The State of the Online Gambling Industry
written April 16, 2007
Ever since the Unlawful Internet Gambling Enforcement Act (UIGEA) was passed last October, there have been notable changes effecting the entire Internet gambling sector.
In fact, the first significant event occurred months before the passage of this bill, when arguably the largest online sports book collapsed, failing to pay out thousands of gamblers who were owed money by them.
On July 18, 2006, when customers tried logging on to the Betonsports web site, they received the following message:
“IN LIGHT OF COURT PAPERS FILED IN THE UNITED STATES, THE COMPANY HAS TEMPORARILY SUSPENDED THIS FACILITY PENDING ITS ABILITY TO ASSESS ITS FULL POSITION. DURING THIS PERIOD NO FINANCIAL OR WAGERING TRANSACTIONS CAN BE EXECUTED. FURTHER INFORMATION WILL BE POSTED ONCE THE COMPANY IS IN A POSITION TO DO SO.”
Since then, BOS has permanently closed its doors and faces numerous criminal charges filed in the United States.
Perhaps more shocking, was the sudden and unexpected closing of Pinnacle Sports to US citizens.
The announcement was not made however, until after players from the US tried to sign into their account on the morning of January 11, 2007 only to find a message letting them know they could no longer place bets.
Pinnacle Sports has been one of the oldest and most reputable sports books online.
The announcement of their withdrawal from the United States came as a big surprise due to the timing. Most online gambling sites either had already decided to continue accepting bets from US citizens, or they quit the US market when the UIGEA law passed. The timing of their withdrawal was confusing and made little sense to Internet gambling professionals.
The most common explanation that nobody wants to talk about is that Pinnacle Sports’ closing wasn’t really a voluntary one at all.
What sports book would ever dream of turning away millions upon millions of dollars due to Super Bowl wagering which was just a few weeks away?
The most plausible explanation dates back a couple of months before Pinnacle closed its doors to US citizens.
27 people were indicted in November of 2006 on Internet gambling charges in Queens County Supreme Court, New York. The leader of the operation, James Giordano, has pleaded guilty and is awaiting trial.
It is believed that at least one of the 27 people arrested had an affiliation with Pinnacle Sports.
In fact, a prominent free lance writer for the ‘New Yorker’ magazine, namely Evan Ratliff told EOG the following:
“While I was working on a story involving this case, particularly their Playwithal Internet site, the DA who was prosecuting these individuals tipped me off.”
“She instructed me to turn on my computer in the early hours of the morning. I believe I was one of the first to see that Pinnacle Sports alerted gamblers they were no longer taking bets from US citizens”
Therefore, I believe that Pinnacle Sports worked out some sort of a deal with US prosecutors to protect individual(s) and perhaps the parent company as well from facing legal charges and consequences.
Six days after Pinnacle stunned the realm of online sports betting, another shock even more devastating was about to transpire.
Neteller, a publicly traded third party payment processor located in Canada had been by far the most popular, convenient and most widely used method for gamblers to fund sports betting accounts with and to make withdrawals from as well.
Shortly after the passing of the UIGEA, and specifically on January 17, 2007, Neteller displayed the following on its web site:
US member update: “Due to recent US legislative changes and events, effective immediately, US members are no longer able to transfer funds to or from any online gambling sites.”
Now Neteller, too, along with BetonSports, suddenly had legal issues filed by the US feds against the founders of Neteller who aren’t even US citizens and who had sold their company several years ago, largely believed to protect them from future prosecution.
The collateral effects due to the closing of Pinnacle and Neteller to US citizens within one week of each other have had profound and permanent impacts on Internet sports betting.
The industry will never be the same.
Part 2-Coming Soon
written by Kenneth B. Weitzner –EOG
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