Arrested on a Bet
August 8, 2006; Page A10
David Carruthers was arrested in Dallas on July 16 while waiting with his wife for a connecting flight to Costa Rica, where his company, BetOnSports.com, has operations. He remains in jail while his lawyers negotiate release terms, and federal prosecutors want him held without bail pending a trial, calling him a flight risk. The publicly traded company he used to run fired him two weeks ago and requested that its shares be suspended from the Alternative Investment Market of the London Stock Exchange.
By any measure, this is a case of extraordinary prosecutorial zeal. Mr. Carruthers is a British citizen, just laying over in the U.S. The legal theories under which he is being held and charged are untested, to put it politely. His business is perfectly legal in the U.K.
Mr. Carruthers and others, including BetOnSports.com itself, are charged with conspiring to run an illegal gambling operation under the 1961 Wire Act. Mr. Carruthers, who could face 20 years in prison if convicted, pleaded not guilty last Monday. The business that Mr. Carruthers ran is (or was) an online gambling site that allowed users to place wagers on sports events or play casino-style games for real money. Pursuant to a restraining order from a U.S. judge, the site is currently shut down.
But this was not a furtive or fly-by-night operation. A 2005 reform of gambling laws in Britain legalized online gambling in an attempt to regulate, control and tax it. On this newspaper's Web site in April, Congressman Jim Leach (R., Iowa) engaged Mr. Carruthers in a debate on whether and how online gambling should be regulated in the U.S. Mr. Carruthers declared himself in favor of regulation to protect minors and potential gambling addicts. He added:
"While Rep. Leach maintains that online gambling is illegal in the U.S., the legal issues are not clear. Rep. Leach is relying on an outdated, irrelevant law [the 1961 Wire Act] that is inapplicable and unenforceable for online gambling. That is why we are looking for clear standards, regulations and licensing for what is an everyday entertainment medium enjoyed by millions."
Mr. Carruthers may now get those standards the hard way. Mr. Leach, meanwhile, has promoted through the House a bill that would tighten restrictions on offshore gambling online and forbid U.S. financial firms from processing payments to offshore gambling sites (which many banks already decline to do voluntarily). Senator Jon Kyl (R., Arizona) has been trying, so far unsuccessfully, to push a similar bill through the Senate.
One irony is that Mr. Leach's legislation would expressly carve out gambling that is run by government -- such as lotteries and state-run gambling on horse races. Mr. Leach argues that these enterprises and private casinos are more easily regulated than Web-based businesses, which may be true. But it's also true that they'd rather not have the online competition, which is why most of those "good" gambling operations support suppression of online gambling sites like BetOnSports.
No doubt there is potential for online gambling abuse. But BetOnSports and Mr. Carruthers are not charged with dishonest behavior toward their customers. They are being told that a business they believed was legal was a criminal enterprise even if it was being run in the open. That suggests that prosecutors believe they have the right to enforce compliance with even ambiguous U.S. laws on any business, wherever based, solely because some of the people accessing their site happen to be Americans. As a legal theory, this is a stretch. But as an excuse to incarcerate a foreign national just passing through, it smacks of a politically opportunistic prosecution
August 8, 2006; Page A10
David Carruthers was arrested in Dallas on July 16 while waiting with his wife for a connecting flight to Costa Rica, where his company, BetOnSports.com, has operations. He remains in jail while his lawyers negotiate release terms, and federal prosecutors want him held without bail pending a trial, calling him a flight risk. The publicly traded company he used to run fired him two weeks ago and requested that its shares be suspended from the Alternative Investment Market of the London Stock Exchange.
By any measure, this is a case of extraordinary prosecutorial zeal. Mr. Carruthers is a British citizen, just laying over in the U.S. The legal theories under which he is being held and charged are untested, to put it politely. His business is perfectly legal in the U.K.
Mr. Carruthers and others, including BetOnSports.com itself, are charged with conspiring to run an illegal gambling operation under the 1961 Wire Act. Mr. Carruthers, who could face 20 years in prison if convicted, pleaded not guilty last Monday. The business that Mr. Carruthers ran is (or was) an online gambling site that allowed users to place wagers on sports events or play casino-style games for real money. Pursuant to a restraining order from a U.S. judge, the site is currently shut down.
But this was not a furtive or fly-by-night operation. A 2005 reform of gambling laws in Britain legalized online gambling in an attempt to regulate, control and tax it. On this newspaper's Web site in April, Congressman Jim Leach (R., Iowa) engaged Mr. Carruthers in a debate on whether and how online gambling should be regulated in the U.S. Mr. Carruthers declared himself in favor of regulation to protect minors and potential gambling addicts. He added:
"While Rep. Leach maintains that online gambling is illegal in the U.S., the legal issues are not clear. Rep. Leach is relying on an outdated, irrelevant law [the 1961 Wire Act] that is inapplicable and unenforceable for online gambling. That is why we are looking for clear standards, regulations and licensing for what is an everyday entertainment medium enjoyed by millions."
Mr. Carruthers may now get those standards the hard way. Mr. Leach, meanwhile, has promoted through the House a bill that would tighten restrictions on offshore gambling online and forbid U.S. financial firms from processing payments to offshore gambling sites (which many banks already decline to do voluntarily). Senator Jon Kyl (R., Arizona) has been trying, so far unsuccessfully, to push a similar bill through the Senate.
One irony is that Mr. Leach's legislation would expressly carve out gambling that is run by government -- such as lotteries and state-run gambling on horse races. Mr. Leach argues that these enterprises and private casinos are more easily regulated than Web-based businesses, which may be true. But it's also true that they'd rather not have the online competition, which is why most of those "good" gambling operations support suppression of online gambling sites like BetOnSports.
No doubt there is potential for online gambling abuse. But BetOnSports and Mr. Carruthers are not charged with dishonest behavior toward their customers. They are being told that a business they believed was legal was a criminal enterprise even if it was being run in the open. That suggests that prosecutors believe they have the right to enforce compliance with even ambiguous U.S. laws on any business, wherever based, solely because some of the people accessing their site happen to be Americans. As a legal theory, this is a stretch. But as an excuse to incarcerate a foreign national just passing through, it smacks of a politically opportunistic prosecution
