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Emily D. Swoboda
 

Cigars, Sports Betting and a Full Moon

19 June 2008

A group of young men from Texas, angry about the Unlawful Internet Gambling Enforcement Act, started a sports betting company that, by all accounts, is the only legal answer to sports betting since the United States online gambling ban.

CentSports is an advertising-supported sports book that starts off each new user's account with 10 cents, used for placing Vegas-style line bets on sporting events. The winner of each bet takes all and doubles their money. If a user loses, CentSports replenishes the 10 cents, and play continues.

Big-name advertisers include Netflix, Skype, Pizza Hut and the National Basketball Association.

"We use a variety of advertisers," Victor Palmer, the chief executive of CentSports, told Interactive Gaming News. "It's sort of 'advergambling.' I did not coin that term, but I like it."

When the act passed in October 2006, and whittled the United States online gambling market down to a nearly unrecognizable version of its former self, Mr. Palmer, 26, and a few of his friends found a new way to gamble on the Internet.

"Me and a bunch of friends were pretty angry about [the UIGEA]," said Mr. Palmer, who graduated with a bachelor's degree in mathematics at 16. "I think it's an idiotic way to treat online gambling and it pretty much killed a lot of sites that we used to go to. We were thinking, 'Screw it, we'll just make a system where we can bet against each other.' "

Initially, CentSports was a text-based site designed to keep track of bets among just a few friends. But it quickly grew into an online community for ousted American sports bettors.

"It was literally just for beer money and random stuff," Mr. Palmer said. "And people liked it so much that they wanted to keep getting added to the system. Eventually I got sick of adding new accounts manually, so I just made a sign-up form."

Mr. Palmer and his four partners stumbled upon a site called Moola.com, which has an identical business model, but offers casual games and keeps at least 1 cent in users' accounts at all times.

So, the guys at CentSports decided to adapt Moola's business model to their idea of a sports betting site.

Before moving ahead, the CentSports team sought legal advice from Charles Humphrey, a gaming attorney and creator of Gambling-Law-US.com, to make sure their idea would not earn them any state or federal challenges.

The three elements that must be present to violate most gambling laws are prize, chance, and consideration. But if you take away consideration, or an entry fee, which CentSports has done, the game is generally considered legal.

Anthony N. Cabot, a gaming lawyer with Lewis & Roca in Las Vegas, told IGN that a site like CentSports will pass legal scrutiny in virtually all states, even where the site makes money from advertisers or sponsors.

"Some states, however, have unusual nuances where even free sites might be considered illegal gambling depending on which games are offered and how they are played," Mr. Cabot said. "For example, Nevada has an unusual attorney general opinion that limits the method of playing free games even where players do not pay anything to play and merely risk play credits (or other representatives of value) in the games offered on the site."

But Mr. Palmer said CentSports has not been challenged yet.

Now, CentSports boasts more than 200,000 users and Mr. Palmer seems surprised by its popularity.

"It was a complete accident," he said. "We had no intention of starting this company to be the answer to online gambling. We were just a bunch of friends that were angry that Congress decided to outlaw online gambling in such a [stupid] way. We just made this site and it exploded."

CentSports in its current form launched in October 2007. Mr. Palmer cannot remember the exact date of the launch, but he remembers the circumstances.

"I remember the day," he said. "We were sitting outside on the porch smoking cigars, looking at the full moon thinking, 'This is going to be interesting.' "

All it takes to sign up at CentSports is a valid e-mail address. Users are asked to give their name and age, but no other personal information is requested and nothing is verified, which could raise some red flags with the anti-gambling constituency.

However, Mr. Palmer said players are not losing any of their own money, so legally, they are not required to do much of anything in the way of identification verification.

"We want to be as minimally invasive as possible," he said.

But Keith Whyte, the executive director of the National Council on Problem Gambling, told IGN that there is still the need to be cautious -- even with this type of model.

"I think for many people, while [CentSports] is basically small stakes sports gambling, A, you don't want kids playing, and B, if their typical customer/client is someone who is into sports and wagering they may run the risk of developing an obsession or addiction (or losing control), so you want to help them get the help they need," Mr. Whyte said.

"It's likely that avid sport gamblers have other accounts, and while they may not lose their house at CentSports, they can certainly engage in all the other detrimental consequences of this addiction, like preoccupation, loss of control, neglect of work, and family. Gambling addiction isn't always just about losing money, just as alcoholics have more social, work, and family problems than their own personal liver disease."

Mr. Palmer said CentSports has been in contact with the council and will run ads for responsible gambling and a link to its resources on the new version of the site, which is currently in development.

The CentSports model is simple. Users generate revenue for the site by clicking on the advertisements, which is turned into prize money for the users.

"And that model can be applied to any game, like poker or blackjack," Mr. Palmer said. "And we're already doing that. That's in development right now."

But how well that model can be sustained remains to be seen.

Mr. Cabot said while gaming sites that do not charge anyone for the opportunity to play and win prizes rarely face legal problems, they do face challenges in earning enough advertising revenues to justify the business.

"If someone could figure out a sustainable economic model where no one pays anything to play, it would have some merit." he said. "This is a difficult undertaking because generating prize pools attractive to sustained play is difficult when it is generated solely from advertising."

While CentSports launched only eight months ago, Mr. Palmer envisions eventually selling his company to a major media company or a casino-related entity in the United States.

"I want to get into someone's hands who can really expand it and really support this kind of free 'adver-sports betting' indefinitely," he said. "It's really very special to all of us. We want to keep this going forever and while we can do this, it would be much more stable in the hands of a bigger corporation."

Even if he sold CentSports though, Mr. Palmer would still be involved.

"I would hate not being involved in the day to day operations of the site," he said. "I don't care if I serve coffee to whoever's in charge."

Cigars, Sports Betting and a Full Moon is republished from iGamingNews.com.
Emily D. Swoboda
Emily D. Swoboda