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Friday, April 14th, 2006

US Moves to Stop Casino and Betting Ad Revenues

 

Online gambling is illegal in the United States and has been for years. Though it is against the law to place a bet online, US Government regulators have been unable to prevent sportsbooks, online casinos and for-profit poker rooms from opening, advertising and profiting.

Increased enforcement of anti-gambling laws is expected to grow to include targeting revenues generated by all casino and gambling advertising, including participation in affiliate programs.

While over 50% of all online wagers come from the United States, most online casinos and betting rooms are housed on servers outside US jurisdiction, putting their operators virtually out of the reach of US law enforcement agencies.

Since the US Government has little power to prosecute the operators of sites legally based on foreign soil, the Organized Crime and Racketeering section of the US Department of Justice (DOJ) is betting on a simpler target, advertisers and ad-publishers. They have started targeting the largest advertisers in a bid to send a message to smaller ones.

According to a report in today’s Wired News titled, All Bets Are Off, Online Anyway, the website Sporting News, owned by Microsoft co-founder Paul Allen, reached a $7.2Million settlement with the DOJ in order to avoid prosecution for running gambling ads in its magazine and on its syndicated radio show in 2002 and 2003. Allen’s site recently surrendered $4.2Million in gambling ad revenues and is running $3Million in anti-gambling advertisements over the next three years. Here is a script for one of the spots, copied from the Wired News piece.

Announcer: “Sports fans like you should know that betting with offshore or foreign gambling enterprises via the internet or telephone violate U.S. federal and state laws.”
Fan: “You mean it’s illegal?”
Announcer:
“Yep!”

The Sporting News website is also running a series of anti-online gambling ads that appear at the bottom of several pages in the site. One such ad reads:

NO INTERNET GAMBLING. Please be aware that betting with offshore or foreign gambling enterprises via the internet or telephone violate U.S. federal and state laws. Companies that engage in the business of online casino-style gambling, or online or telephone sportsbooks also violate U.S. federal and state laws.
(A public service announcement from Sporting News)

Online gambling is estimated to be a $12Billion per year industry that is growing rapidly, especially due to the rise in popularity of poker variation, Texas Hold’em. Advertising for online gambling in the United States is considered aiding and abetting illegal activities by US law enforcement authorities.

For many webmasters and site owners, an enforced ban on gambling advertising is going to hurt. Online casinos offer lucrative revenues for sites carrying their advertising, sometimes even splitting monies lost by gamblers with the owners of the sites that originally referred them. In one reported example, Gibraltar based casino affiliate program, Referback, offers ad-publishers 20 – 35% commissions, depending on the amount of losses accumulated by high-spending gamblers referred by sites in the affiliate program.

Webmasters should also be aware that as part of the anti-online gambling crackdown, the US Government could seize assets and revenues believed to be derived from online gambling advertising. One famous case involved the Discovery Channel, the US Department of Justice and online poker-room, Paradise Poker.

In October 2003, Paradise Poker paid the Discovery Channel $3.85Million to run ads for Party Poker during the televised World Series of Poker Tour. The Discovery Channel cancelled the contract after running about $600,000 worth of the 30-second spots but did not refund the remaining $3.25Million. Paradise Poker filed a suit to recover the unearned portion of the contract but by April 2004 US Marshals had seized it stating that the Discovery Channel was a party to illegal activity when broadcasting online gambling ads. The US Marshals also seized about $2Million under contracts relating to PartyPoker.com advertising from sister-station the Travel Channel.

The message sent by the US Government at the time was very simple. Assets derived from online casino or gambling advertising could be seized and held as evidence pending trial.

Following US law, Google and Yahoo refuse to run ads for online casinos or gambling operations in the United States but serve such ads to search engine users in many other parts of the world. A search conducted in the UK under online gaming related keywords often produces paid advertising for real-world and online casinos, along with betting parlours and poker-rooms.

For non-US citizens, running online gambling advertising could be a risky source of revenue, even if online gambling is perfectly legal in their home countries. Violation of US law, regardless of where the violation takes place, is punishable on US soil or by restrictions from visiting (or flying over) US territories. The United States Government considers the Internet, or at least the parts of it found in US jurisdiction, to be subject to US Federal law.

Though the United States has laws prohibiting online gambling, the fact remains over half the revenues generated in the online gambling industry come from the pockets of US citizens. The demand is obviously high and there are plenty of entrepreneurs willing to fulfil that demand.

While Google and Yahoo don’t run ads for online casinos, sportsbooks, or other direct Internet gambling operators in the United States, both still offer a wide array of paid-advertising choices for US visitors. Filling the vacuum left by the Paradise Poker, PartyPoker, various Sportsbooks, and other direct online gambling sites are a number of “educational” sites offering free games, playing tips, books on the perfect gambling systems, and a heck of a lot of malware in the form of adware products.

Surfers and free-gaming enthusiasts beware, adware products are often included in the free-game downloads found at many of these free-game “educational” sites.

There is nothing wrong or illegal with running a few thousand friendly Texas Hold’em tables, as long as no money is bet or exchanged at those tables. Advertising for, and accepting money for on behalf of, online gambling operators is illegal but somebody, somewhere is sporting the bill for the free, educational online card rooms. For all we know, they could be watching you now.


2 Responses to “US Moves to Stop Casino and Betting Ad Revenues”

  1. Birzu

    Great post ! people should know about it.

  2. Topboss

    Great article! it really irritates me that the Governments decided what people can and can’t do online. Under age gambling agreed is a no no, but why can’t adults decide what to do with their own money!

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