AGM’s appeal for federal help in the fight against offshore books was overdue

It was late.

On Wednesday, the American Gaming Association publicly urged the US Department of Justice to prosecute illegal gambling operators who are a financial spine alongside legal gambling businesses and also create danger to an unwary or reckless public.

In a letter to US Attorney General Merrick Garland, AGA CEO and Chairman Bill Miller identified two specific types of illegal gambling businesses – offshore internet operators that offer sports betting and online casino games, and so-called “skill games”, which are slot machines. which look like slot machines and are often found in bars, restaurants and social clubs.

For the fast-growing online gambling industry in the United States, offshore poses a major competitive headache.

Legal and regulated operators are trying to catch up

There’s no way to know exactly how much money is bet with offshores – companies such as Bovada, MyBookie and BetOnline, according to Miller – but anyone who understands the gambling industry knows that offshore betting far exceeds the authorized and regulated variety. The AGA estimated that the illegal market exceeded $150 billion a year at one point. That’s well over double the handful of legal sportsbooks in America last year, which was around $58 billion even though more than 30 states have legal sportsbooks. Six of these states also offer real money online casinos.

Dealing with offshores has baffled legal traders, as evidenced by comments from none other than DraftKings CEO Jason Robins.

Last year, during an investor presentation, Robins said, “We’ve seen a lot of data through the research we’ve done that we haven’t converted a ton of people from the illegal market yet, and that are arguably the most valuable players.

As to why those customers haven’t moved, Robins suggested it’s as simple as the offshores being there first and the customers getting comfortable.

“I think it’s just stickiness; it goes back to the point we raised earlier, which is that early movers are important,” Robins said. “People feel comfortable with a particular product, brand, (user interface) and they just don’t want to change.”

Well, there are other reasons too. The first is that offshores can and often do offer better odds. the AGA Miller conceded as much in his letter to the DOJ, saying that because offshores don’t have the regulatory expenses and don’t pay taxes, they “offer better odds and promotions and ignore any commitment to gambling. responsible”.

AGA Response to Necessary Illegal Books

It is a good thing that the AGM has considered the question. AGM officials were pressed to engage the DOJ by Group at the industry-wide G2E conference in Las Vegas in October, and again during a virtual presentation on the of the industry in February.

It’s important to understand that the gambling industry is generally reluctant to have the federal government meddle in its business (after all, that’s what has kept sports gambling illegal in most of America until recently). in 2018). But when it comes to offshores, federal officials are key because they have the muscle – that’s been crystal clear since the gambling industry first complained about the illegal activity.

“We believe that ultimately there needs to be a coordinated effort, primarily at the federal level, to ensure increased enforcement from these offshore operators,” Miller told GDC in February. “I think it starts with the Department of Justice and Treasury (Department), but also includes agencies like the State Department that negotiate trade deals and have trade agreements with countries, some of which house and really, quite frankly encourage these illegal offshore websites. able to advertise on social media platforms. And then the ability and need to restrict this type of advertising on those platforms that can be seen in legal (US) jurisdictions. »

Until the AGA finally sent its letter to the DOJ on April 13, it seemed the gambling industry’s preferred way of dealing with offshores was to throw the problem in the bettors’ laps. The message was that customers who gambled with offshores were taking financial risks, that bettors could be cheated, that their money could simply disappear, that their personal data could be hacked.

Certainly, all of this could happen. But to say that the public should play sheriff regarding offshores was just plain silly.

And the reality is offshores have built strong brands, and that’s usually based on good service.

In fact, in his letter to the DOJ, even the AGM chair had to admit that average fans actively seek out offshore operators while often ignoring the difference between legal and less legal operators.

Miller wrote: “Nationally, internet searches for offshore sports betting brands grew 38% last year, faster than the growth in searches for legal US operators, and searches for offshore brands accounted for the majority of all sports betting searches, Bovada alone accounts for 50% of all searches.”

No big boost against offshores yet

In 2011, the Department of Justice dealt a mortal blow to online poker by seizing the internet domains of the most popular online poker sites and confiscating, for a period of time, the funds these companies held for their customers. In the end, many poker players got their money back, but the drama left a big impression on the public and online poker is still struggling, even though it may be legalized by individual states.

So far, however, no similar overwhelming action has been taken against offshore sports betting and iGaming companies that have learned to operate skillfully.

There is no easy answer to the problem of offshore operators, especially if it all depends on the gambling industry. To legalize online gambling, whether sports or casino games, state governments will always want their piece of the pie. Consider New York, with a 51% tax rate for online sports betting. High tax rates make it more difficult for legal traders, as this cost is passed on to customers, perhaps in the form of lower odds and fewer promotions than the offshore offering – all of which Miller mentioned.

The AGA finally, forcefully, assigned the responsibility of protecting an emerging American sports betting industry, which contributes millions of dollars to taxes in various states, as well as the welfare of betting consumers to the application of federal law.

Again, it’s late.

Colin L. Johnson