31/8/06

“American Gaming Circles Faltering Online Gambling!” (#503)

Stinger REPORT Skinny!

(4/08/06) A high-profile arrest in transit snaps Online Gambling industry into action. The World Online Gaming Law Report Emergency Briefing gathers the knowledgebase to London event that dissected  BetOnSport.com situation, legality of international sports betting, and the American Wire Act and fraud implications. Also a detailed view of the issues including American Gaming Association involvement, Amusement gaming machines connectivity and American standard and their implications for amusement gaming especially in the International Casino Exhibition Internet scene.

Main REPORT:

The ability to create an Internet gaming international infrastructure was dealt some serious cards over the last few months. The demarcation of American law, international interest and a part to be played by gaming machines came to the fore.

The World Online Gaming Law Report Emergency Briefing was held in London. The impetus for this influential gathering that drew American legal, congressional and extradition experts under one roof to present to a packed executive audience (in August) spoke volumes of a serious situation.

The Stinger Report was the only amusement and attractions delegate invited (separate to Sports Betting Update, Reuters and eGaming Review who attended) and was able to record the force of feeling. This spurred by the arrest of a prominent BetOnSport.com executive and a statement by Department of Justice officials that this was but the first of an ongoing prosecution of online gambling operation officials.

To place this in context; during July 17th 2006 the chief executive of the UK online gaming company BetOnSport PLC was arrested on entering the United States on business. A 22-point indictment, with 11 names was issued – after legal proceeding the executive was literally shackled and escorted by prison bus for the expected 18-month period that will lead to the legal proceedings.

This action was instigated by the Department of Justice, FBI and IRS regarding an ongoing crack down initially against the Caplin Gaming group, and a watchlist has been instigated against online gaming firms. In particularly those UK companies that attempt to attract US citizens to play. The breaching of the Federal Wire Act, and various issues of fraud violating the legal issues regarding interstate placing of bets, phone betting and mail fraud – this achieved by Illegal advertising, representing that the companies in question are legal.

The federal departments, supported by Congress ruling first stated to police the crimes they saw in 1999 and 2002. The focus of the action was to terminate the sports book betting run on the Internet sites. In arresting and holding the BetOnSport executive they have also announced that other executives from key corporations seen in violation is expected. The danger of other UK executives finding themselves arrested and shackled in maximum security prisons causing serious concerns.

The UK is particularly worried due to the high-profile legal battle that saw three bank executives (known as the ‘Natwest three’) extradited to the US involved in the ongoing Enron collapse. The share prices in online betting companies have collapsed in the UK and BetOnSports has suspended operation sacking the arrested individual – a flurry of concern and activity causing the gathering of chief executives to the World Online Gaming Law Report Emergency Briefing.

To prove the prescient worth of the event, one speaker repeated the warning that Deputy Assistant Attorney General in the Criminal Division of the DoJ had made at the World Online Gaming 2002 event, that active prosecution of European infringers was about to commence. Though the sector may have been slow to head the warning.

For the Stinger Out-of-Home leisure entertainment brief this situation in the online gambling scene take on great interest as the market encroaches into the machine business. As stated during the briefing the American Gaming Association have sponsored research into legal online gaming, while the casino and gaming industry evaluates the deployment of internet enabled tournament based systems (see G2E'05 coverage Stinger #425).

In particularly the development of systems that cross state with player prize stats or enable tournament playing now find themselves implicated in this scrutiny.

It was observed at the London briefing that the casino specific tournament and hotel room gaming connectivity could be seen as a move towards a gaming industry controlled standard that would use AGA powers to ensure adoption and could overrun the hamstrung UK operations -- excluded fro US clients.

What Could this all Mean:

The monetization, player identification, and established governmental contacts that what was referred to as 'bricks and mortar' gaming and gaming machines bring to an online / connected gaming application seemed to only now to permeate the attendees from the existing online gaming sector. The collapse of share prices, and possible arrest or extradition of executives focusing the mind.

The closeness of European gaming to online business illustrated by the expansion of the International Casino Exhibition Internet (ICEi) component to ATEI. The American gaming sector, comprising their embryonic online resource will be gathering in Las Vegas in November for G2E, but in this case concerns were voiced that UK executives attending may be wary to leave the plane after the BetOnSport situation.

Possible 'closer' relationships with established American casino and gaming resources are now an option for greater security for UK companies, resembling protectionism, a possible change in control of worried providers.