Politics in the United States makes for
some strange alliances and none more curious than that between Congressmen, the
FBI and the nation’s illegal bookmakers.

Last week the US House of
Representatives voted to ban all internet gambling apart from lotteries and
horse racing. This week the FBI arrested the chief executive of a London Stock
Exchange listed company in the transit lounge at Dallas-Fort Worth airport as he
attempted to complete a journey from London to Costa Rica. The chief
beneficiaries of both actions will be organised crime which dominates the
traditional sports betting business in the United States.

To see that betting on football, baseball, basketball
and ice hockey is a major pastime you only have to look at the sports pages of
the country’s daily newspapers. The line – the start that bookies give one team
to make the contest theoretically even – figures prominently everywhere yet only
in the state of Nevada is it legal to actually have a bet and the operators
there are forbidden to take a wager from outside the state.

The hundreds of millions of dollars turned over every
day are in the hands of people like Australia’s old fashioned SP
bookies with the exception that the Mob controls the business as it does the
other pleasures for the people that legislators declare illegal. Gambling
provides a profitable foundation for criminals and they have no interest in
opening the market to competition by having it legalised.

The growth of gambling on the internet was becoming a
serious impediment to continuing profits so a Congressman seeking to have it
banned would be supported whole heartedly. Whether the legislation passed last
week by the lower house actually becomes law is now in the hands of
Senators.

Not that the FBI thinks new legislation is needed. It
detained BetOnSports chief executive, David Carruthers, and charged him along
with the company’s American founder and former owner, Gary Kaplan, and nine
other individuals, with 20 felony violations ranging from racketeering to tax
evasion, wire fraud, running an illegal gambling operation and money-laundering.

The Mafia will have been pleased.

Not so pleased are investors in British based sports
bookmaking companies who have built their businesses largely on business from
the US. BetOSports shares fell by 100p to 282p on the news of the
arrest of Mr Carruthers. PartyGaming was down 22% (although still valued at
£3.41bn) and Sportingbet, which has a subsidiary operating out of Darwin, fell
44%.

The uncertainty created by the FBI’s action was
unfortunate for the Alice Springs based Centrebet International
Limited which listed on the ASX last week with an issue price of $2. Its shares
were down this morning to $1.82. International All Sports based in Darwin at 32
cents was down 1.5 cents on its price last Friday.

Peter Fray

Get your first 12 weeks of Crikey for $12.

Without subscribers, Crikey can’t do what it does. Fortunately, our support base is growing.

Every day, Crikey aims to bring new and challenging insights into politics, business, national affairs, media and society. We lift up the rocks that other news media largely ignore. Without your support, more of those rocks – and the secrets beneath them — will remain lodged in the dirt.

Join today and get your first 12 weeks of Crikey for just $12.

 

Peter Fray
Editor-in-chief of Crikey

JOIN NOW