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Kevin Smith

Q &A : Jay Cohen

26 March 2004

Jay Cohen, one of the founders of World Sports Exchange, was released from federal prison on Tuesday and was sent to a halfway house in Oakland, California, where he will finish the remaining 30 days of his sentence.

IGN spoke to Cohen via telephone from the halfway house about his current legal status with the government (he is still fighting to have his conviction overturned), the recent news of the World Trade Organization's ruling against the U.S., and how he managed to keep busy while in prison.

Cohen said he has no regrets about being the only one of 21 people indicated by the Federal Government for violating the Wire Act by operating Internet-based gambling operations. He remains adamant that the U.S. is wrong in its opinion that he and others in the industry are in violation of the law and said unless the legal climate changes he is likely done as an operator in the interactive gaming industry.

IGN: Were you able to monitor the industry while you are in prison?

Cohen: Yeah. People would send me printouts from the posting forums and any relevant articles that were published. I was sent all of them.

IGN: So what is your take on the latest developments with the Grand Jury Investigation being conducted by the Department of Justice where numerous subpoenas have been handed out, included those for companies that were accepting advertising for online gaming sites?

Cohen: Well, I think the WTO decision will put a stop to that. I think this decision makes it pretty clear that the U.S. is out of bounds for harassing offshore service providers. Antiguan service providers really, since Antigua is who brought the case, and once it goes through it will only apply to Antigua, it isn't going to apply everywhere else.

The decision, as far as I know, says that the U.S. does have commitments under the General Agreement on Trade and Services and that they have to stop measures affecting the cross-border supply of gaming from Antigua. That includes article 11 of the GATS, which says that you can't interfere with international money transfers.

IGN: There have been reports that you are going to go back to trading, which was your profession before starting World Sports Exchange, is there anything in your probation that says you can't work in the I-gaming sector

Cohen: I am sure they (the federal government) wouldn't be happy with it if I did that. There is nothing that says I can't, but I know what would happen if I did. Unless this WTO decision takes us somewhere with the federal courts, and there is a potential of us filing something in the federal courts because the WTO essentially said the Wire Act, which I was convicted under, is illegal under the GATS.

IGN: Are you surprised with where the industry is now 17 months after you were sent to prison, with the rise of online poker and P2P betting exchanges?

Cohen : We were ahead of our time at World Sports Exchange, no question about that. They are not going to kill this industry. We will see what happens with the WTO decision and if that gives me the green light to get back into this business or not.

IGN: It sounds like you aren't opposed to getting back into the industry, but only under the right circumstances?

Cohen: Yes. I have to get cleared with the federal courts, and we are looking at how we can use this opinion to work in the federal courts in our favor. A lot of people are saying that it doesn't matter. But the fact is that the U.S. gets more out of the WTO than any other country. The U.S. has never not abided by a WTO decision, so that could be interesting. Do they want to jeopardize all their favorable rulings over this? We will see.

IGN: Let's say nothing really changes with the WTO decision, and you go back to trading, and then your probation is up in two years and you don't have any problems. Would you ever just move to Antigua and join everyone else?

Cohen: I don't think so. But two years out, who knows? I would like to see how the U.S. is going to handle this WTO thing. I don't think they can just ignore it. The process should be pretty quick. In a year the claim went from being filed to a decision.

IGN: Do you see yourself becoming at least a public advocate for regulating and legalizing the industry in the U.S.?

Cohen: I will also be a public advocate for the industry. I will always be World Sports Exchange's number 1 fan. I an not done fighting the government on this either, separate from the WTO decision. I have some other motions dealing with selective prosecution and prosecutorial misconduct. The judge denied the motion, but he did rule that there was error. He said there was error and the government made a misstatement about the legal status of the OTB, he just said it was a 'harmless' error. In our mind, an error is an error.

IGN: Will this being on your record effect your trying to get work in the trading industry?

Cohen: I don't think so since it isn't securities related. Even if I can't get back into trading I have enough general business experience that there will be plenty of people that will hire me. I got a lot of letters from people when I was in prison who had just heard about my case and were offering their assistance when I get out. Everyone who reads about my case, or hears the whole story can't believe it.

In prison, people couldn't believe that I was there for running a business. They wanted to know what else I did. They thought there had to be some kind of fraud or something else. They locked up someone for running a legal business in another country. It is the ultimate act of protectionism, to incarcerate your competitors.

IGN: Do you regret being the only guy that stood up and fought this?

Cohen: I regret that other people didn't stand up and fight with me. Do I regret it? I am a fighter, and I am not going to lie down for these people. They are wrong, they have been wrong, and they are still wrong. I am glad that we finally got to a venue (the WTO) where we have an unbiased panel. I just wish it could have happened 17 months ago.

IGN: Were you surprised that others didn't fight the charges with you?

Cohen: Most of the other 21 people charged were in different situations than I was. They dismissed 2 of the charges, so that left 19, seven of them are still at large. Of the remaining 12 I was the only one that didn't plead guilty. There was only one other guy that was close to having a clean case like mine in terms of being totally offshore. Everyone else, 10 of the 12, had significant U.S. presence. They were either working in the U.S. or living in the U.S. or doing their banking in the U.S. I was the only one of the 12 that lived offshore, had my business down there and all my bank accounts. Not all of them had as strong of a case as I did, but it would have been nice if they all stood up instead of lay down for these people.

IGN: It wasn't like there was a meeting of the minds and then they left you holding the bag was there?

Cohen: There were a couple of other guys who called me and said: 'Oh, we are going to fight this, and we are going to fight it all the way. I have Richard Nixon's lawyer and I am going to fight this.'

Of course next thing you know they are pleading guilty. I am not going to name names, but some of them turned out to be real scum and even went on to stiff their customers.

IGN: Unfortunately, we have seen a lot of sports books go under the last year along with claims of slow or no payment by their customers. How do you feel about all of that?

Cohen: I think it is disgraceful and terrible. I am not sure exactly what the solution is, but all I can tell you is that Antigua has had only one failure since day one. I can tell you on whole your money is safest in Antigua. They have the strongest regulation out there. As opposed to Costa Rica, which is just the Wild West.

These books come up, I kind of caught the end of the BetPenAm thing, and it is just unreal. They said they were having disputes with the investors and the investors needed to put their money in to pay off the customers. I have never head of a book operating like this.

You don't have the investors taking their money out on a daily basis and deciding when they are going to put it back in. When you back a book, it runs and it has operating reserves. What kind of a fly-by-night thing is that? A lot of these places got on board backing these people. These people need to stick with the tried and true, you have to go with the percentages. For percentages, you best shot is going to a long-operating book in Antigua.

IGN: You mentioned you were getting clippings and stories from those in the industry while you were in prison. Where there any people particular that you heard from regularly?

Cohen: I would get notes now and then from people. I wouldn't want to start mentioning them because I don't want to offend someone by forgetting a name. There was a lot of support coming from the industry. I also got a lot of random correspondence after the 60 Minutes piece ran.

IGN: You only served 17 months of your 21-month sentence. You were doing some tutoring in prison for inmates trying to get their GED, did that affect your sentence?

Cohen: Not really. The standard equation is you get 15 percent knocked off for good behavior, it actually works out to about 13 percent. I could have done more time at the halfway house, but I choose to only do a month.

I didn't get any special treatment for teaching, although I am very proud to say that I had 25 students pass the GED math in 14 months. This is a place that graduates between 40 and 50 a year with 10 tutors. I am very happy that I was able to do that while I was in there and have 25 of those guys go through me. But I will say that I am sick of algebra and geometry. It is going to take some time before I look at Xs and Ys again.

IGN: I would guess teaching helped pass the time by?

Cohen: It was strange, because the time went by pretty fast. Looking forward only seemed like forever and looking back always went quickly. Even the last couple of days seemed like they were never going to come. I managed to stay busy and keep up a routine. That is how you just click off the days. It was a grand waste of time for all involved. It was a grand waste of taxpayer money.

IGN: So what was your daily routine like?

Cohen: The tutoring took me from 7:30 to 11 in the morning and from 12:30 to 2:30 in the afternoon. At 4:30 p.m. I would go and workout. Around 6:30 p.m. I would play chess and then get in bad at 9 p.m. and fall asleep by 10 p.m.

IGN: So were you one of the elite chess players there?

Cohen: I don't consider myself a very good chess player actually. There are some great chess players in there. You get guys that have been in there for five or 10 years and they get very good. I had a student, who passed math, but he struggled to do it, and he was probably the best chess player there.

IGN: I would imagine you were well respected by the guys in prison since you were helping them better themselves?

Cohen: Yeah, everyone was very appreciative of the help I was able to give them. It was a good place to work, it sure beat working in the kitchen. It felt like you were working for the fellow inmates instead of the man.

Q &A : Jay Cohen is republished from
Kevin Smith
Kevin Smith