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Internet Gambling

Why is Washington out to stop it?
Bruce Schoenfeld
From the Print Edition:
Gene Hackman, Sep/Oct 00

(continued from page 3)

Cohen had the marketing insight to target stock traders who might not ever have placed a sports bet. This demographic was far more lucrative than that of the typical sports gambler, and stock traders innately understood the interactive methodology. He established the URL for World Sports Exchange because it was memorable and had a frisson of naughtiness. The Wall Street Journal wrote about them early on, and word of mouth did the rest. The betting volume exceeded their expectations almost immediately. Life was good.

Then the indictments arrived.

Cohen, a stock trader who'd been trained as a nuclear physicist, decided to return to the United States and go to trial. He would draw attention to the hypocrisy of prosecuting Internet gambling and call for regulation. Not yet 30, he looked and sounded good on television. He'd be the articulate voice of World Sports Exchange and the industry beyond. Besides, he didn't believe he'd done anything wrong. He was running a business in a country where that business was legal--like selling Cuban cigars on the streets of Havana. If he had customers who lived in the United States, that shouldn't be his problem. He had faith in the American criminal justice system, he said, and left for the airport. Hours later, he was in custody.

Schillinger was already in his mid-40s. His wife, two children and two step-children were in Antigua with him. He had no interest in returning home to face a trial. "I wouldn't spend one day in jail if you paid me $20 billion," Schillinger says. "I would not get off the plane and be handcuffed and fingerprinted like Jay was for any amount of money." For him, the decision to stay was easy. This was a job of a lifetime, the culmination of a career spent calculating odds. And the money was rolling in.

The country of Antigua, population 68,000, holds a certain cachet in the Internet gambling world. Currently, 57 Antigua-based sports books (and about 48 Antigua-based casino sites that don't include sports) operate on the Internet, making it by far the industry leader. All have been sanctioned by the Antiguan government, which gets a $75,000 annual licensing fee from each.

Nearly half the virtual casinos on the Web operate with an Antiguan license, which means there are plenty that don't. As of late 1999, according to several published sources, there were 40 gaming sites--including sports books, blackjack sites, electronic roulette and beyond--based in Costa Rica; 28 in Dominica; 10 in St. Kitts; 10 in Curaçao; and eight in the Dominican Republic. Australia and some small islands off the English coastline added several more. Many of these countries require no licensing application at all. Just pay a fee, and get approved.

Yet merely because an Internet casino claims to be sanctioned by Antigua doesn't mean that gamblers are necessarily safe, though winners who don't get paid or have other complaints can appeal to the Antiguan government. It promises to investigate and, if necessary, prosecute the violator. A toll-free number is provided for inquiries: 1-888-734-1919. "We pay for you to call up and tell us if our licensees are doing wrong," said Gyneth A. McAllister, who recently resigned the title of Antigua's Director of Offshore Gaming.

Sometimes, though, the money simply isn't there anymore, or the operators have fled to points unknown, although the $75,000 fee makes that less likely. Sometimes the Web site might have claimed to be licensed in Antigua, but in fact had nothing to do with the country. "People lie all the time and say that they're in Antigua," McAllister admitted. "There's nothing to stop you from doing that. All we can do is try to regulate the ones that are here." HBO's "Real Sports" traced one virtual casino that purported to be Caribbean-based to a row house in Philadelphia.

The most reputable sites provide verifiable local addresses in their country of origin and, most importantly, they stay active for years. "If we ever once stiffed a winner, you'd hear about it in chat rooms all over the Internet," says Schillinger. As with any product or service on the Web, a user's best protection is to inquire.

The Antigua sanction does carry some meaning, though perhaps not quite as much as the country might like to believe. "We have raised the standard higher than anywhere else," said McAllister. "We do background checks. We talk to the FBI, Interpol, Scotland Yard. We have one sports book on the island that was audited by PricewaterhouseCoopers. They want regulation. All those that don't meet our standards go to Costa Rica and other places, where you only have to write a check to set up an office. We're separating out the sheep from the goats."

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