because a federal judge in some state puts an indictment on a sportsbook doesn’t mean that they have to close. Sportbooks are perfectly legal in Costa Rica as long as operators obey Costa Rican laws. Why BetonSports closed is a mystery." the bookie added.

While Congress has attempted to enact laws directed against Internet gambling (The Internet Gambling Prohibition Act of 1997 was passed by the U.S. Senate on July 23, 1998, by a vote of 90-10. However, it was not approved by the House of Representatives), it hasn’t stopped the wheels of Justice or new legislation from moving forward. The Internet Gambling Prohibition and Enforcement Act was passed by the House of Representatives in early July..

If anyone is really surprised the Justice Department finally managed to shut down one of the major sports betting sites, they only have themselves to blame for ignoring what had become obvious since the start of the year.

On Friday, January 20, 2006, The Sporting News reached a $7.2 million settlement with the Justice Department to resolve accusations that it promoted Internet gambling by publishing and broadcasting advertisements for online casinos overseas. The Sporting News didn’t say they had done anything wrong, but agreed to pay the United States $7.2 million. Vulcan Media, owned by Microsoft co-founder Paul Allen may have been able to afford to write a $7.2 million check, but that should have sent a strong wake-up call to Internet based gambling websites trying to attract American dollars.

The United States attorney's office in the Eastern District of Missouri began what has been an extensive investigation that focused on Internet casinos and sports gambling in 2003. Catherine L. Hanaway, the United States attorney for the Eastern District of Missouri told the New York Times, her office has been sending out letters for more then three years to trade organizations representing major media organizations stating that their members could be violating the law by accepting advertising from offshore casinos. Shortly after, there was a significant drop in the number of American media companies accepting such ads.

In Canada one of the more interesting sponsorships takes the issue of sports gambling to an entirely new level. Several Canadian Football League teams ‘enjoy’ have working sponsorship agreements with, another sports and gambling Internet service. Bowmans is based on the Island of Mauritius, which is about 900 kilometers east of Madagascar in the Indian Ocean.

The Toronto Argonauts, Hamilton Tiger-Cats, Edmonton Eskimos and Calgary Stampeders each have major sponsorship agreements with a business (Bowmans) that actively solicits bets on CFL games.

"We are not aware of any issues regarding Internet gaming," said Lee Genier, the Calgary Stampeders club's vice-president of business development in a National Post report. "We have requested a directive from the league, and they are investigating it."

The league itself had a league sponsorship with Bowmans in 2004 and 2005. The league now has something called “” as its gambling partner and has almost a cavalier attitude towards working with Internet gambling sites.

"Under current CFL operations, the franchises are free to solicit sponsorship independent of the league," Perry Lefko, the CFL’s public relations director told the National Post. "If any sponsorship is deemed to fall outside the law or by general perception not in the best interest of the fan, the matter, including a recommendation from the league, would be tabled for discussion at the board of governors."

According to the report in The National Post, “the four clubs doing business with Bowmans may be violating parts of Section 202 of the Criminal Code of Canada, which states it is against the law to: "[commit] an offence [that] prints, provides or offers to print or provide information intended for use in connection with book-making, pool-setting ..."

The section goes on to say that it does not matter if the gambling has taken place in Canada, or if any gambling has or has not taken place. And it states that any person or group that "imports or brings into Canada any information or writing that is intended or is likely to promote or be of use in gambling, book-making or pool-setting ..." is violating the law.”

Similar to the legal problems Paul Allen’s Sporting News Radio faced (and again paid a $7.2 million file), at least two Canadian all-sports radio stations, Toronto’s Fan 590 and Ottawa’s Team 1200 ran a program sponsored by Bowman’s during the 2005-06 NFL and NHL’s seasons.

The sports betting show hasn’t aired since the NHL season ended. It remains to be seen if it will resume in September when the NFL and NHL seasons begin. Bowman’s was also a major advertiser on the Team 1200 and on Montreal’s Team 990. Both all sports radio properties are currently owned by CHUM Media. CHUM was recently purchased by Bell Globemedia, Canada’s largest media company.

Gambling and other vices are all too often referred to as ‘victim-less’ crimes. There are many (mostly gamblers) who believe people should be left to decide if they want to spend their money betting on sports events. According to a recent Business Week report, online gambling (poker and sports betting are one and two respectively in money wagered) now generates in excess of $12 billion a year.

BETonSports may indeed be forced out of business, but like weeds in one’s garden, it appears next to impossible to eradicate the problem. Few who have taken the time to understand what Congress is trying to do, believe anything will stem the tide of sports betting on the Internet.

"We believe this bill is rhetoric and it will only indirectly help problem gamblers," says Keith Whyte, executive director of the National Council on Problem Gambling in Washington, D.C. "We suspect that, much like with people buying illegal drugs, the money will find a way to flow. Certainly prohibiting sports gambling over the last 20 years has not done much to limit the flow of money to domestic sports gambling."

For Sports Business News this is Howard Bloom. Sources cited in this Insider Report: the New York Times, the National Post, and Business Week