Crypto Settles with New Jersey

Six months after the New Jersey Division of Gaming Enforcement filed a civil lawsuit against gaming software supplier CryptoLogic Inc., the two sides have reached a settlement.

In an announcement made this morning, CryptoLogic said it has proved to state officials that it had never profited from sports betting and that it doesn't assist any operators in conducting sports betting businesses.

New Jersey Attorney General John J. Farmer Jr. filed a civil lawsuit against eight online gaming companies for violating the state's law by accepting wagers for Garden State residents.

The lawsuit marked the second round of civil complaints filed in New Jersey against Internet gambling sites. Last June the DGE and Consumer Affairs filed civil actions against Alohacasino.com, Royalclubcasino.com and 7sultants.com.

At the heart of each case was the principle that operators of online gambling sites were breaking the law by providing illegal betting facilities to users in New Jersey, even if the sites aren't based within the state.

John Peter Suarez, New Jersey's director of gaming enforcement during the time the complaints were filed, told IGN shortly after they were filed that justice was hoping to get a speedy decision.

The settlement agreement expressly acknowledges that CryptoLogic, WagerLogic and the Wagerlogic licensees named in the civil action have not violated any law, statute, ordinance, contract, duty or obligation whatsoever.

Dave Outhwaite, COO of CryptoLogic, told IGN on Tuesday that proving the company was the wrong target for New Jersey was a simple but detailed process.

"We wanted to delineate ourselves from the sports betting issue," Outhwaite said. "This was a sports betting-related case and we wanted to prove that we don't get any revenue from sports betting and we are not involved in sports betting. So we wanted to make sure we didn't associate ourselves with the other sports betting organizations that were defending themselves."

To that end, Crypto commissioned an independent audit, according to Outhwaite, including the investigation of the company's books, to demonstrate that the company has never received any Revenue. The company also proved to New Jersey officials that it didn't have any software that could be used for sports betting, nor were they developing any.

"We always were confident that we could win this; it was just a matter of time and putting it through the process," he said. "Of course we got delayed a bit with the changing of the guard in New Jersey, as they went through the electoral process."

To proving its point for New Jersey officials, Crypto decided it was better to worry only about the Crypto complaints rather then join alliances with other defendants.

"From our side it was us, our subsidiary WagerLogic, the name Inter Casino (because we own the name and license it to the licensee) and our employees that were named," he said. "We really concentrated on our own company and didn't get together with anyone else to defend any of their actions."

Kerry Hand, a spokesperson for the New Jersey Division of Gaming Enforcement, said today she hadn't received all the paperwork yet on the details of the agreement, but she confirmed that a settlement had been reached.

Hand said of the seven complaints that were filed in October, "several" of them had been settled one way or another. "Those that didn't settle were the ones where it was more difficult to contact or they had folded since we filed," she said. "I don't think there is a lot outstanding or overhanging. The settlements are pretty much what we are looking for in these types of cases."

Hand said the three complaints filed in June against individual operators have proven more complicated.

"Those complaints were difficult to serve and process," she said. "There haven't been any settlements reached in those cases. That is still a work in progress and has been a little trickier in the service department than the online sports books were. But we knew that going into it."

In a prepared statement to the media, Jean Noelting, President and CEO of CryptoLogic said the settlement means his company can move forward with its growth strategy process.

"As a leading advocate of safe, secure, responsible and regulated online gaming, we are very pleased that this issue has been resolved and is now behind us," he said. "CryptoLogic is committed to compliance with the laws and regulations governing Internet gaming and continues to invest considerable resources in maintaining a leadership position with respect to regulatory issues worldwide."