The Ugly Details Behind the AWI 'Sting'

The Nevada State Gaming Control Board filed a complaint November 16 with the Gaming Commission against American Wagering for allegedly accepting Internet wagers from a bettor located in Nevada. We've gotten our hands on a copy of the complaint, and you won't believe what transpired.

First, a little background on AWI: American Wagering Inc., a land-based sportsbook operator licensed in Nevada capitalized on Internet gambling opportunities via a subsidiary, MegaSports Pty. Ltd. in Australia. With a license granted by the Australian Capital Territory, MegaSports launched its online sportsbook at www.megasports.com.au in May 1999 under the provision, of course, that it doesn't take bets from anyone located in the U.S.; otherwise it would jeopardize its license in Nevada.

The MegaSports website has controls in place designed to block wagers made by persons located in the U.S. First, its computers are equipped with software that effectively blocks all persons accessing the Web via Internet Service Providers (ISPs) based in the U.S., making it impossible for them to register. It also requires bettors to provide an address, and anyone who enters a U.S. address is automatically blocked as well. Additionally, the service requires bettors to provide at least two forms of identification upon registration.

The Gaming Control Board, responsible for monitoring the conduct of all Nevada licensees, sought to infiltrate the controls established by American Wagering and went to great lengths to do so. Taking a page from the World Interactive Gaming Corp. investigation in New York (in which agents based in New York claimed to be in Nevada), the Board had an agent, located in Nevada, register using a bogus Canadian address. The agent, using the name James Lawrence, was able to register because he was using a Canadian ISP. The agent then deposited $100 via credit card and placed wagers on several Major League Baseball games between July 23 and August 4, 1999.

On August 5, the agent sent AWI an email requesting that his winnings be sent to a U.S. address. On the 6th, the agent telephoned MegaSports in Australia and was told by an operator that funds could be sent anywhere in the world, but the bets must take place in the U.S. The operator then asked the agent to send a birth certificate.

The agent sent a fabricated birth certificate via fax--which, according a spokesperson at American Wagering, was poorly doctored--on August 9. MegaSports consequently locked the account on August 10.

AWI President Vic Salerno sent a letter to James Lawrence on or around August 19 explaining that his account had been rescinded and that his original deposit had been refunded.

Despite precautionary measures taken by MegaSports, which ultimately led to the cancellation of the account, and despite the fact that the agent(s) clearly put forth several efforts to deceive the operators, the Board says that AWI violated Nevada gaming regulations by accepting the wagers from a bettor located in the U.S. In it's complaint the Board contends that "the failure of MegaSports Australia to verify the identity of the Board agent within 10 days of the account being opened, and allowing 12 separate wagers to be placed in the interim, was a violation of the internal control procedures of MegaSports Australia." Further, "AWI failed to exercise discretion and sound judgment to prevent incidents which might reflect on the repute of the State of Nevada and act as a detriment to the development of the gaining industry."

The board is asking the Nevada Gaming Commission to take disciplinary action, which could consist of fines or even the suspension of AWI's license. AWI has 20 days to respond to the complaint. Once it has responded, the Commission has 10 days to set a date for a hearing. In the meantime, a settlement is possible, although an AWI spokesperson indicated that the company intends to refute the charges.

The Gaming Control Board declined to comment on the case.

Click here to view the Gaming Control Board's complaint, submitted to the Gaming Commission on December 16, 1999.