Should the US Government Ban Offshore Betting Sites?

Should Offshore Betting Be Banned

Many states in the US have legalized sports betting. More are considering doing so and have legislation in the pipelines.

However, a good portion of states are still served by offshore bookmakers. The latter operate in the US without licensing and don’t pay taxes to the American government.

Surprisingly, though, the federal government has yet to explicitly ban offshore betting.

They instead leave the matter up to individual states.

Should the federal government finally take strong action against unregulated operators and ban them? I’ll discuss more on offshore bookmakers along with if they should be completely ousted from America.

What Are Offshore Betting Sites?

The United States doesn’t allow for any unregulated gambling sites to be based within its borders. They’ll take swift action against anybody who tries to run an illegal gambling operation in any of the 50 states.

However, authorities would probably need to do much more work to bust unlicensed bookmakers that operate outside of its borders. They just can’t send the feds to Costa Rica on a whim.

Speaking of which, Costa Rica is the biggest hotbed for offshore bookmaking. It allows online sportsbooks to operate within its borders with nothing more than a business license. The Costa Rican government also has few restrictions in place against operators.

Therefore, an offshore bookmaker can serve whatever country or territory they’d like from within this loose jurisdiction.

Please Note:
Typically, these operators only restrict countries or states that they think would take aggressive legal action against them. For example, Kentucky once seized 141 gambling domain names in 2008.

Most offshore operators stopped serving the Bluegrass State after this incident. For the most part, though, offshore betting sites will operate in any market that doesn’t have strongly-worded laws regarding online gambling.

What’s the Legal Situation Surrounding Offshore Bookmakers?

Unregulated betting sites have never been legal in the US. However, they haven’t necessarily been banned either.

The first major action that the federal government took against sports gambling sites was the Unlawful Internet Gambling Enforcement Act (UIGEA). Signed into effect by President Bush in 2006, the UIGEA bars online gambling sites from accepting payments where doing so is illegal.

This law is so vague that most people have to read through it two or three times before understanding its meaning. Even then, the UIGEA is ambiguous in some ways.

Its main function is to disrupt offshore operators’ ability to take payments from many US states. The US Department of Justice (DoJ) called on this law when they took down several online poker sites in April 2011 (e.g. Black Friday).

The UIGEA isn’t, however, an outright ban on internet sports betting. Bookmakers have found ways around this law through unconventional payment methods, such as Bitcoin.

In 2011, the DoJ gave an opinion on the federal Wire Act that may deem offshore betting illegal. They opined that the Wire Act only applies to sports gambling.

Please Note:
The Wire Act of 1961 bans the offering of gambling across state lines, which could apply to unregulated internet wagering today.

However, this is just a decade-old opinion from the DoJ. The federal government has never gone after offshore operators based on this interpretation of the law alone.

Of course, the feds have taken down certain online bookmakers in the past. They’ve only done so, though, when they had proof that the betting sites were laundering money and/or guilty of bank fraud.

Why Governments Hate Offshore Operators

The federal and state governments dislike offshore betting sites for multiple reasons. Here are their main gripes against unlicensed bookmaking.

No Tax Revenue or Licensing Fees

The big motivation behind state governments legalizing sports gambling lately is money. The US betting market is projected to hit $8 billion by 2025.

Politicians want a piece of this pie for their respective states. They don’t want to be among the minority that misses out on serious tax revenue in the future.

Bookmakers are willing to pay large licensing fees and taxes to get into regulated markets. For example, New Jersey online bookmakers must pay $100,000 in licensing fees and a 13% tax rate (plus 1.25% local shares tax).

With offshore operators, states don’t see any of this money. Bookmakers in Costa Rica, Belize, and elsewhere keep all of their earnings beyond what the taxes they pay local governments.

Of course, this situation doesn’t directly impact the federal government. But US lawmakers would rather see money flowing into various states rather than staying offshore.

No Control Over the Operators

One of the key benefits of a legal sports gambling market is that regulatory bodies have some control over the operators.

A state regulator can set rules and standards for the market. Bookmakers, meanwhile, must abide by these standards or risk a heavy fine.

For Example:
The Pennsylvania Gaming Control Commission has strong protections in place for problem gamblers and minors.

Online bookmakers aren’t supposed to run misleading advertisements or target problem bettors.

Regulatory bodies don’t have the same oversight over unlicensed betting sites. They must undertake a big effort to go after offshore bookmakers. After all, the latter are operating in completely different jurisdictions.

No Protections for Gamblers

When an operator gets out of line in a regulated market, the local governing body will crack down. They can impose a big fine on the bookmaker or even revoke their license.

Bettors feel protected in these cases. If they feel that an online sportsbook has wronged them and won’t fix the issue, they can contact the local regulator.

The same situation doesn’t happen in several offshore jurisdictions.

Picking on Costa Rica again, the government takes a hands-off approach to operators.

This isn’t to say that every Costa Rican sportsbook is crooked. In fact, some of them are among the best in the business. However, nefarious operators have more room to get away with ripping off customers in this country.

The Case for Offshore Bookmakers

You can see that regulated markets offer big advantages to gamblers. They protect bettors and have lots of oversight over bookmakers. But as you’ll see below, unlicensed betting sites come with their own set of benefits.

Competitive Marketplace

More operators create a more competitive market. Offshore sports gambling sites have been collectively offering their services for a quarter century.

They’ve had plenty of time to find out what does and doesn’t work.

With that said, operators of the best online sportsbooks know the ropes regarding how to serve customers right and provide competitive odds.

Of course, offshore betting sites possess an unfair advantage when competing directly against legal and state-regulated bookmakers.

Nevertheless, they can force regulated bookmakers to provide more competitive odds. Otherwise, sports bettors might just use a VPN (consider the pros and cons first) and keep gambling at offshore sites.

Freedom to Bet

Not every state in the US features a regulated internet sports betting market.

Those living in these states don’t have many options to choose from.

Overseas bookmakers can fill the void in these cases.

They can give states like California, for example, the ability to bet on sports.

America is built upon freedom. Therefore, many bettors feel like they should have the freedom to wager on sports whenever they wish to.

Plenty of Quality Operators

The offshore betting industry gets a bad rap for the reasons covered before. It also features a few bad apples.

Nevertheless, there are plenty of high-quality sports betting sites that are based overseas. These sites specialize in offering fair odds, knowledgeable customer service, and bonus opportunities.

Of course, you should never blindly sign up at the first online sportsbook that you find. But you can definitely pick out some good ones by reading reviews and looking at rankings for the best sports betting sites.

Do Offshore Betting Sites Belong in America?

Unregulated sports wagering sites have been operating in the US for over 25 years. With that said, they don’t look to be on the outs just yet.

However, America is largely moving towards regulation with online betting. More states are legalizing the matter, and they expect offshore bookmakers to stay out of their markets.

Overseas betting sites should definitely stay away from regulated markets. If they’re not willing to pay the necessary licensing fees and taxes to serve a particular state, then they shouldn’t have a presence there.

Luckily, many unregulated operators are abiding by the rules. They’re only offering their services to states without regulation.

I believe that an offshore bookmaker has the right to serve a gray market with no regulation or strong anti-online gambling laws in place. Unregulated sites belong in America until there are no more gray markets to serve.

Conclusion

The federal government has never fully embraced offshore betting sites. Nevertheless, they’ve put up with them in some capacity for more than a quarter century.

By “putting up with,” I mean that the US government hasn’t explicitly banned offshore bookmaking.

The US government has only gone after betting sites that have used money laundering and bank fraud as a means of serving customers. Ever since the repeal of PASPA, states have had the option to legalize betting and deal with offshore bookmakers.

Most unlicensed betting sites stay out of these markets as a result.

Therefore, the federal government will likely never implement a hard ban against unregulated operators. They’ll just continue letting states handle the matter.

Rex Hoffman / Author

Rex Hoffman is a passionate sports writer, with over five years of experience covering sports journalism in line with the Vegas betting landscape. His favorite subjects include football, basketball, and baseball. As a Las Vegas resident, he enjoys finding an edge against the local sportsbooks and aims to share his extensive knowledge with both beginners and experienced bettors. Rex also dabbles in horse racing wagering and enjoys typical casino fare like blackjack and poker in his spare time.