Opinion: Would Federal Offshore Sportsbook Crackdown Really Help?

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In a letter dated April 13, American Gaming Association (AGA) CEO and President Bill Miller sent a letter to U.S. Attorney General Merrick Garland asking the Department of Justice (DOJ) to focus its attention on illegal gaming including offshore sportsbook activity taking place “across our great nation.”

The letter correctly notes that illegal gambling is hardly a new problem, but argues that illegal gambling threatens the $261 billion casino industry and the 1.8 million jobs supported by the industry.

The letter requests that the DOJ “make it a priority to act” on two specific areas. First is a crackdown on offshore sportsbooks and casinos that serve American consumers. The second request is a follow-up from November 2021 requesting that the DOJ crackdown on unregulated skill gaming machines.

The AGA letter argues that while manufacturers of the games suggest they exist in gray area of the law, they operate much like slot machines.

What does AGA want?

The AGA’s letter to Garland asks that the agency target well-known offshore sports betting brands, naming:

The AGA cites their previous estimate that at the time of PASPA‘s demise, the illegal, offshore, gray, unregulated — whatever you want to call it — market had a handle of about $150 billion annually. This number remains nothing more than an educated guess, with others projecting a value somewhere between $80 billion and as large as $1.5 trillion.

In a perfect world?

I am sympathetic to the AGA’s ask here. In an ideal world, the Department of Justice would be a powerful component in ensuring the viability of all regulated markets.

The reality of the matter is that in a post-9/11 world, the Justice Department, like many law enforcement agencies, focuses much of its attention and resources on particular areas. To the extent that illicit gambling might overlap with any of the areas of interest that the Justice Department has its eye on, one can bet that those operators will be a priority.

But the reality is that multi-national criminal investigations are very expensive. Gambling offenses, even significant schemes, rarely result in significant jail time for the offenders. From a resources perspective, that is likely a very difficult sell at the DOJ.

What might come of AGA offshore sportsbook letter?

The AGA’s letter might get Garland to open a few new case files or it might not. But history tells us that even if the DOJ does make a move, there will be more companies.

The AGA’s own letter highlighted that companies do sometimes disappear overnight, but it misses that new ones come back all the time. The solution to the offshore gambling market is not to periodically play illicit operator whack-a-mole. The solution is to create a regulated market that people want to be in.

If American consumers do not know which sites are operating legally in the United States and which are not, that is a huge failure of the regulated market, not a problem for the DOJ to fix.

In the long run, if the AGA and the regulated operators in this country want a market that snuffs out its offshore competition, they will need to create a market that can compete and is ultimately better than what is offered offshore. Even if the DOJ does use its resources this time, it is not going to do it every time the AGA asks.

Competitive advantage for offshore sportsbook market?

The AGA letter cites the offshore sportsbook market’s competitive advantage, noting that offshore sites are able to offer better promotions while ignoring responsible gaming commitments, and not paying state or federal taxes. The AGA also cites a lack of regulatory compliance costs as providing a competitive advantage.

The AGA’s research arm conducted a study, which found that 74% of sports betters believe it important to only wager in the white market, but the study found 52% of the sample still wagered in the unregulated market, with many unable to identify which brands operate legally.

Self-inflicted harm?

The AGA’s letter asking the federal government to step in and eradicate offshore competition should not be surprising. In fact, it should be obvious that if steps were not taken to make the offshore sportsbook market less attractive, people would invariably continue using those sites or even make the shift to those sites if they offered a better product.

Going after offshore sites is a part of the battle to make the regulated market successful in the long term, but many of the regulated market’s problems are self-inflicted.

If we want to talk about offshore bonuses being better than the regulated market, then you need to question the wisdom of awarding monopolies, and suffocating tax rates and license fees. If you do not want people to wager at offshore operators, then politicians need to answer for creating products that lack essential features that people want, like the ability to bet on in-state teams.

Thanks, but you need to do more

The AGA acknowledges that the FBI put out a recent public service announcement designed to educate Americans about the potential risks of betting offshore, but acknowledges that this is not the same as “sustained attention and action” from the DOJ.

The AGA then asks that the DOJ investigate and indict the operators of offshore gambling operations serving American customers.

Crooked casinos too?

The AGA letter does not just target prominent offshore sportsbook brands but also goes after online casinos that are accepting American customers. The AGA notes that these sites may be offering games that lack the same standards, age verification, and data protection that the legal market offers or requires.

The letter notes that “illicit gambling operations have also been known to at times simply disappear, walking away with their customers’ funds in the process.”