Casino industry urges federal prosecutors to crack down on illegal operators

US casinos, gaming companies and lawmakers are calling on federal prosecutors to crack down on illegal offshore gambling sites they say are circumventing consumer protection regulations.

The push comes as sports gambling has grown rapidly in the United States in recent years, with more than 30 states and Washington DC allowing it.

“What was once perhaps a relative nuisance, is now becoming a serious threat to the legal and licensed gaming industry,” Bill Miller, CEO of the American Gaming Association, told CNBC in a recent post. interview.

In a letter to Attorney General Merrick Garland this spring, the AGA asked the Justice Department to investigate well-known offshore gambling sites, which it says openly violate federal and state laws and brazenly pay for advertising targeting US gamers.

Then, on June 29, more than two dozen members of Congress also sent a letter asking the Justice Department to investigate and prosecute illegal offshore sports betting.

The Department of Justice has yet to respond to the AGM letter or CNBC’s request for comment..

The challenge for the gambling industry has intensified as online searches for offshore sports betting grew faster than searches for regulated operators last year, according to the AGA. More than half of players say they continue to bet on offshore sites like Bovada, MyBookie and BetOnline, according to a survey by the association.

“There are hundreds of illegal or unregulated operators taking sports bets every day. We estimate there’s potentially $15 billion going through some of these offshore operators,” the CEO of the company told CNBC. FanDuel, Amy Howe.

Legal operators, including FanDuel, owned by Flutter, DraftKings, Caesars and BetMGM, co-owned by MGM Resorts and Entain, are spending billions of dollars licensing, marketing and lobbying for the legalization of sports betting in the new states.

The companies say offshore operators compete for customers without having to invest in licensing or lobbying or pay state and local taxes.

“It gives them an unfair competitive advantage. They can give the consumer a better chance,” Howe said. She added that many gamblers don’t even know when they are using illegal betting sites.

Some gamblers used offshore bookmakers for years before the Supreme Court struck down the Professional and Amateur Sports Protection Act in 2018 and paved the way for states to legalize sports betting.

Professional gambler Justin Werlander says many high rollers use offshore gambling sites because they allow larger transactions and accept credits.

Courtesy: Justin Werlander

New Jersey player Justin Wunderler says he used to bet on sports via offshore venues, starting in high school when it was the only option for sports betting. Since then he has been burned several times when he was unable to withdraw money from offshore bookmakers.

“I screwed up a bit,” he said. “They ran off with my winnings, and that was it. Sometimes bookies don’t pay when you win.”

Howe said unregulated sites frequently ignore responsible gambling safeguards that US operators have in place to retain their licenses. She said that 25% of FanDuel customers who leave illegal operators do so because they haven’t received their winnings.

Yet some experienced gamblers continue to use unregulated sites, attracted by better odds or promotions, or because the sites let high rollers bet on credit. Additionally, some frequent gamblers might have their betting limits limited in legal sports betting in the United States.

Wunderler said offshore venues allow much higher limits, including for “sharks”, who are experienced and savvy players. “Some of them might go as high as $50,000, while on some of these legal sites you can only bet $120,” he said.

In states that have legalized sports betting, online searches for offshore betting sites have declined, according to the gaming association. But offshore site Bovada still accounts for half of sports betting-related searches nationwide, the AGA told CNBC.

AGA’s Miller said the gaming industry is looking to partner with Google and other internet search engines to stop showing results with illegal sites.

The casino industry is also calling on law enforcement to crack down on unlicensed slot machines, often placed in taverns, mini-markets and gas stations.

Courtesy of the American Gaming Association

The casino industry is also calling on law enforcement to crack down on unlicensed slot machines, which are often found in taverns, mini markets and gas stations. They look, sound, and play like slot machines, but the makers call them “skill-based” games to avoid gambling regulations.

“What matters is that they’re untested. There’s no quality assurance around the ratings,” Miller said. And if the machines don’t pay out, he said there’s rarely accountability from the venue.

Aristocrat manufactures the popular Buffalo slot machines, as well as many others, which are licensed in 300 US jurisdictions. Its CEO, Hector Fernandez, said unregulated manufacturers stole the company’s designs and other intellectual property.

Fernandez said he was also concerned about the lack of consumer protections with unregulated gambling.

The industry strives to educate players about unregulated operators, although it says it can be difficult to tell the difference between legal and illegal operators.

“Educating the public who generally don’t know if they are betting on illegal or illegal sites is a job for all of us,” Miller said.

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