Does U.S. Want Online Poker & Online Gambling All To Themselves?

The respected UK newspaper The Telegraph carried a hard hitting article this weekend which suggested that the US crackdown on online gaming, including online poker, may not be so much about morals as hard cash.

Writer Mark Choueke gives voice to the perceptions of many people in the online gambling industry when he writes: "The Americans, suggest the cynics, want to drive foreigners out to establish their own Vegas gambling brands."

The article reports that the long arm of the American legal machine reached further into the British business establishment last week, and says that the news that the US Department of Justice (DoJ) is pursuing London-based banks for information relating to online gambling companies has sparked fears that an American campaign to shut down these sites will lead to further arrests and charges.

"The still-smouldering issue of Britain's legal relationship with the US was further reignited last week when Ian Norris, one of several British businessmen targeted for alleged price-fixing, lost a vital appeal in the High Court. Taken together, the two cases could make the recent furore over the NatWest Three look like just the start," the article continues, referring to US extradition moves.

"There is an enormous row brewing over extradition," says Alun Jones QC, one of Britain's top extradition lawyers. "It's only a matter of time before some of the online gaming executives become caught up in extradition requests, and that will bring the issue back into focus."

A number of gambling executives are already staring down the barrel of the US legal system after being arrested while travelling there. David Carruthers, the chief executive of BetonSports, is awaiting trial in St Louis, Missouri and faces 20 years' imprisonment for allegedly flouting US rules that outlaw online gambling. Similarly, John Lefebvre and Stephen Lawrence, the founders of NETeller, were arrested in Los Angeles last Monday and stripped of their passports; they face charges of laundering billions of dollars in "illegal" online gaming proceeds.

Choueke writes: "Given this backdrop, it is no wonder the banks subpoenaed by the DoJ are trying to keep their heads down. 'We're co-operating fully,' said one London banker last week. 'We don't have any legal right to withhold information from the US authorities.'"

The hope is that the Americans are just trawling for information, not looking to widen the net. "The Americans are going after the gaming companies, not the banks," says another banker. "The only request they made of us was to hand over any contact we had with the gaming outfits." But lawyers with experience of such investigations warn against complacency.

Jason Chess, a partner at Wiggin, the London law firm, and a gaming law specialist, says: "Nobody should be blase about what the Americans are doing. They're acting very aggressively, and if you're an executive of an internet gaming company operating just about anywhere from Alderney to the Isle of Man, the message is, don't go anywhere near the US."

Chess describes the DoJ's actions as "nothing more than economic and imperialist bullying" and says the two-faced approach of the American authorities towards gambling shows there is a need to stand up to the DoJ. "There are US politicians preaching that gambling is a destroyer of families while a quarter of the population spends its vacations putting coins in slot machines in Vegas casinos," he says. "For me this is more about driving foreign traders out of action so Nevada and Vegas don't lose out on business in the future. The moves being made now give the US time to sort out the legalisation of online gaming and give the Vegas brands time to establish their own brands online."

Warwick Bartlett of Global Betting & Gaming Consultants agrees. "The Americans want to bring these gaming company executives to what they refer to as 'justice', which means slamming them in jail, pocketing their proceeds from the business and claiming the market as their own. Our view is that the US will legalise online gaming within five years. These subpoenas and the arrests represent sheer hypocrisy."

Choueke says that the DoJ refuses to comment on the ongoing activity and won't even state the name of the specific crime it is investigating. But the American Gaming Association confirms that the legal status of online gaming in the US could change in the future.

Helen Thomsen of the association says: "The AGA supports a study of online gambling in the US being congressionally funded. Such a study would look into how online gambling could be properly regulated and controlled. We are pursuing the matter with the new Senate and hopefully a study could begin in the next few months. We can't be sure of how the recent change of power in the Senate will affect the future status of online gambling but it's interesting that the majority leader is Harry Reid, who is from Nevada, one of the larger gambling centres."

"So online gaming executives are being hunted all over the globe in a manner more befitting terrorists, dragged off to American shores and forced to fight for their freedom because their successful businesses – perfectly legal in the country they operate in – are being or have been illegally used by American citizens," says Choueke.

But the apparent double standards are not restricted to the US. The British Government, about to announce plans for new super-casinos over here, had previously backed the development of the online gaming industry in the UK but has so far had little to say about the fates of Carruthers, Lefebvre or Lawrence.

Bartlett says: "The Government should have come out with a clear, unequivocal statement by now. It wanted to draw online gaming operators away from the likes of Gibraltar and into the UK, where a global gambling hub could be created. Not only would such a drift mean the industry could be properly regulated but the Treasury would also benefit from extra jobs and revenue. Where is the Government's support now things are getting a little bit hairy?"

The Treasury declined to comment but a spokeswoman for the Department for Culture, Media & Sport said that "protection of the vulnerable and strong industry regulation", rather than revenue and tax, are at the heart of the Gambling Act, which will come into effect in September.

Fearful of future extradition and constantly looking over their shoulders, Britain's online companies have gone unusually quiet, but privately there is mounting frustration over what they see as double standards.

"There is a poker and gaming website in the United States run by a Texan, who moves freely around the US, as does the famous actress who stars in his TV commercials and only recently closed her own online gaming company that had customers in America," says one British gaming executive. "Why don't the US authorities arrest the pair of them?"

Others feel more confident about running gaming websites within the US and seem prepared to test the DoJ's resolve.

Lee Jones of PokerStars.com, based in the Isle of Man, told The Sunday Telegraph: "We are still offering our services to poker players in the US and have got expert legal advice both within and outside PokerStars and believe we are operating a legal service. Beyond that we are not able to give you any comment."

However, last Wednesday the PokerStars management posted a message to its US customers on "2+2", a popular poker forum on the web. It reads: "Despite recent matters our position remains the same; PokerStars continues to offer its services to US players. You may play on our site as you did prior to the recent developments. This new legislation is not aimed at players and does not change the legality of playing online poker."

How long such businesses, and indeed those operators who have reluctantly closed down their websites to the US, can hold out before the DoJ comes knocking is anyone's guess. After all, as one source says: "The DoJ is going after those who have closed in America with charges of illegal online gambling before the Bush administration clarified the situation with a bill in October.

"It would not be going to all this trouble if it wasn't hell-bent on getting some results, which means there will be more scalps."

-- Online-casinos.com, also reprinted on EOG.com

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