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U.S. Actions Worry Sportsbooks

Have the stakes been raised for online sports betting operations, known as sportsbooks? Recent actions by the U.S. government have Costa Rican sportsbook insiders wondering just how much the U.S. government can regulate Internet gambling sites operating on foreign shores.

The U.S. arrest Sunday of David Carruthers, head of BetonSports – a London-based operation with a massive call center in Costa Rica – came just five days after the U.S. House of Representatives passed a bill to prohibit the use of credit cards to place online bets.

Asked what the high-profile arrest and the U.S. bill could mean for Costa Rica’s sportsbook call centers, Eduardo Agami, president of the Costa Rican Call Centers and Electronic Data Association, admitted he is “concerned about the impact this might have.”

“This is not a good thing that’s occurring. It’s crusade-like … and it could devastate a segment of the population whose lives and families depend on this,” he said.

About 200 call centers operate in Costa Rica for sportsbooks based out of countries such as the United Kingdom, Antigua, Curacao, Malta, Ireland and Australia, according to Agami.

Bilingual employees at these call centers carry out transactions for callers from around the world to place bets; however, the money ends up in offshore banks and never enters Costa Rica, Agami explained.

Nonetheless, these sportsbook call centers are a known source of cash flow here and provide jobs to an estimated 9,000 bilingual Costa Ricans – including more than 1,500 at BetonSports.

Carruthers, who is from the United Kingdom, was arrested Sunday night by U.S. authorities in the Dallas airport. He, along with 10 other people working for four online gambling companies (BetonSports and three Florida-based companies), is being charged with racketeering, conspiracy and fraud, according to a statement from the U.S. Department of Justice.

BetonSports PLC is a publicly traded company that owns a number of Internet sportsbooks and casinos founded by U.S. citizen Gary Kaplan, who has been indicted on charges of 20 felony violations of federal laws, the statement said.

The indictment seeks forfeiture of $4.5 billion and various properties from Kaplan and his associates who allegedly “failed to pay federal wagering excise taxes on more than $3.3 billion in wagers taken from the United States,” the statement said. The United States has issued a warrant for Kaplan’s arrest.

As news of Carruthers’ arrest rippled through international media, BetonSports Tuesday night shut down its Web site and posted a message that “in light of court papers filed in the United States, the company has temporarily suspended this facility pending its ability to access its full position. During this period, no financial or wagering transactions can be executed.”

Despite this message, BetonSports employees were working normally Wednesday during a Tico Times visit to the company’s offices, which occupy the top four floors of the San Pedro Mall, east of San José.

BetonSports investor relations advisor, Ginny Pulbrook told The Tico Times during a phone interview from London that Carruthers’ arrest came as “a complete and utter surprise” to the company, which is appealing his restraining order.

The 11 indictments came from a federal grand jury in the Eastern District of the U.S. state of Missouri, where U.S. attorney Catherine Hanaway called them “but one step in a series of actions designed to punish and seize the profits of individuals who disregard federal and state laws,” according to the Department of Justice statement.

Another step to squash sportsbooks appears to be a bill passed by the U.S. House of Representatives July 11 by a vote of 317-93. The bill prohibits the use of credit cards and other forms of payment to make bets online. To become law, the bill would also have to pass through the U.S. Senate, which has placed the bill on its calendar but not debated it on the floor.

This bill isn’t the first time the U.S. has sought to regulate the sportsbook industry –U.S. restrictions on Internet gambling prompted the World Trade Organization (WTO) to rule in March 2004 that the United States must provide justification for these restrictions (TT,March 26, 2004).

This week, Antigua complained before the WTO that the United States has not complied with this ruling, and on Wednesday the WTO set up a panel to investigate whether U.S. restrictions on Internet gambling comply with international trade rules, The New York Times reported.

The bill’s supporters – including banking institutions, law enforcement officials and religious groups – express worry over people becoming addicted to the thrill and ease of online gambling.

“This is really the worst form of gambling that you can have – all the ills that come from gambling without any of the regulations,” Representative Robert Goodlette, a Republican from Virginia, told The Miami Herald.

However, many say it is doubtful the bill will pass through the Senate. Opponents argue it would be difficult to enforce and compare a ban on Internet gambling to the U.S. prohibition on alcohol during the beginning of the last century.

The fact that sportsbooks operate outside of the United States also calls into question how much influence the U.S. government can have on regulating the global industry.

Agami pointed out that though U.S. bettors account for a large part of the online gambling market, the European market is also “very big” and growing. The United States can do nothing to control Internet gambling in the rest of the world, he said.

Calvin Ayre, founder and CEO of the Costa Rican sportsbook, told The Tico Times, “The bill will have implications, but there are other payment methods that will enable the industry to continue to offer services to the United States.

“Our organization is quite confident the U.S. government’s actions will have no impact on our operations,” he added.

Sportsbook call centers benefit Costa Rica by boosting its economy tremendously, Agami said. These businesses buy large quantities of computers, phones and other office supplies, consume Internet and phone services and buy and rent real estate, Agami said.

Starting salaries, about $4.50 per hour, are above average for Costa Rica.



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