5Dimes Says Regulators Key To Next Steps After Fed Deal On Criminal Investigation

Written By

Updated on


5Dimes is on the hunt for a regulated CEO as the former offshore book continues its transition to the regulated market.

The company last week announced a $46 million settlement with the US Department of Justice that clears the 5Dimes assets of legal restrictions. The settlement wrapped a years-long federal investigation of 5Dimes including illegal gambling activity in the United States, as well as wire fraud and money laundering.

LSR understands several US operators have approached 5Dimes about acquiring various assets, but the company plans to go it alone – starting with a new CEO.

Jeff Ifrah, attorney for 5Dimes owner Laura Varela, said discussions were already underway with a “narrow pool” of candidates.

“There are not a lot of people who understand the US market, US customers, the regulatory hurdles, digital marketing and so on,” Ifrah said. “It’s a very narrow pool of people and we’re talking to them now.”

US regulators must also license any candidate or find them suitable in the first place.

Can 5Dimes acquire a license?

Licensing is the key to the entire move here. 5Dimes is talking to the New Jersey Division of Gaming Enforcement first up, but it’s still a question whether it can get licensed on the state level.

“We have people speaking to them [the DGE], but we don’t know for sure,” Ifrah said. “We hope they create a pathway to licensing and we are planning for that. Our focus is on launching a US brand with a US management team and we will follow any guidelines they give us.”

5Dimes had roughly 270 staffers in Costa Rica including an operations and trading team that could be valuable in the US. But again, it is a question whether staffers would be licensed.

“We will wait and see what regulators require before we finalize our plans,” Varela told LSR by phone on Friday.

A DGE spokesperson declined comment for this story.

Should regulators allow offshores into US market?

The licensing question divides opinion in the sector. To some, the chance to chip away at the offshore market by bringing it into the legal space is a good thing for everyone.

Legal US sports betting was worth around $920 million in revenue last year, according to Eilers & Krejcik Gaming, compared to $6.5 billion offshore.

And the influx of legal betting ads is inadvertently flowing through and benefiting offshore books, Eilers said.

“We need to figure out a way to bring offshore firms into US markets,” Ifrah said. “We can’t rely on law enforcement, they can’t really stop it. The AGA can keep talking all day long about offshore but nothing has changed. This is an opportunity to do something.”

The AGA declined comment.

How would it work?

Ifrah argued that offshore brands could follow a similar pathway as 5Dimes into the regulated market if they were to change management teams, or sell off assets to licensed operators.

“I’m not saying anyone can just come into the US, but there’s a pathway here,” Ifrah said.

5Dimes’ transition was facilitated by the fact Varela only took over the company after the death of her husband and was not involved prior. 

On the other hand, some regulated operators argue that offshore books shouldn’t be rewarded for breaking US law for decades and reaping hundreds of millions of dollars for doing so. It’s highly likely some incumbents will lean on state regulators to block offshore books.

5Dimes looking for partners

As for 5Dimes, the company is now on the hunt for partnerships that will allow it to expand in the US.

“We are discussing deals with folks who have access to a whole bunch of states but maybe haven’t had success in sports betting yet,” Ifrah said.

Ifrah said there was interest from casino companies, as well as startups and corporate bankers.

“It’s pretty remarkable, the level of interest we’ve had,” he said. “People really like this brand and respect it.”

All about the emails?

The 5Dimes customer database is arguably its biggest asset. That’s particularly true in not yet-regulated states like California, where only FanDuel and DraftKings can market (for DFS.)

But 5Dimes also will be a new company in a sector that is brutal for newcomers.

Varela, however, was undeterred.

“I think there’s a misconception that the offshore market is easy. It’s definitely not, and I am so excited about this new chapter and the chance to continue my husband’s legacy into a regulated company.”