Gaming Law International

California reintroduces bill to allow sports betting

Today, the California ] legislature reintroduced a bill to legalize sports betting at state racinos, casinos and other gaming establishments on professional and colleage sports events, except for college sports events in California. If the bill is passed, it would still need to be approved federally.

Nevada moves to legislate online poker

The Governor of Nevada, Brian Sandoval, in Tuesday asked the state legislature to approve a bill that would allow Nevada to enter into agreements with other states to offer online gambling, specifically poker, and that would also repeal an existing law prohibiting interstate gambling until such time as a federal law was enacted to address the issue. Nevada does not want to be left behind it the US moves to allow online poker. 

DoubleDown Casino lands in Las Vegas

International Game Technology (IGT) today announced a land-based partnership with the Hard Rock Hotel & Casino in Las Vegas for its DoubleDown casino application. The application will be hosted on the Hard Rock's website and will give gamblers a chance to compete online for virtual chips. First-time users of the appication will receive USD$1 million in virtual chips to start playing. DoubleDown casino is a free Internet-based gambling website, purported to be the world's largest online gambling website.

Absolute Poker founder pleads guilty

Brent Beckley, one of the founders of Absolute Poker, pleaded guilty in Manhattan to conspiracy to commit bank fraud, wire fraud and conspiracy to violate the Unlawful Internet Gambling Enforcement Act and is expected to be sentenced in April 2012. “I knew that it was illegal to accept credit cards from players to gamble on the Internet,” Beckley said to the judge before his plea. “I knew that it was illegal to deceive the banks in this way.” 

In April 2011, the U.S. indicted  eleven people associated with PokerStars, Full Tilt Poker and Absolute Poker, including Canadians Isai Scheinberg, Nelson Burtnick and Ryan Lang. 

The indictment alleged that:

• Among others, Beckley deceived, or directed others to deceive, U.S. banks into processing billions of dollars in payments by disguising the funds as payments to fictitious merchants;
• Beckley paid certain payment processors to lie to U.S. banks about the nature of their business and the transactions processed through the U.S. financial system and to disguise the payments as non-gambling related proceeds;
• In order to continue to accept Visa and MasterCard payments from U.S. customers for online gambling, the defendants set up phony entities to be able to have credit card merchant numbers assigned to those entities that were not associated with online gambling to circumvent regulations implemented by Visa and MasterCard to deny all authorization requests from online gambling merchants. Because the risk control and anti-money laundering systems at the banks could frequently detect the activity associated with the phony merchants as illegal gambling activity, different phony entities were continually being created to obtain merchant codes to process payments;
• The defendants developed stored value cards (also called prepaid access) such as prepaid debit and phone cards that could be loaded with funds from a U.S. customer’s Visa or MasterCard unassociated with a merchant code so that the cards could be used to transfer funds to the online poker sites and they also arranged for false e-check processing to facilitate gambling from U.S. customers; and
• The defendants invested in small local banks in the U.S. that were facing financial difficulty so that they could control their decisions with respect to the processing of gambling proceeds. In exchange, the banks or their officers, were given certain kick-backs from the funds processed.

Another defendant, Bradley Franzen, pleaded guilty in May 2011.

American poker players said to be immigrating to Canada - 10 tips on doing it right for poker players

According to a report posted on a popular Internet based poker website, several prominent American poker players are relocating to Canada from the United States including Olivier Busquet, Daniel Negreanu, Phil Galfond and Daniel Cates following the U.S. indictment of 11 people associated with PokerStars, Full Tilt Poker and Absolute Poker in April.

Apparently, Canada is viewed as a more secure location for online gambling. The report also indicated that one of the players, Daniel Cates, was previously denied entry to Canada. He apparently tweeted before arriving at the U.S.- Canada border that he intended to immigrate here without taking any of the legal steps required in advance to apply for a work permit, or as an investor to Canada. 

For those of you contemplating a similar move to Canada to pursue an online gambling career, here are some tips for doing it right:

1. Hire a lawyer located in the city in which you wish to relocate - consider engaging a lawyer who understands the online nature your work because ultimately that lawyer will have to prepare your submission to Citizenship and Immgration Canada and they should understand the business (e.g. where the funds originate, how you get paid, etc.);
2. With your lawyer, explore the immgration category that best applies to your special set of poker playing skills. The likely categories will be business class and provincial nominee program; 
3. If your partner or spouse is likely to be a stronger immigrant applicant, have your partner be the primary applicant for immigration purposes; 
4. Visit Canada as a business visitor a few times to meet with your lawyer and familiarize yourself with the culture and your future working environment. If you are setting up a business, it's a good time to come here and look into incorporation and tax options to maximize those structures at the incorporation phase; 
5. A criminal record will have to be dealt with long before you immigrate to Canada - if it involves a DUI, get it resolved in conjunction with your immigration process;
6. Do not misrepresent any facts on your immigration application or at any time while entering Canada to visit;
7. Do not publicly comment about your intended immigration to Canada at any time;
8. Do not negatively comment about U.S. and Canadian laws that criminalize the online poker sites that offer their services to American or Canadian residents. Immigration officials will conduct an online search of you and any indication that you do not respect the rule of law will not be well received;
9. Make sure you understand tax advice you receive for your prospective activities in Canada. Generally speaking, gambling wins in Canada are tax-free unless the wins are professional income. The distinction appears to be whether you are a casual player or whether you play as your primary occupation; and
10. Do not tweet that you are immigrating to Canada and without applying in advance, show up at the border expecting to receive a green light to enter. Unless you qualify as a refugee, you must apply to enter Canada in advance if you wish to work, relocate or immigrate here. 

Details of indictment against principals of PokerStars, Full Tilt Poker and Absolute Poker

The indictment in the U.S. against eleven persons associated with PokerStars, Full Tilt Poker and Absolute Poker, including Canadians Isai Scheinberg, Nelson Burtnick and Ryan Lang, has been made public. The indictment alleges as follows:

• The principals of PokerStars (Isai Scheinberg and Paul Tate), Absolute Poker (Scott Tom and Brent Beckley) and Full Tilt Poker (Raymond Bitar and Nelson Burtnick) deceived or directed others to deceive U.S. banks into processing billions of dollars in payments by disguising the funds as payments to fictitious merchants;
• Scheinberg, Bitar, Beckley, Burtnick and Tate paid certain payment processors, including Canadian Ryan Lang, to lie to U.S. banks about the nature of their business and the transactions processed through the U.S. financial system and to disguise the payments as non-gambling related proceeds;
• In order to continue to accept Visa and MasterCard payments from U.S. customers for online gambling, the defendants set up phony entities to be able to have credit card merchant numbers assigned to those entities that were not associated with online gambling to circumvent regulations implemented by Visa and MasterCard to deny all authorization requests from online gambling merchants. Because the risk control and anti-money laundering systems at the banks could frequently detect the activity associated with the phony merchants as illegal gambling activity, different phony entities were continually being created to obtain merchant codes to process payments;
• The defendants developed stored value cards (also called prepaid access) such as prepaid debit and phone cards that could be loaded with funds from a U.S. customer's Visa or MasterCard unassociated with a merchant code so that the cards could be used to transfer funds to the online poker sites and they also arranged for false e-check processing to facilitate gambling from U.S. customers; and
• The defendants invested in small local banks in the U.S. that were facing financial difficulty so that they could control their decisions with respect to the processing of gambling proceeds. In exchange, the banks or their officers, were given certain kick-backs from the funds processed.

Under U.S. anti-money laundering legislation, a person who launders proceeds of crime or participates in a money laundering transaction greater than US$10,000, is liable on conviction to a sentence of up to 20 years and a fine of twice the value of the funds laundered. The U.S. government estimates that billions of dollars were processed in the U.S. by PokerStars, Full Tilt Poker and Absolute Poker as described above between November 2006 and March 2011. The defendants are charged with, among other crimes, laundering proceeds of crime and participating in financial transactions knowing that the transactions involved criminal proceeds. A total of US$4.5 billion is being sought by civil forfeiture.  

3 Canadians affiliated with PokerStars, Full Tilt Poker and Absolute Poker indicted in U.S. on illegal gambling and anti-money laundering charges

The U.S. Attorney and the FBI today unsealed an indictment today charging 3 Canadians with money laundering, bank fraud and illegal gambling in connection with the operation of Internet gambling websites that provide online gambling services to U.S. residents. Eight other individuals, mostly residents of the U.S., were also indicted. The defendants include the founders of three of the largest Internet gambling sites - PokerStars, Full Tilt Poker and Absolute Poker.

The 3 Canadians indicted are:

• Isai Scheinberg, currently living in the Isle of Man;
• Nelson Burtnick, currently living in Ireland; and
• Ryan Lang, currently living in Canada.

The U.S. has sought the assistance of foreign law enforcement agencies for the arrests of Lang, Burtnick and Scheinberg.

The indictment alleges that the defendants fraudulently circumvented anti-money laundering laws and the Unlawful Internet Gambling Enforcement Act (UIGEA) by disguising payments from U.S. gamblers as payments to fictitious online merchants selling other goods and services, lied to banks about the nature of their businesses and set up fictitious corporations, in order to open bank accounts to accept bets from U.S. players. Scheinberg, one of the founders of PokerStars, is alleged to have acquired a 30% interest in a small bank in Utah called SunFirst Bank in exchange for the Bank agreeing to process payments for PokerStars.

The U.S. also filed a civil complaint against the individual defendants and the poker companies to recover US$3 billion in civil penalties for money laundering. Asset restraining orders were issued against more than 76 bank accounts in 14 countries, including Canada, to freeze the accounts on the basis that the funds are proceeds of crime.

Five Internet domain names used by the poker companies to host the online gambling sites were also seized.

The indictment by the U.S. Attorney General on anti-money laundering law violations is a clever legal manoeuvre that will allow them to prosecute the defendants, secure the extradition of foreign defendants and retain frozen assets with much greater success than if the indictment was based solely on violations of the UIGEA. Most foreign Internet gambling site operators have little to no understanding of international anti-money laundering laws.

The defendants face up to 20 years in prison on the money laundering charges alone.

Canada increases severity of gambling offences

Canada has introduced amendments to the Criminal Code regulations to re-categorize certain gambling offences as "serious offences" that carry a longer term of imprisonment. The gambling offences that are now "serious" include:

• keeping a common gaming house (a place kept or used for gambling);
• permitting a place to be used for gambling;
• allowing a place to be used for betting or selling a pool;
• importing, making, buying, keeping or allowing to be kept any device for gambling, betting or pool making;
• controlling any money or property related to a gambling offence;
• recording or registering bets;
• engaging in book making or pool selling;
• entering into an agreement for gambling privileges or for information for assisting gambling;
• printing or providing information (such as on the Internet) for any type of gambling in or outside Canada;
• importing into Canada information that promotes gambling whether the gambling is inside or outside Canada;
• advertising, publishing, offering, inducing or inviting the results of a contest or any contingency; and
• transmitting or receiving messages that convey information related to gambling.

The amendments are touted as necessary for countering organized crime, however, those related to gambling have no specific application to organized crime and are of much more general application.

The starting point under Canadian law is that gambling is a common and public nuisance, contrary to public policy, inherently criminal in nature and prohibited under the Criminal Code. The Criminal Code provides for certain exemptions, making lawful certain gaming activities where prescribed conditions are met. Gambling activities that do not fall clearly within the permitted exemptions contravene the Criminal Code prohibition and are illegal.  The Criminal Code permits four categories of groups or individuals to legally operate gambling in Canada: provincial governments; charitable and religious organizations; agricultural fairs; and the federal government in respect of pari-mutuel betting on horse races.

The amendments, above, are significant because they increase the severity of the general aiding and abetting of illegal gambling offences and capture a broad range of prohibited conduct, including gambling activity conducted over the Internet by foreign-based operators that target, market or provide gambling-related services to persons in Canada without authorization.

Legalized Internet gambling starts in France

France opened up its online sports betting and horse racing industry a few weeks ago in time to coincide with the World Cup. Thus far, 17 licences have been issued to 11 operators including Bwin Interactive Entertainment AG from Austria and BetClic Enterprises Ltd. from Malta. Internet poker is in the process of being approved as well in France and may be available by the end of June. In France, the government taxes the total amount of money gambled at 8.8% and there are predictions that with such a high tax rate, the new online gambling sites may not be economically viable. By contrast, in Canada the government does not tax money gambled or gambling wins from legalized gambling, except in the case of professional gamblers. The only forms of legalized gambling in Canada are those that are licensed, registered and regulated by governments in Canada.     

European Court upholds Internet gambling ban in member states

The Court of Justice of the European Union has ruled that an EU member can ban a foreign Internet gambling company based in another member state from operating within its border to protect its citizens against fraud and other crime associated with Internet gambling. The ruling follows a court adviser's March opinion which stated that recognition of gambling licenses across member states is not viable under the EU's current system. 

In the decision, the Court held that "because of the lack of direct contact between consumer and operator, games of chance accessible via the Internet involve different and more substantial risks of fraud by operators against consumers compared with the traditional markets for such games".

The decision confirms that the Netherlands has jurisdiction to prohibit Internet gambling sites based in the UK from offering Internet gambling services to its citizens. The Court stated that: "A member state is entitled to take the view that the mere fact than an operator ...lawfully offers services via the Internet in another member state is not a sufficient assurance that national consumers will be protected."

The ruling is not unexpected. Foreign Internet gambling companies that offer Internet gambling in countries where they are not legally authorized to operate are essentially unregulated and unsupervised in those jurisdictions. 

Canadian payment processor pleads guilty in U.S.

Douglas Rennick, the Alberta man who was accused of laundering US$350 million in illegal Internet gambling proceeds in the United States last year, pleaded guilty in a federal court in Manhattan to a lesser charge of one count of transmitting wagering information in the U.S. From 2007 to 2009, Rennick opened a number of bank accounts in the U.S. under various corporate entities to receive funds from foreign Internet gambling companies and disburse the funds to U.S. residents. Rennick received about US$350 million from bank accounts in Cyprus used by the offshore Internet gambling companies that he did business with. 

Australian indicted for laundering US$500 million in Internet gambling proceeds

The US Attorney's Office announced today that an Australian foreign national, Daniel Tzvetkoff, was arrested in Las Vegas today on charges that he assisted illegal Internet gambling companies process about US$500 million in transactions for American gamblers. Tzvetkoff operated a payment processing company called Intabill Inc. Tzvetkoff was charged with gambling conspiracy, bank fraud conspiracy, money laundering conspiracy and one count of money laundering. The indictment was unsealed in Manhattan federal court today. It alleges that Tzvetkoff convinced banks to provide services through the Automated Clearing House System to offshore online gambling companies and that he disguised the recipients so banks would not know they were online gambling companies. 

In an e-mail, one of Tzvetkoff's alleged co-conspirators told him he had hired programmers to develop "unique" websites for the shell companies so that if someone was "checking the companies out there is absolutely no way to tie the companies together." Tzvetkoff replied that it was "perfect." If convicted, Tzvetkoff faces a term of imprisonment of up to 75 years.

Survey says Canadians unaware Internet gambling from foreign sites is illegal

According to a survey conducted by Ipsos Reid, only 23% of Canadians and 37% of Americans, respectively, know that Internet gambling from foreign sites is illegal. Ipsos Reid said the survey shows that authorities are doing a poor job of informing citizens that Internet gambling provided by foreign operators is illegal. The difference among Canadian and American responses can be explained by the fact that the U.S., unlike Canada, has actively prosecuted foreign Internet gambling operators for several years. By way of clarification, it should be noted that in Canada, it is the provision of Internet gambling by non-government entities that renders the activity illegal in Canada.

French to permit (and regulate) Internet gambling

The French government has ended a long-standing ban prohibiting Internet gambling in France and has approved regulations that will grant licenses to foreign companies seeking to offer Internet gambling services to French citizens. Under the new regulations, companies will have to establish separate sites for French customers and provide permanent records on players to the government. There does not appear to be any discussion occurring about which companies can provide online gambling services to French citizens under the new regulations or whether proposed service providers will be subject to investigations to ensure the integrity of the gaming industry as is customary for land based casino operators in Canada and the US.

German national in Florida pleads guilty to operating an unlicensed money transmitting business

Michael Schuett, the German national living in Florida who was arrested by the US Secret Service on February 18, 2010 for money laundering and operating an unlicensed money transmittal business that serviced online gamblers, has pleaded guilty to the lesser charge of operating an unlicensed money transmitting business. Schuett incorporated numerous companies which received and transmitted about $70 million for online gambling. None of his companies were registered with the Office of Financial Regulation or FinCEN. The US government seized over $2.7 million in assets from Schuett's numerous bank accounts in Florida as well as a Porsche and Audi. The US Attorney is seeking a sentence of up to five years in federal prison. Our earlier post describing the original criminal complaint is here. 

Popular online gambling domains in jeopardy

Kentucky is one step closer to blocking online gambling activities in that state. The Kentucky Supreme Court ruled today that two groups purporting to represent several offshore Internet gambling sites whose domains were the subject of a state seizure in September 2008, did not have standing in the litigation. The domains that Kentucky is seeking to seize include absolutepoker.com, bodoglife.com, goldencasino.com, sportsbook.com, playersonly.com, sportsinteraction.com, mysportsbook.com, linesmaker.com and vicsbingo.com.

Several men indicted in Kansas City for online gambling scheme

Four Kansas City area men are accused of operating a multi-million dollar Internet gambling scheme in a federal indictment recently unsealed. Gerlarmo Cammisano, 56, James J. Moretina, 60, Michael J. Lombardo, 54, and James L. Dicapo, 57, appeared in a US court accused of operating an Internet sports bookmaking business that attracted almost $3.6 million in bets between March 2006 and April 2009. Two companies also were charged - Phoenix International Teleport Satellite Services of Chandler, Ariz., and Elite Sports, a company in San Jose, Costa Rica.

Internet gambling site allegedly connected to mafia

According to UK news reports, the Internet gambling company Paradise Bet Ltd., that operated the foreign Internet gambling site paradisebet.com, is connected to the Italian Parisi mafia clan. In December 2009, Italian police froze the assets of the London-based gambling site as part of a three-year operation called "Domino" and seized €220 million worth of assets including 227 properties, 680 bank accounts, 61 luxury cars, 71 horses and 35 businesses in Italy and the UK. Savino (or Savinoccio) Parisi, the 48-year-old apparent head of the clan, was among 74 people arrested by Italian officials in Bari, Italy where Paradise Bet operated an office. He is accused of laundering the proceeds of crime, attempted murder, drug trafficking, loan sharking and interfering with bids.

 

Two former Neteller executives arrested in U.S.

The two Canadian founders and former directors of Neteller PLC, the Internet payment processing company, were arrested in the United States today. John David Lefebre and Stephen Eric Lawrence, both originally from Calgary, Alberta, were charged with allegedly laundering billions of dollars in gambling proceeds. Lefebre was arrested yesterday in Malibu, California and Lawrence was arrested in the U.S. Virgin Islands. The criminal complaints against them were unsealed in U.S. District Court in Manhattan yesterday. The press release from the United States Attorney General's Office is available here.

Download ag_statement.pdf

U.S. Senate approves anti-Internet gambling legislation

As expected, the U.S. Senate approved the proposed Unlawful Internet Gambling Enforcement Act of 2006 (the "Act") today as part of the adoption of the Safe Port Act, H.R. 4954. The Act amends Chapter 53 of Title 31 of the United States Code (the "Code") You can download a copy here Download unlawful_internet_gambling_enforcement_act.pdf. Some of the key amendments are as follows:

Definitions

Several new terms are defined in the Code and are intended to capture all the components of the activity of Internet gambling from the placing of bets, the handling of funds and the use of the Internet.

(a) "Bet or Wager" (i) means to stake something of value on the outcome of a contest of others, a sporting event or game of chance on the understanding that either the better or someone else will receive something of value in the event of a certain outcome; (ii) includes purchasing a chance or