Victimless Fraud

Jacob Sullum | July 19, 2006

In addition to indicting BetOnSports CEO David Carruthers and founder Gary Stephen Kaplan, the Justice Department is charging four advertising executives who helped publicize the site in the U.S. The federal indictment charges them with participating in a "racketeering conspiracy" by assisting "a scheme to defraud gamblers in the United States by inviting, inducing and persuading them to place bets." The "fraud," which is subject to a penalty of up to 20 years in prison, did not involve ripping anyone off. Rather, the defendants are accused of creating and placing ads that "falsely stated that internet gambling on sporting events and contests was 'legal and licensed.' " This happens to be true in Costa Rica, where the Web site is based. The Justice Department argues that the Wire Act, which prohibits using interstate phone lines to take bets on sporting events, applies to bookmakers in other countries, but it arguably does not. Despite the talk of fraud, this legal dispute has nothing to do with consumer protection, except in the sense of protecting consumers from their own desire to bet on sports.

Last week I commented on the House vote to ban online gambling (which the Justice Department claims is already illegal), and a couple years ago I discussed the federal government's threats against businesses (such as advertisers) that "abet" such betting.

[Thanks to Michael Keferl for the tip.]

Comments

Jennifer|7.19.06 @ 5:37PM|#

the defendants are accused of creating and placing ads that "falsely stated that internet gambling on sporting events and contests was 'legal and licensed.' " This happens to be true in Costa Rica, where the Web site is based.

So hypothetically, a Nevada brothel owner could get in trouble for putting "prostitution is legal" on his company's website? Or the owner of a Nevada casino saying the same about gambling, for that matter?

|7.19.06 @ 5:41PM|#

Fscking hypocritical moralists. They're just trying to shut down the competition to state-run lotteries, some of which include the ability to place bets online.

At least BetOnSports offered the sucker a chance to improve his odds through superior knowledge of the game -- with a lottery, the only way to improve your odds is to keep the money in your pocket.

Even if you accept their premise for this action, it has zero to do with preventing fraud and everything to do with treating people like children.

|7.19.06 @ 5:42PM|#

We should be arresting these guys for, you know, making money and spending it and stuff. It's against our Judeo-Christian ethic except for Vegas, lotteries, casinos, and Off-Track Betting sites, office pools, and some fantasy games.

|7.19.06 @ 6:07PM|#

Don't forget church bingo!

|7.19.06 @ 6:12PM|#

Jennifer,
Very good point there. Nice to know that my government is keeping me safe from anti-moral advertising.

Shannon Love|7.19.06 @ 6:46PM|#

Jacob Sullum,

This happens to be true in Costa Rica, where the Web site is based.

I think the government can go take a flying-leap on the basic issue of internet gambling but I am curious why so many people seem to think it obvious that the legal jurisdiction governing an internet transaction is the jurisdiction in which the server resides.

Suppose BetOnSports was defrauding its customers by refusing to honor bets or (as the government currently alleges) steals customer's identities. Would Costa Rica automatically have jurisdiction? Suppose they used a system like Akamai where the same content can arise from multiple servers anywhere in the world?

I don't think this as simple a matter as many seem to think based on the technical issues alone.

|7.19.06 @ 6:59PM|#

How can you say it is "Victimless Fraud"? What about all of the poor little state lotteries who are losing their customers? How can you expect these lotteries, which have an average payout of about $0.50 for every dollar wagered, to compete with Internet gambling sites, which have an average payout of over $0.90 for every dollar wagered? It's not fair!!

|7.19.06 @ 7:12PM|#

does internet traffic even cross state lines on telephone wires? Don't they go to a local ISP and then on to a fiber network?

|7.19.06 @ 7:19PM|#

Pornography intices and pursuades me to masterbate.

|7.19.06 @ 8:40PM|#

does internet traffic even cross state lines on telephone wires? Don't they go to a local ISP and then on to a fiber network?

BOS takes bets over the phone, too. Smart companies like www.PinnacleSports.com (if you ever want to bet online, I can't recommend this company enough) don't even have a phone line for customer service, nevermind to take bets. Their servers are in Antigua, and since the laws regarding 'where the transaction takes place' over the internet has been fought and never decided, Pinnacle stays more or less in the clear.

I work in this industry, and can't even begin to tell you the ripples this is causing. Bodog, a massive sportsbook with marketing offices in Canada and servers in Costa Rica, has cancelled its annual Bodog Marketing Conference due to concerns that it will be busted by the Feds. The day these arrests were announced, myself and many others in the business cancelled our travel plans. Magic Johnson was scheduled to speak, and he was reportedly among the first to cancel. Can't say I blame him.

|7.19.06 @ 11:49PM|#

Small world Tanya, small world :)

The Wine Commonsewer|7.20.06 @ 12:21AM|#

Jennifer, that was my immediate thought, and I even composed a post about the Chicken Ranch online presence. But I didn't post it because I figured that someone would say that technically the act of prostitution will take place in Nevada and not in the customers living room. That doesn't mean I've changed sides.

|7.20.06 @ 1:44AM|#

Small world Tanya, small world :)

Indeed. Hope all is well in your neck of the woods!

Chin up. As they say, 'this, too, shall pass.'

:)

Points of Note|7.20.06 @ 9:43AM|#

This really peeves me. I enjoy playing poker online. I can't believe the feds want me to drive 5 hours to wait on a list in a casino when I can get a game in 5 minutes on the internet. Stay out of my business! *grumble grumble*

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