US Levies More Charges Against Online Betting Sites

The U.S. Department of Justice unsealed an indictment against the principals of a series of online sports betting sites on May 23. The defendants, Darren Wright and David Parchomchuk of British Columbia and Ann Marie Puig of San Jose, Costa Rica, were charged with conducting an illegal gambling business and money laundering in violation of the laws of the State of Maryland.

Homeland Security Investigations opened an undercover payment processor business (“Linwood Payment Solutions”), which collected funds and distributed winnings to/from the defendant websites and transferred those funds to offshore foreign banks. The undercover payment processor processed over 300,000 gambling transactions worth more than US$30 million for the defendants between December 2009 and January 2011.

The defendants’ domestic and foreign bank accounts, together with their domain names (,,,,,,,, and have all been seized as part of the investigation.

This latest attempt to prosecute online gambling follows last month’s indictment of 11 individuals associated with three major Internet poker sites (Pokerstars, Full Tilt Poker and Absolute Poker) for similar money-laundering and illegal-gambling offences.

The Unlawful Internet Gambling Enforcement Act

Most online gambling in the U,S, became illegal with the passing of the Unlawful Internet Gambling Enforcement Act (UIGEA), which prohibits banks and credit card companies from making or processing payments to gaming sites. While the law was enacted in 2006 and remains in force today, the validity of the law and the issue of whether online gambling should be legalized in the U.S. remains hotly debated on a national and international level.

In 2003, Antigua successfully challenged the validity of the UIGEA before the World Trade Organization, alleging the law violated the General Agreement on Trade and Services, or GATS.

The WTO held that the UIGEA does indeed violate the U.S.’ obligation under the GATS provisions requiring open market access, by not allowing foreign businesses the opportunity to provide U.S. citizens with services that are provided by domestic companies. The U.S. appealed the decision, but the WTO panel again sided with Antigua in March 2007, holding that the UIGEA violated the U.S.’ obligation under the GATS provisions requiring open market access

At the national level, the law has been criticized for being practically unenforceable. Proponents of legalization argue that with so many operators targeting the U.S. market, the law has had limited success in preventing online gambling among Americans and, more importantly, fails to protect the millions of American consumers who take part in online gambling.

Proposals for Regulating Online Gambling

In 2009, Rep. Barney Frank, D-Mass., introduced the Internet Gambling Regulation, Consumer Protection, and Enforcement Act. The proposed bill explicitly recognizes that “millions of people have chosen to gamble online, and today Internet gambling is offered by operators located in many different countries under a variety of licensing and regulatory regimes.”

It sensibly proposes the creation of a federal licensing and regulatory framework to protect underage and otherwise vulnerable individuals, to ensure the games are fair, to address the concerns of law enforcement, and to enforce any limitations on the activity established by the States and Indian tribes.

Internet gambling operators would be required to obtain federal licenses from the Department of Treasury in order to accept wagers over the Internet from individuals located in the U.S.

A number of state-level online gambling bills have also been proposed. New Jersey, Iowa, California, Florida and Nevada are among other states considering proposed bills for the legalization and regulation of online gambling.

In the meantime however, the UIGEA remains in force and gambling operators who provide services to U.S. residents run the risk of being — or are being — indicted for conducting an illegal gambling business.

Emir Aly Crowne

Emir Aly Crowne, BA, LLB, LLM, LLM, PhD (cand.), is Of Counsel to Heydary Hamilton PC and is a law professor at the University of Windsor Faculty of Law.

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