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Emily D. Swoboda
 

Insights: Another NY Bust - Another Mistaken Case of I-Gaming?

29 March 2007

Queens County, New York, District Attorney Richard A. Brown is patting himself on the back for busting another alleged Internet gambling ring. That makes two illegal gambling rings in the last four months that were only tangentially involved in the Internet, so they may not fall under the definition of Internet gambling.

According to a prepared statement released on Wednesday by Brown's office, 17 individuals were indicted on charges of running an illegal online gambling operation that was mainly run out of a Long Island City strip club and a Jackson Heights restaurant. Furthermore, Brown alleges the operation annually booked more than $30 million in wagers on a wide variety of sporting events. The indictment lists 16 counts of "gambling in the first degree."

This case mirrors another bust Brown made in November, in which he indicted 27 individuals allegedly connected to the Playwithal.com sports book, operating in Queens County, Miami and off shore in St. Maartens. The official charge in that case was "enterprise corruption."

Both cases raise questions regarding state and federal law pertaining to gambling businesses, but the bigger question is whether or not these cases involve Internet gambling at all.

IGN asked the experts,

is the Queens DA prosecuting a bona fide illegal Internet gambling case?


"I think 'alleged' Internet gambling ring just about covers it."
- Martin Owens

Martin Owens: I think "alleged" Internet gambling ring just about covers it.

This is a land-based bookie operation in my opinion. It might have tangentially involved a Web site, but the indictment makes it clear that all the principals and key employees of this operation had their feet firmly on the ground in New York. There is no question whatsoever about illegal activity taking place in New York, because not only were the bets physically picked up and paid off by runners in New York, but the operation was run from there--even the books were kept in New York. (I don't know what the hell these people were thinking. If I were the DA, I would just be praying that this crew doesn't plead insanity, because then they'd walk for sure.)

So the usual questions about Internet jurisdiction simply don't apply here.

An Internet gambling operation whose only connection to the United States is that the gamblers reside there, may or may not present a jurisdiction question. But if you do something against New York law, and you're in New York while you do it, and you're a resident of New York to boot, then there is no more to be said. New York has got jurisdiction eight ways from Sunday, and they'll be lucky if they don't get a set of Federal RICO charges (enterprise corruption is the State of New York's version) added to that.

Martin Owens is an attorney who specializes in the problems of operating gambling businesses online. Services emphasize strategic planning and preventive action in such areas as legal compliance and proper corporate structuring, as well as contracts, intellectual property protection, technology transfer, domain names, and the assorted other ramifications of operating online. Feel free to address questions and comments to mowens@trade-attorney.com.

I. Nelson Rose:According to the indictment, a bettor would place a bet with an agent/runner, who would place the bet either through the Web site or through one of the organization’s toll-free telephone numbers. Afterwards, the bettor collected his winnings or paid any losses by typically meeting with an agent/runner in person. The agent/runner, in turn, met with a distributor or the bookmaker to turn over any gambling debts the agent/runner collected from his bettors and/or to receive any money from the distributors or bookmaker that the agent/runner’s bettors won. The bookmaker, financial officers, accountant and other members of the organization then allegedly conducted various financial transactions with the gambling proceeds to, in part, conceal or disguise the nature, location, source or control of the gambling proceeds or to avoid any transaction reporting requirement imposed by law.

So, they are going to argue that there were no illegal wagers made in the United States; that they were made with a licensed overseas sports book. Their problem is going to be that this was not a friend placing a bet online for his friend. If the allegations are true, this was one gambling business, which makes everyone, except the bettors, directly liable for violating the anti-gambling statutes, and also for conspiracy. The prosecutors probably don't even need to allege the runners were accomplices, aiding and abetting the bookie.

Professor I. Nelson Rose is an internationally known scholar, public speaker and writer and is recognized as one of the world's leading authorities on gambling law. A 1979 graduate of Harvard Law School, he is a tenured full Professor at Whittier Law School in Costa Mesa, Calif., where he teaches one of the first law school classes on gaming law. Professor Rose is the author of more than 300 books, articles, book chapters and columns. He is best known for his internationally syndicated column Gambling and the Law.

Insights: Another NY Bust - Another Mistaken Case of I-Gaming? is republished from iGamingNews.com.
Emily D. Swoboda
Emily D. Swoboda