U.S. Approves Law Targeting Online Gambling

October 6, 2006

U.S. lawmakers dealt the online gambling industry a bad hand last week by passing a law banning the processing of bets for online gambling companies in their biggest market.

The passage of the law, which was tacked onto a port security bill at the last minute by U.S. Senate Majority Leader Bill Frist, sent the billion-dollar industry into disarray, with stock shares for some online gambling companies plummeting on the London Stock Exchange and some companies promising to stop U.S. operations, the Associated Press reported.

The bill outlaws the processing of bets for online gaming companies, effectively preventing U.S. banks and credit card companies from doing business with sportsbooks. It could be signed into law by U.S. President George W. Bush as early as this week.

The move is the latest in a hard-line stance being taken by U.S. authorities. The Internet gambling industry is located almost entirely outside the United States, in countries such as Costa Rica, although many of its customers live in the United States. An estimated 200 online gambling companies have call centers in Costa Rica.

SportingBet’s former chairman, Peter Dicks, was arrested last month on a warrant issued by Louisiana State Police, but was released by a New York court recently.

SportingBet has offices in Santa Ana, west of San José, where operations continued as normal after the arrest.

In July, then chief executive of BetonSports, David Carruthers, was arrested in Texas, sending Internet gambling stocks plunging, and resulting in lay-offs of more than 1,000 workers at the company’s SanPedroMall offices (TT, Aug. 8) Carruthers, who has since been fired by BetonSports, has pleaded not guilty to racketeering and tax evasion.

I. Nelson Rose, a legal expert on online gambling in the United States, told The Tico Times he is “appalled” at the new U.S. law.

“The most amazing thing to me is that Bill Frist would do this,” he said, adding that the Republican lawmaker tacked the online gaming bill onto a port security bill at the last minute to “win him some votes”with conservative groups on the religious right, who have been pushing for tighter regulations.

Frist said in a statement this week “gambling is a serious addiction that undermines the family, dashes dreams, and frays the fabric of society … Although we can’t monitor every online gambler or regulate offshore gambling, we can police the financial institutions that disregard our laws.”

Rose said though the bill has sent shock waves through the industry, it doesn’t really change the playing field for online gambling companies.

“The real world difference for the companies is that it will make it slightly harder to transfer money,” he said.

Eduardo Agami, president of the Costa Rican Association of Call Centers and Electronic Data, which represents 19 of the online gambling companies here, said it is unclear what effects the law will have on call centers operating in Costa Rica.

“The law has to be interpreted,” he said, though he acknowledged that the legislation will complicate financial transactions in the online gaming industry.

“The public wants to participate, it will find a way where they can … Necessity is mother of invention,” he said, adding that the industry will likely find new ways to make financial transactions.

In the BetonSports case, the indictment said the online gaming enterprise asked clients to wire money to various Latin American countries to start up accounts.

Also this week, sports gambling center Nine.com announced it has decided to shut down its Costa Rica operations by the end of the month.

The closing will result in about 100 employees being laid off from the company’s call center in Rohrmoser, in west San José, according to the company’s human resources manager Alejandra Sanabria.

Sanabria said the decision has nothing to do with changes in U.S. laws. She said the company would be merging with sister company VIP Management in Curaçao to consolidate operations.

 

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