San José, Costa Rica, since 1956

Sportsbooks Confident Despite U.S. Pressure

SEVERAL Costa Rican sportsbook owners hailed a recent World Trade Organization (WTO) ruling ordering the United States to provide justification for the restrictions it imposes on Internet gambling that affect countries where online gambling firms are located.

On Monday, the WTO’s dispute settlement body issued an initial ruling validating charges filed last year by the Caribbean island nation of Antigua and Barbuda against the United States.

The Antiguan government claims U.S. laws making it illegal for U.S. financial firms to transfer money to offshore gambling firms – by processing credit card transactions, wire transfers or any otheractivity – have cost that nation millions in lost tax revenues and left thousands unemployed.

“THE announcement is huge for our industry,” said Dalton Wagner, an investor at MVP, an online gambling firm whose customer-service operations are based in Costa Rica.

“The WTO ruled online gambling is absolutely legal and the actions taken by the United States to stop it are illegal. Hopefully, this ruling will help us,” Wagner told The Tico Times on Wednesday.

However, the WTO’s final ruling won’t be announced until April. And if the United States loses the case, it most likely will appeal, online gambling experts said.

Sportsbooks are online gambling call centers whose operators take wagers placed over the phone or over the Internet.

Sportsbook call centers do not have an actual physical presence for taking bets and process payments through credit card transactions, wire transfers and, more recently, Internet-based money transfers (TT, Sept. 12, 2003).

IN Costa Rica, 36 sportsbooks are formally registered with the government, although insiders say there may be almost twice that number operating here, along with at least 59 online casinos. These businesses employ at least 5,000 Costa Ricans, mostly college students.

Despite the lack of a law regulating the industry, in January 2003 the government charged sportsbooks a one-time operating fee under its Emergency Tax Plan.

Revenues from the permits generated ¢557.17 billion ($1.46 million at the January 2003 exchange rate) in revenues for the government, according to the Ministry of Economy, Industry and Commerce (MEIC).

THE initial WT O ruling comes two weeks after the New York Times reported that Federal prosecutors in Missouri have been threatening to take legal action against companies there that run advertisements from and do business with sportsbooks and Internet casinos.

By doing business with online gambling firms, prosecutors claim, companies are “aiding and abetting” an activity that has been declared illegal in the United States.

In response to the pressure, several major media firms – including Infinity Broadcasting, Clear Channel Communications and the Discovery Networks – stopped running print, radio and television advertisements for offshore gaming.

The advertising bans, according to some sportsbook operators, have already had devastating effects on the industry and stand to hurt it even more next fall when the online gambling high season – the U.S. National Football League season (NFL) – begins.

WAGNER says MVP Sportsbook has been “significantly impacted” by the ban.

The company has had $1.7 million in print ads and $1 million in radio ads for the upcoming NFL season negated by U.S. advertising companies as a result of the pressure, he said.

MVP was scheduled to publish ads next fall in Sporting News – a weekly sports news magazine read by 4.3 million sports enthusiasts. Wagner said the company also lost a $400,000 contract with Fox Sports Radio, a $250,000 contract with Sports Digest, a $175,000 contract with Athlon Sports and dozens of smaller contracts.

Without advertising, Wagner said he fears many customers will not be able to find the gambling firm. This will jeopardize MVP’s finances and the jobs of the 202 Ticos it employs, he said.

BET on Sports (BOS), the country’s largest licensed sportsbook, says it also has been affected. BOS ads recently were banned from the outside of city buses in New York and several of Clear Channel’s 1,200 radio stations, according to company CEO David Carruthers.

Despite this, Carruthers said he remains optimistic that the sector and his company, which employs 1,800 Costa Ricans, will continue to thrive even with the advertising ban.

“There has been no material effect on my business whatsoever,” Carruthers said. “We have many advertising opportunities. We have seen some entrenchment in advertising in radio in the United States because of the decisions of Viacom and Clear Channel. I believe the Department of Justice investigation will be unsuccessful in its attempt at frightening advertisers and suppliers out of businesses.

“I’m very confident about the future of online gaming in Costa Rica and my confidence is fortified by the decision in the court of the World Trade Organization,”

he said.

COLE Turner, C.E.O. of Group, which operates a sportsbook in western San José that employs 60 people, said he is not very concerned, either.

“The Group of companies has accounts from all over the world and as such is partially insulated from the actions of any one government,” Cole told The Tico Times via e-mail. “We monitor what happens in the United States as well as many other countries worldwide.“… Nothing has recently changed, but a bit of pressure being brought to bear on a few suppliers to our industry,” he said. “It is not clear if this approach is even constitutionally legal in the United States, but either way, it will have no impact on us.”

Cole said BoDog does most of its advertising through companies located outside the United States and over the Internet, which shields it from the ban’s effects.

“It might even have a favorable impact if it makes it harder for some of our competitors to attract new players using some of the advertising channels we are not currently using,” he said.

EDUARDO Agami, president of the Costa Rican Association of Data- Processing Centers and CallCenters and president of SBG Global, one of the country’s oldest sports-wagering operations, said he believes online gambling firms will continue to thrive.

“There are a lot of ways to advertise,” he said. “…People want the business; they want to wager. The people have spoken. They will look for companies where they can place their wagers, even if advertising is limited. I’m sure the pressure from the United States won’t end. But the customers will try to find us and we’ll be around.”

(Next week: A look at the different proposals to regulate sportsbooks in Costa Rica.)


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