Just got back from the casino affiliate convention.Lawsuits regarding online gambling

Just spent two days at the Excalibur for the casino affiliate convention. I met representatives from sports books, casinos, poker rooms, other affiliate sites, lawyers, search engines, and more...

Final talk was about the status of lawuits in America regarding online gambling. Michael Corfman of Casino City (who is suing the Justice Department) and David Carruthers from BetOnSports spoke.

Corfman has incredible confidence in the suit. He says that it's a slam dunk and that the government has known all along that what they were doing is unconstitutional. The case itself may take a year, but they have one of the top Constitutional attorneys in the United States handling the case. He's successfully argued 3 times in front of the US Supreme Court and he was the one who fought for Bush to win the Florida recount.

What this will mean, if won, succesffuly, is that US companies have the Constitutional right to advertise for online gambling sites under the First Amendment. Google, Overture, Yahoo and others will once again open up that revenue stream. They said even Paypal could be possible.

One thing that won't be determined by this is the legality of online gambling itself; this case is about the right to advertise online gambling. Having said that, the bills in Congress to outlaw or restrict online gambling actually work against the government. If it is already illegal, why the need to pass a law against it or restricting it? By trying to write laws, they actually legitimize the activity as being legal.

What I think is that this will win. US sites will be able to advertise online gambling sites, but that online gambling is decades away from being allowed and regulated in the United States. Our country's puritanical mindset just can't mentally handle the positive ramifications that would ensue.

Going back to Shrink's post about which party is better for online gambling, I would have said Democrats a while ago because Ashcroft is known to despise the industry, but I now lean towards the Republicans for three reasons. 1) The Democrats lead candidate for Attorney General is Eliot Spitzer who has a hard-on for online gambling as well. 2) This lawsuit has been registered against Ashcroft and his staff. A change in staff might delay this lawsuit from being pursued or might even shelf it. 3) The lead attorney in the case is the one who got Bush the Presidency.

Kind of a hodgepodge of info, but overall I feel positive about the current situation. I wish our country could see the benefits of legalizing, regulating, and taxing online gambling, but that's not going to happen any time soon. In the mean time, $100 billion is being gambled on the streets in this country, illegally. The parallels between our current policy on Internet gambling and the Prohibition of the early 1900s are amazingly strong.

Thanks DAVE, great report!

WOW dave a glimmer of hope thanks for the news

I've said this a few times. Spitzer does not want to be attorney general, it's a dead end job. Where besides speculation here has anyone said he will be AG?

It's commmon knowledge in NY that he has his sights set on the governor's office.

Also, there is a big difference between free speech and commercial speech. The courts tend to ignore the law and look at where they want the case to go, then reverse engineer the opinion from there.

what i always find funny is the offshore guys want to make internet gambling legal.except the minute it becomes legal how long do you think it will take before gambling corp. in the u.s. that will be by law regulated will come in and put the offshore operator out of business.and please dont tell me people will stay play offshore.

I definitely respect your opinion Jay... especially since you're a victim of the courts. Maybe I'm riding on high after the speech, but I'm still going to be optimistic. I take it you think the Dems taking office would be better for this industry. Certainly 4 more years of Bush would lead to an even more conservative Court. That wouldn't help.

I agree, legislation in the US to allow Internet gambling would cause a huge scramble offshore. The big boys would survive I think, but many smaller books might just fold up with customers money. It's still the right thing to do.

I hear in England, they have a sports betting office on every street corner. What a world of difference it is over there.

miked429 said:

what i always find funny is the offshore guys want to make internet gambling legal.except the minute it becomes legal how long do you think it will take before gambling corp. in the u.s. that will be by law regulated will come in and put the offshore operator out of business.and please dont tell me people will stay play offshore.

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If legalized in the US I have to imagine the taxes will hold the onshore books down. whether the feds can figure out how to impose "tariffs" on offshore operators is another question, but that is easier said than done.

drunkguy i think the taxes would be the same as if you were to win in any casino or sportsbook today.but the thing the u.s. internet casino would gain in customers knowing you will be paid and the games arent rigged would crush the offshore industry.imo

David,

I get the same way. And I try to be optimistic as well despite what has happened to me.

The democrats would be better than the republicans. Gambling doesn't go well with the right wing social agenda of this administration. Ashcroft was a co-sponsor of the original Kyl bill when he was in the Senate before he lost to a dead man.

miked429 said:

drunkguy i think the taxes would be the same as if you were to win in any casino or sportsbook today.but the thing the u.s. internet casino would gain in customers knowing you will be paid and the games arent rigged would crush the offshore industry.imo

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I am thinking of corporate taxes/licensing fees paid by the books. Taxes would possibly be comparable as land based "brick-and-mortar" casinos. However, taxes on US-based internet casinos/books would probably be much more than offshore books. why don't the Las vegas casino-based books offer reduced juice, sign-up bonuses, and competitive lines? Likely because their profits are small enough as is.

I agree that you MAY have an infux of customers, but most of the big money bettors are already playing offshore and would not play at US-based unless there was an advantage to doing so. I can't see people dropping Pinnacle so they can play with the Stardust online at -110 on all sides with no bonus or other perks (never mind other regulations that would surely come into play).

There certainly is some merit in you saying that the trust issue will drive revenue. My opinion is that it is going to be primarily the $50 and $100 bettors, and that the revenue seen would hardly be enough to be profitable once Uncle Sam starts taking his share out of the profits.

Corfman has incredible confidence in the suit. He says that it's a slam dunk and that the government has known all along that what they were doing is unconstitutional

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Keep in mind who this is coming from. I would be extremely surprised to hear Corfman or Carruthers say that this suit has no merit and will be shot down without issue. That's like Kobe saying there's a lot of evidence and he is probably going to lose his civil case.

At a casino affiliate convention, I don't expect anyone to say, "Hey, listen, you might be prosecuted for doing this". Would kind of be a downer for all their affiliates. I take these comments with a grain of salt and see them more asd "cheerleading" for thier affiliate programs rather than any real commentary on actual legal probabilities.

I have it on very good authority, maybe one of the best sources around, that the funding provision will be stripped possibly tomorrow. I have also heard that Casino City's case is probably close to a slam dunk because they have carefully crafted it. Where and how they filed it should play some role, but my source would not elaborate.

As for regulation, remember we have a regulated jurisdiction, Nevada. There the tax is 6.75% plus a .25% federal tax. That is tiny compared to the taxes on gaming nationwide, with the average rate coming in north of 20%. Now considering how people in this forum complain to no end about Nevada sports books, how do you figure people will be happy with books that face 3 times as much tax? At the end of the day I suspect David Carruthers and his employer have the insight that should regulation be in the cards someday, extremely few of the current operators would survive. They are hoping to be one of them. The only way regulated sports betting would survive is if very few competitors competed in the space. My guess is that it might not even come to that, but be a state lottery run game where approved. What a disaster that will be.

I have written plenty on this before and I make my assumptions from talking to people in the industry, but taking their arguments at face value. They are biased and of course positive, and I agree they miss the big picture quite often. Regulation is something all claim to desire, but they either aren't being 100% truthful or are hopeful beyond repair. The type of regime that would be allowed here is nothing they would be taking part of. State regulators don't forgive prior actions and will treat the vast majority of people in them like criminals. Regulators don't need courts to make their decisions, they can just screw people over if they feel like it. I went to a little bit of the same conference as David did and am now attending another and I hear a lot of wishful thinking and just a tiny bit of reality at them. When people accept that their positions and businesses aren't anything that resemble what sanctioned gambling a government would allow, we could all move forward in this discussion and come to some simple conclusions:

1. Regulated gambling for sports bettors would make things worse for us.
2. The companies you play with now mostly will go out of business or be bought out in the future.
3. The future of sports betting, while still positive, isn't nothing but blue sky. Our best case scenario is status quo. I am a believer that we can keep status quo for some time, but not forever.

The end losers among us are the people with abilities in sports betting. The squares won't care or notice the worse odds. They might be happy with the lack of a stigma on their activity. The people that casually bet won't make enough play to be hurt, the takeout going up on modestly affects them. The people that get hurt are high volume winners. No way around that.

David Matthews said:

I hear in England, they have a sports betting office on every street corner. What a world of difference it is over there.

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Not exactly every street corner but certainly on every major high street.

The village I come from has one Church of England, one Protestant chapel, three pubs and one betting office.

The book is next door to a pub. When betting offices were legalized it became necessary to step out of the pub to place a bet rather than speak to the pub's owner to put it on his telephone account, which were legal.