How a US Administration Could File suit An Overseas Sportsbook

In the absence of a regulated sports betting market, Georgia gamblers are forced to fend for themselves in the risky waters of offshore sportsbooks.

One of the main arguments for passing legalized gambling is that legal alternatives would attract customers away from illegal sportsbooks. These offshore platforms lack regulatory oversight to ensure the safety of personal and financial information, and players have little recourse if an offshore site fails to fulfill payouts.

Couple that risk with the fact that offshore operators are under no obligation to identify themselves as such, and the question arises of what it would take for the US Justice Department to pursue cases against offshore gambling companies preying on American sports bettors.

Despite the evident risk, building and pursuing cases against offshore entities is challenging. Bringing a case against any company outside the US involves numerous complexities. Federal prosecutors may have limited access to company resources or individuals under criminal investigation. Additionally, federal cases also need to focus on harms significant enough to warrant federal attention.

“The Justice Department has about 19 types of cases they are looking to handle,” said Richard Schuetz, former Arkansas gambling regulator. “And, you know, not many people are complaining about that other than the American Gaming Association.”

A productive Offshore Circumstance: Full Lean Poker

When Preet Bharara brought fraud charges against Full Tilt Poker in 2011, he was doing so during a period of heightened sensitivity to financial fraud. The Great Recession had ended less than two years earlier, and white-collar crime was under a newly intensified spotlight. Full Tilt Poker was accused of paying company executives with funds that still belonged to players.

In addition, Full Tilt Poker failed to disclose to its customers that it did not have enough cash on hand to cover their winnings. Forbes reported that the company accepted customer funds despite knowing it couldn’t fund customers’ credits, resulting in “$130 million of phantom bets” that worsened Full Tilt’s financial position.

Although Full Tilt Poker operated overseas, the Department of Justice seized the website’s domain, shutting down its operations. In 2019, Full Tilt Poker’s CEO, Isai Scheinberg, was arrested in Switzerland and extradited to the United States. In March 2020, Scheinberg pled guilty to operating an illegal gambling business.

Full Tilt Poker mishandled customer funds that should have been under customer control, lacked the funds to pay customers’ winnings, and continued to operate under false pretenses. The harm suffered by enough customers was significant enough for the federal government to pursue the case.

Deciding To get A Federal Circumstance

The federal government won’t pursue a case against an offshore company unless it poses a significant threat to Americans. In the case of Full Tilt, the number of affected customers and the amount of money at risk crossed a threshold. When determining whether to investigate, federal prosecutors consider the following factors:

• Number of people affected.
• Value of the harm.
• Personal considerations.

The first two factors are self-explanatory. Cases like Enron’s Ponzi scheme, which wiped out the life savings of many individuals, garnered federal attention due to the immense harm caused. Additionally, if a case involves a prominent company, such as Enron, it becomes easier to assign responsibility to specific individuals like Jeffrey Skilling.

In offshore cases, political considerations play a significant role, and they are not necessarily partisan. Pressure from industry lobbyists, companies, and other influential stakeholders can create a sense of urgency that warrants allocating federal resources to an investigation.

In 2019, a former US senator’s Freedom of Information Act (FOIA) request revealed that former GOP mega-donor Sheldon Adelson lobbied the Justice Department to change its interpretation of the Wire Act to ban all online gambling. Adelson was the top Republican donor in the 2016 presidential election.

Not all industries have a mega-donor exerting such influence over the presidential administration. Other potential criminal cases must be serious enough or cause significant harm to attract federal attention.

“It’s all a question of resource allocation,” said Johnathan Nash, an attorney and Emory Law School professor.

Prosecutors have the discretion to choose which cases to pursue, and some cases are more urgent and well-founded than others.

For example, in January, the Department of Justice “unsealed murder-for-hire and money laundering charges” against three men hired by the Iranian government to assassinate an American citizen. About a week later, the man who killed three people at a Walmart in El Paso, Texas, in 2019 pled guilty to 85 federal hate crimes and weapons violations. These cases presented clear targets for federal prosecutors.

Conceivable Charges In opposition to Offshore Wagering Companies

Offshore gambling lacks the severity of assassinations and hate crimes. Companies that accept American bets must cause enough harm to Americans and corporations to warrant federal attention.

National law prohibits unregulated gambling companies from accepting bets from Americans. This includes companies that allow American bets from countries like Costa Rica and the Bahamas. These companies are in violation of the Unlawful Internet Gambling Enforcement Act. Despite being located outside the US, these companies can still face legal action by the federal government.

However, particularly egregious behavior by an offshore company can attract even more unwanted attention. Sometimes offshore companies refuse to pay out winnings. In his memoir, “The Smart Money,” Michael Konik recounted an incident where one offshore company failed to pay him $287,000 in winnings. After suggesting various ways to deny or delay full payment, the offshore bookmaker eventually only paid him $193,000.

While Konik may have been identified as a skilled gambler, if an offshore company can refuse payment to one winner without consequences, they can do it to anyone. High-profile cases like these, as well as security breaches that compromise social security numbers, can make offshore gambling sites a higher priority for the Justice Department.

Two Adjustment Options In opposition to Offshore Sportsbooks

Should federal prosecutors pursue an illegal gambling case against a major offshore operation, they have two options: targeting individuals for arrest or seizing assets within their jurisdiction.

Targeting individuals involved in an offshore bookmaker’s operation provides tangible targets for prosecutors who can be fined and potentially sent to prison. Extradition of individuals from foreign countries can be challenging due to jurisdictional issues and the need for cooperation from other governments. Individuals wanted by the US government may find refuge in countries without extradition agreements. However, if they enter a country with an extradition treaty with the US or enter the US itself, they can still be arrested.

Taking down an offshore corporation is also challenging. Imprisoning a corporation is not possible, so other approaches are necessary. This could include imposing fines, having the corporation plead guilty, and agreeing to change its practices.

Targeting an offshore corporation requires multiple approaches, and one potential avenue is focusing on company assets that fall within US jurisdiction. If there are assets in the US that can be seized and collected to support criminal charges, it becomes a viable option. However, if the offshore company’s assets are not reachable in the US, that is one of the reasons they operate in foreign countries.

If an offshore company has a server in the US, the government can seize it. Financial accounts in US banks could also be targeted if they are directly linked to criminal activity by the offshore company.

The most challenging scenario is when an offshore corporation’s assets remain outside of the US, which requires international cooperation.

Utilizing foreign co-operation

The US cannot invade another country solely to gather evidence or seize assets from a corporation that violates US law. Instead, the federal government can have the foreign country’s government lead the investigation and impose penalties. The US can also bring a case against a company and have the foreign government enforce criminal penalties.

The first example relies on various foreign policy considerations and is not always a feasible option. In the case of the Bahamas, they cooperated with the extradition of Sam Bankman-Fried after the collapse of FTX. The US has an extradition treaty with the Bahamas that allows for extradition of individuals charged with a crime that is considered illegal in both countries and could result in at least one year of imprisonment. This level of cooperation enables both countries to more effectively enforce actions against organizations and individuals in each other’s countries.

On the other hand, Russia has not cooperated in the case of Alexander Viktorovich Ionov. According to the Department of Justice, Ionov was charged with conspiring to have US individuals act as illegal agents of the Russian government. This is part of a larger case involving a campaign of malign influence by Russian content creators to influence US elections.

“If you don’t have jurisdiction, you have to either rely on Russia to hand them over or for them to go to a country where another country is willing to extradite them,” Nash said.

Even in high-profile cases that require action and government attention, some individuals and companies are beyond reach. It’s part of the calculation when deciding whether to pursue cases against foreign companies and individuals.

Overseas Gambling And Low Goal

With legal sportsbooks available in most of the US, offshore gambling has garnered significant attention from lawmakers. In April 2022, the American Gaming Association (AGA) urged Merrick Garland to pursue a case against offshore gambling companies. In the following June, 28 members of Congress signed a letter to Garland, urging the same action.

So far, the only press releases from the Justice Department since April 2022 have announced charges against illegal gambling operations within the US. Offshore gambling is not currently a priority for the Justice Department.

As online gambling continues to expand in the US, concerns within the industry regarding offshore gambling could eventually lead to government action against gambling companies operating abroad. However, industry pressure will only be one of many factors that would prompt such legal action. Economic conditions, political environments, and various other variables will also play a role in determining the likelihood of federal actions against offshore corporations.