How a Business Becomes a Racket

Yesterday a federal judge in St. Louis sentenced BetOnSports, which just a few years ago billed itself as "the largest online wagering company in the world," to probation and a $28 million fine that, per A.P., "lawyers on both sides say probably will never be paid." The company's crime was openly running a business that was considered perfectly legal in the U.K., where it was incorporated, and in Costa Rica, where its servers were located. Because many of its customers were Americans, the U.S. Justice Department argued that BetOnSports violated the federal ban on using "a wire communication facility" to accept bets "on any sporting event or contest." That position hinged on the view that the company was taking bets in bedrooms and dens across the United States, as opposed to its operation center in Costa Rica. In the end, it was the physical location of the company's officers that proved decisive. Last month BetOnSports founder Gary Kaplan, an American nabbed in the Dominican Republic in 2007, was sentenced to more than four years in prison and a $44 million forfeiture after pleading guilty to conspiracy. Former BetOnSports CEO David Carruthers, a Scotsman arrested during a layover at the Dallas/Fort Worth airport in 2006, faced charges that could have resulted in a prison sentence of 20 years. He pleaded guilty to racketeering in April but has not been sentenced yet.

I discussed Carruthers' arrest in my 2008 Reason story about the crackdown on Internet gambling. In my column today, I expressed the hope that Congress would reconsider this unjust and senseless crusade.