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Gaming Guru

Ed Koch
 

Gaming Operator Freed from Prison

23 March 2004

LAS VEGAS -- Internet gaming whiz Jay Cohen insisted on facing south to talk to a Sun reporter after his release Monday from the minimum-security Nellis Federal Prison Camp because, he said,"you're not supposed to look back."

As the former California stock options trader stood about two miles north of Nellis Air Force Base's main gate, his line of vision was directly on the distant Strip, where billions of dollars are generated by doing what he was sent to prison for in October 2002.

Cohen is unrepentant for taking Internet sports bets from U.S. gamblers through World Sports Exchange, an Antigua-based business of which he is founder and former president.

"I still maintain I ran a legal business in another country," Cohen said. "I regret that I did not get a fair trial or a fair appeals process. What if I were Chinese and ran a website in the U.S. that was critical of China, then returned to China and was jailed? Would the U.S. support China on that?

"People need to speak up for their rights when they feel they are right."

Cohen did not have much time to chat, as his civil attorney, Bob Blumenfeld of Texas, was on a tight schedule, set by the government, to get Cohen to Oakland, Calif., where he will spend 30 days in a halfway house. Cohen intends to return to stock options trading next month. He also will spend two years on probation.

Cohen was charged in March 1998 with violating the U.S. Wire Act and was convicted in a New York federal court trial in February 2000. In a twist of irony, he was sent to Las Vegas to serve a 21-month prison sentence.

For now, the native of Woodmere, N.Y., who holds a bachelor's degree in nuclear engineering from the University of California at Berkeley, is through with the Internet sports gaming business that in 1997 he helped pioneer.

His concept was to allow bettors to gamble on games in progress by buying and selling contracts, similar to how stocks are traded. The business also features a traditional sports book.

But, when federal agents placed several $50 bets from New York through his Internet service -- an act anyone can do because it is not illegal to place a wager over the Internet -- Cohen was charged with the crime because it is illegal to accept a sports bet from the United States in a foreign country.

He could have stayed in Antigua and remained a free man. But Cohen, who when setting up his business had consulted attorneys about the legal issues, felt he had done nothing wrong. He decided to come home and prove it in court.

His partners, Steve Schillinger and Haden Ware, decided to stay in the Caribbean. U.S. authorities cannot touch them unless they step foot on U.S. soil. They continue to run the business, of which Cohen says he has no part.

Cohen said he believes he will be vindicated -- if not legally, in theory -- when the World Trade Organization in late May decides a case brought by Antigua against the United States over the offshore betting issue.

If the organization rules in favor of Antigua, Cohen believes "it will open cross-border gambling and the United States will no longer be able to harass offshore operators."

Gaming lobbyist Frank Fahrenkopf, president of the American Gaming Association, does not see the ruling -- either way -- as having that much power.

"There could be some sanctions on U.S. products (traded) with Caribbean nations and it might put some pressure on Congress, but I doubt that will happen," Fahrenkopf said. "I doubt the ruling will have any impact at all on land-based casinos in the United States."

Fahrenkopf said the U.S. Justice Department has long operated on the premise that wire laws from the early 1960s make it a crime for offshore casinos to take sports wagers from the United States.

He noted that the 5th U.S. Circuit Court of Appeals has upheld a Louisiana ruling that Internet sports wagering is permitted on casino-type games but not on sporting events, which bolsters the government's position.

And Fahrenkopf, a noted Nevada attorney, also disagrees with Cohen's claim he did not get a fair trial. He said: "This is first-year law. If a man stands in Utah and shoots a man in Nevada he cannot say he can't be prosecuted because authorities in Nevada can't touch him. Authorities in Utah can."

But, Fahrenkopf said, the issue of Internet gaming may soon be decided not through the courts or by U.S. laws, but rather by economics.

He noted that gaming giant MGM MIRAGE ran a foreign Internet website that did not take U.S. wagers. It failed after a few months "because there just wasn't enough volume," Fahrenkopf said.

"Sixty percent of Internet wagering is from U.S. customers."

Before recent crackdowns by credit card companies, most Internet-based wagering was driven by credit cards, he said.

Fahrenkopf said a bill banning the use of credit cards for Internet wagering passed the House and is awaiting action in the U.S. Senate. But, he said, "the credit card companies have been put under so much pressure that every major card company no longer accepts (transactions involving) Internet gaming wagers."

While many Internet gamblers use alternate funding methods such as cash transfer companies based outside the United States, Fahrenkopf said Internet casino operators know they will not enjoy the same profits they had under the credit card system.

Cohen says the company he started is still going strong.

Cohen maintains that in a number of ways, Internet wagering is more aboveboard than land-based bet-taking. In a March 7, 2003, Sun story, Cohen made the following observations, by which he still stands:

- "It's hypocritical to say that our kind of gaming is bad but their kind of gaming is good."

- "On our website, we have a reference to Gamblers Anonymous on every page and we don't extend credit the way Vegas does. ... You've got to have the money in your account or you can't wager it."

- "They (Las Vegas casinos) serve you alcohol ... for free. It distorts your judgment. They put you in this room with no clocks and no windows. We don't give you free booze. We don't put you in a windowless room ..." ."

- "Land-based casinos take cash. Internet casinos don't take any cash. Which is more susceptible to money laundering?"

Cohen said he has "no complaints" about how he was treated at the Nellis camp that is predominantly for white-collar criminals -- a place some would call a "country club" prison. Still he was happy to be free Monday.

"I'm excited to put this chapter of my life behind me," Cohen said.

And does he ever plan to return to Las Vegas?

"Someday," Cohen said.

Gaming Operator Freed from Prison is republished from Online.CasinoCity.com.