Sports Betting, Spam and Taxes in the USA
Sen. John McCain, R-Ariz., who has every year since 2000 introduced legislation that would prohibit Nevada sports books from taking wagers on college sports, told the Las Vegas Review Journal last week that he is not certain whether he will introduce his bill again this year. Based on the legislation's track record, he also doubts that such a bill could pass unless a betting or match-fixing scandal was revealed in American college sports. "Until there's a scandal, we won't pass it. The gambling interests are too powerful. But there will be another scandal," he said.
. . . The District of Columbia and 40 U.S. states, which together form the Streamlined Sales Tax Project (SSTP), are attempting to develop measures to design, test and implement a system that would simplify sales and use taxes. To that that end, the SSTP issued a request in November for bids on Web-based networks and software that would make it easier for Internet merchants to collect sales tax. A second request was made in January for bids on building a registration system that would enable Internet merchants to declare intentions to collect and remit taxes on sales to customers who live in SSTP states.
. . . Jason Smathers, the former AOL employee who stole a list of 92 million customer names and e-mail addresses and then sold the data to the owner of an online gambling site for $28,000 in June 2004, has for the second time pleaded guilty to violations of the U.S. CAN-SPAM Act. Smathers first pleaded guilty in December, but U.S. District Judge Alvin Hellerstein refused to accept the plea because he was not certain that Smathers had actually deceived anyone, which is required for an action to violate the law. On Friday, however, Judge Hellerstein accepted Smathers' guilty plea and scheduled sentencing for May 2
. . . Internet service provider EarthLink has reached a settlement with two men, Damon DeCrescenzo and David Burstyn, who were accused of using the EarthLink network to send more than 250 million spam messages. The pair has been ordered to stop sending spam and to pay an undisclosed cash settlement to the company. In May 2003, Earthlink received a $16 million settlement in a case against Howard Carmack (a.k.a. the Buffalo Spammer), who was accused of sending over 800 million spam messages over the EarthLink network.
. . . Texas Attorney General Greg Abbot is suing two spammers for violating the CAN-SPAM Act and two Texas state laws--the Electronic Mail Solicitation Act and the Deceptive Trade Practices Act. Microsoft and Texas resident Dewey Coffman are credited with providing evidence of over 20,000 spam messages sent by Ryan Pitylak and Mark Trotter, whose spam operation was considered the fourth largest in the world. Under the federal charge, the men could face a $250 fine for each violation, up to $2 million, while the Texas laws would impose fines of $10 for each unlawful spam message or $25,000 per day and up to $20,000 per violation.
. . . Microsoft, MessageLabs and the FBI are sponsoring a meeting between federal lawmakers in the United Kingdom and the United States to discuss information security issues including viruses, zombies, rogue dialers and DDoS attacks. The meeting will take place in Britain later this month, and one of the main problems to be addressed is the inconsistency and ineffectiveness of the nations' spam policies.
Laundering and Corruption in Britain - Part 1
U.K. Sports Minister Richard Caborn last month asked the Treasury to order a risk assessment of the ability of criminals to launder money via bookmakers. The assessment is to be carried out by the National Crime Intelligence Service. Caborn in November discussed a potential loophole that might permit money laundering, and a recent report published by an independent think-tank called the Centre for the Study of Financial Innovation reinforced his speculation. According to the report's authors, "The key point is that High St. betting shops will still accept very large cash wagers without knowing the identity of the person placing the bet. To convert cash to an apparently legitimate check is very easy."
NAO Declares UK Betting Tax Reform a Success
England's National Audit Office declared that its gross profits tax reform on betting in 2001 was successful in encouraging bookmakers to keep their core operations in the United Kingdom. Before 2001, bettors paid a 9 percent tax on each stake, creating an environment that made relocation to offshore jurisdictions a tempting option for betting businesses. (Moving offshore would allow them to offer punters tax-free betting.) The 2001 reforms replaced the 9 percent levy with a 15 percent gross tax on bookmakers. According to a report published Wednesday by the comptroller and auditor general, gambling duties collected in the year to April 1999 fell from £1.53 billion to £1.35 billion in the year to April 2004. Yet the report points out that if no tax reform had been made, the loss could have been much greater. The report also reveals that "customs underestimated the popularity of new gambling products with low profit margins such as betting exchanges. Consequently, the duty revenue rate has been much lower than expected (down 6.7 percent in 1999-00 to 1.2 percent in 2003-04 as percentage of bets placed), even though spending on betting has been higher than expected in terms of value placed on bets." As a result, the report suggests that Customs receive more IT expertise to carry out compliance work on new products such as gambling via interactive TV, mobile phones and the Internet as well as spread betting and betting exchanges.
Laundering and Corruption in Britain - Part 2
While the NAO report agreed with Caborn and the Centre for the Study of Financial Innovation in speculating that bookmakers could be used to launder money, it also stated that betting exchanges also might provide an avenue for laundering. One passage of the report says, "Gambling at bookmakers is a simple and relatively risk-free option for laundering money. Typically, the money launderer makes frequent high-stake bets at very low odds, resulting in a minimal profit or, more usually, an overall loss. However, all winnings are effectively 'clean,' since they are received in the form of cheques, payable either to the individual or to third parties. Betting exchanges also provide an opportunity to launder money. The customer can set up two accounts, bet against him or herself and receive a bona fide cheque from the betting exchange provider for the payout of the winnings."
. . . The all-party Parliamentary betting and gaming group announced Wednesday that it has come to the conclusion that the growth of Internet betting, especially betting exchanges, has left sports more vulnerable to fraud and match fixing. The inquiry took evidence from all the major sports governing bodies and was headed by Lord Faulkner, who stated, "Whilst we accept that the greater part of sports betting is neither corrupt nor unfair to punters, the evidence convinces us that the growth of betting exchanges--because of the facility they provide to bet against a result--has increased the potential for corruption." The group has therefore made a list of 15 recommendations to fight corruption in sports, among them are that the government should raise the maximum jail sentence for gambling cheats above the current two years, that sports bodies should have a say in the type of bets offered to punter, and that traditional bookmakers should set up transparent audit trails like the betting exchanges have already done.
Ontario Has No Plans for I-Gaming
Ontario's government last month announced its strategy for the gaming sector. Economic Development and Trade Minister Joseph Cordiano said the plan emphasizes social responsibility. "We are building a responsible, sustainable plan that also safeguards jobs and public investments in Ontario's gaming assets," Cordiano explained. Among the government's five main declarations is that there will be no provincial involvement in Internet gaming. There will also be no additional commercial or charity casinos, no additional racetrack slot facilities, no video lottery terminals in bars and restaurants and no slot machines in bingo halls. The province's gaming strategy builds on the comprehensive market assessment conducted by the Ontario Lottery and Gaming Corporation last year.
China Fights Corruption
The state-run People's Daily in China has called gambling "the next battleground in eradicating corruption" following the revelation that about US$94 billion in public and private funds was gambled with foreign casinos and online gaming sites in 2004. Last month the government began a thorough investigation of gambling, and three weeks in, 4,000 people have been arrested for cross-border gambling violations. An additional 760 suspects have been arrested for alleged participation in 249 Internet gambling gangs. The Banking Regulatory Commission has asked the country's banks and financial institutions to monitor accounts and fund exchanges more closely to crack down on gambling. The commission will soon set up special mechanisms to monitor abnormal transactions and blacklist account suspected to have funded gambling activity.
Kerala Bans Paper Lotteries, Online to Follow
The government of Kerala, India banned all lotteries in the state, thereby putting close to 300,000 lottery sellers out of work. The government promised a compensation package to those left unemployed, but it doesn't seem to be anywhere near completion. Next the government plans to ban online and out-of-state lotteries.