Thursday, September 21, 2006

The hot-button topics in Britain these days regarding the Americans aren't
only about Iraq. It's also about business. The CEOs of two British Internet
gambling sites (both publicly listed) were arrested this summer when they
were changing planes on U.S. soil. More have been targeted and legislators
are looking at other options to prevent Americans from betting online. The
act of accepting bets online is legal in Britain but illegal in the United
States. The tricky part is that the Internet crosses borders and so a
crackdown by one country to stop Americans from betting on British sites
means Washington is flexing its muscles outside its own territory. This is
nothing new. During the Prohibition era of the 1920s and early '30s, the
Americans went after Canada, where alcohol was still produced (and much of
it was then smuggled across the U.S. border). Then there was a dust-up about
an alleged "cartel" of uranium producers during the Cold War and for legal
reasons some Canadians could not travel to the United States. In 1994, some
executives of Sherritt International were put on government blacklists for
involvement in a joint venture with Cuba's nickel company. The Americans
were angry because the nickel had been U.S.-owned before the Communists
confiscated the assets.

And this summer the crackdown has escalated beyond Canada.

On July 17, David Carruthers, then CEO of BetOnSports.com, was arrested
while on a layover at Dallas-Fort Worth International Airport, in transit
between Costa Rica and Britain. He was charged with racketeering and mail
fraud and is under house arrest in St. Louis.

Dozens more were arrested in the United States. Since then, the company
fired him and closed its U.S. operation. Some U.S. papers reported that the
company, while legitimate in Britain, had shared office space with people in
Costa Rica with U.S. criminal records.

The next salvo occurred this month, when Peter Dicks, chairman of
Sportingbet PLC, was taken into custody at JFK International Airport in New
York as he came off an overseas flight. The warrant was issued by police
officials in Louisiana.

Immediately after his arrest, the company was forced to ask the London Stock
Exchange to halt trading. Sportingbet is one of the industry leaders in
Britain, with US$2.86-billion in revenue in the year that ended July 31,
2005. About two-thirds of bets came from U.S. customers.

Mr. Dicks has been freed on bail and he returned to Britain but must return
to the U.S. for his trial.

The online gambling market is estimated at more than US$11- billion annually
and is projected to reach US$25-billion by 2010. More than half comes from
U.S. gamblers.

There are tax issues in the U.S. So Congress is getting into the act.

In June, the House passed a measure prohibiting banks or other licensed
financial institutions from aiding payments to wagering sites in the form of
cheques or other transfers. The Senate hasn't ruled yet.

One of the problems is that laws haven't quite caught up with the new
Internet reality. The law is clear when it comes to taking bets over the
phone, but so far only moral harassment or threats or arresting foreign CEOs
on U.S. soil have been used when it comes to e-gambling.