Editorial - No Conspiracy Here, Just the Flexing of Muscles

22 October 2003

For conspiracy theorists, news over the last the couple of weeks in the interactive gaming industry has been enough to fill hours upon hours of discussion in a dark basement of an underground coffee shop.

The U.S. District Court in the Eastern District of Missouri has subpoenaed a host of Internet sites, media outlets and other companies in an effort to get as much information as possible about the advertising practices of the online casinos and sports books . A whirlwind buzz has subsequently made its rounds through chat rooms, Internet forums, e-mails, and phone calls as those in the industry tried to make heads or tails out of the pending grand jury investigation.

The reaction to the news may be a bigger story than the investigation itself.

For years the industry has had its fair share of paranoid souls, and much of this paranoia is grounded in the legal quagmire that is Internet gambling. Good cases can be made on each side pointing to why the activity is either legal or illegal in the U.S.

Despite the worthy efforts of the conservative right in Congress, a prohibition bill has yet to pass.

It was that desire that sent many in the industry into overdrive over what could be drawn from the grand jury investigation.

Some wondered if the subpoenas were the direct result of higher-ups in the Department of Justice wanting to see Internet gambling ended once and for all.

Others guessed that the investigation was started because supporters of prohibition in Washington realized they didn't have much of a chance of getting a bill passed. Thus, if they couldn't stop the industry legislatively they would usurp their power in the DOJ to get something done.

Or maybe the investigation is a scare tactic by the federal government to keep an emboldened industry in check, some would suggest. After all, you can hardly turn the radio dial without catching an advertisement for an Internet casino or sports book. Maybe someone is Washington didn't like to be shown up with the legality of the industry in question.

A handful of "webmasters" have found themselves in the fetal position, in a padded room wetting themselves over the news because they figure this is the end of the road for them.

And of course there are those who even think the grand jury investigation is just the tip of the iceberg. They're convinced the only reason the subpoenas were issued was to get as much detailed information about the people behind the sites, and the companies that market them, to be used later for a major sting operation.

The crazy thing about all this is that no one knows the real reason behind the investigation or what will come of it.

In the short term, many radio stations and popular radio shows have pulled advertising from online casinos and sports books. Many portal sites and the leading handicapping services, which cater to sports bettors and are loaded with links and banner ads to online sports books, have taken down such ads.

The decision was difficult for some stations because in these hard economic times, finding a client to bankroll five months of weekly advertising--during the height of the NFL season, of course--isn't exactly easy.

No charges have been filed in relation to the investigation yet, and many legal experts predict that if they were, they wouldn't stick. Aiding and abetting can't be argued in this case, they say.

Just like no one knows the real reason behind the investigation, it's too early to tell whether this will have any long-term implications for the industry. Either way, it isn't the first storm operators and players have had to weather, and it probably won't be the last.

Most operators shouldn't have much to worry about, other than figuring out new outlets for marketing their products. Any decent lawyer would have advised against setting up Internet gambling operations in the United States. Precedence shows that it's nearly impossible for U.S. jurisdictions to bring offshore operators to court, unless of course your name is Jay Cohen.

Even the worst-case scenario wouldn't mean the death of the industry. Assuming the government is able to concoct some successful argument that the advertising of online casinos and sports books is illegal, that doesn't mean bettors still won't use them and find them through other means.

Meanwhile, it's probably about time the industry takes a step back, relaxes and takes a deep breath. Let the government move forward with its witch-hunt and wait for the Oliver Stone movie to come out.

Nobody knows where Kevin Smith came from. He simply showed up one day and started writing articles for IGN. We liked him, so we decided to keep him. We think you'll like him too. Kevin can be reached at kevin@igamingnews.com.