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    Legal Sports Report: Big U.S. Sports Betting Busts In 2016 Serve As Backdrop For Legalization Effort

    July 5, 2016

    By Will Green

    Organizers of an American Gaming Association conference on June 30 advocated for the legalization and regulation of sports betting in the United States, for which the association said it will formally lobby Congress as early as the beginning of 2017.

    The rationale for such a legal framework, which everyone from the U.S. Conference of Mayors to NBA commissioner Adam Silver has called for, is grounded in part in the idea that it would curb the proliferation of illegal sports wagering, and the resultant criminal activity often associated with such enterprises.

    This argument begs the question: Just how widespread is illegal sports wagering?

    As if on cue, Brooklyn (New York) District Attorney Ken Thompson announced on the morning of the June 30th conference that his office had leveled a 57-count indictment against one of the largest illegal sports gambling rings ever prosecuted the United States. The four-person sports betting operation allegedly took in more than $900 million in bets in 2015 alone.

    Illegal sports betting by the numbers

    The AGA estimates sports bettors wagered approximately $145 billion illegally in the United States in 2015. Other estimates of the annual illegal U.S. sports betting handle range in size from $80 billion to $380 billion. Whatever the true size of America’s illegal sports betting market, it dwarfs the $4.2 billion in legal wagers that Nevada sportsbooks accepted during that same time span.

    Where and how are some of these billions being bet illegally?

    An examination of nearly a dozen sports gambling busts in the first six months of 2016 alone indicates that illegal sports betting activity is happening consistently, is facilitated through a complex mixture of money laundering, front businesses and offshore websites, and often involves additional criminal activity not related to sports betting.

    U.S. authorities have uncovered these rings of widely varying size and scope across several states, including New York, Massachusetts and California (two additional sports betting busts also occurred in these states in late 2015). There are likely other indictments against sports betting rings currently under seal as well as other pending investigations that have not been made public.

    While the criminal probes to bring down these gambling rings are keeping law enforcement busy, they appear to constitute a Sisyphean task of sorts, eradicating only a small fraction of the illegal activity taking place, and doing little to curb the continued existence of illegal sports wagering.

    Sports betting busts in 2016

    The following list does not include arrests, seizures or raids occurring prior to 2016 that resulted in criminal verdicts or sentencings in 2016. It also does not include the multiple arrests, seizures or raids that took place against non-sports gambling rings thus far in 2016.

    • On Jan. 27, 22 people were charged by the U.S. Attorney for the Southern District of California with participating in an illegal sports gambling ring, which also engaged in drug smuggling. Authorities made 19 arrests across four states related to the ring. The operation gained notoriety for being run by several former University of Southern California athletes, including former USC tight end Owen Hanson. Authorities said Hanson ran his operations in part through a cross-country network of “runners” and a series of online websites operated by an associate from Peru, and that he threatened violence against delinquent gamblers, one of whom owed more than $2 million to Hanson’s operation.
    • On Mar. 1, Pennsylvania Attorney General Kathleen Kane charged a Pennsylvania state representative with using his elected position to help a friend with ties to aPittsburgh crime family run an illegal video poker and sports betting ring.
    • Polk County (Fla.) authorities arrested 25 people in late March as part of a sting called “Operation Parlay.” Authorities said those implicated ran a sports wagering operation out of separate check cashing and cell phone business storefronts in Winter Haven, Fla., and Lakeland, Fla., respectively. Authorities seized $139,000 in cash, assets and guns.
    • A Queens County (N.Y.) grand jury charged former professional poker player Jay Sharon on Apr. 5 with acting as a sports bookmaker for a ring that annually accepted more than $3.5 million in bets. The allegation came as part of an eight-person, 85-count indictment against the New York and Nevada-based illegal ring. The ring allegedly used a combination of runners, toll-free phone numbers andoffshore websites to transact bets, and funneled all money directly to Sharon.
    • Just over one week later, Rhode Island authorities searched at least three restaurants and raided a beach home in Narragansett, R.I., and arrested 20 people for their involvement in two separate sports gambling rings. Authorities said one of the operations was run out of the restaurant, and that the operations used offshore websites BetCapri.com and VIPBettor.com to facilitate bets. Authorities seized 300 pounds, or $1.5 million worth of marijuana as part of the raids that they said the ring planned to sell. They also seized hundreds thousands of dollars in cash and assets related to sports wagering.
    • Just down the road in Providence, R.I., authorities on Apr. 14 arrested nine peopleand seized $70,000 in assets related to an unrelated illegal sports betting ring that they said was run out of a cell phone retail storefront. As part of the investigation, authorities seized $60,000 worth of Fentanyl, an ingredient commonly used to synthesize heroin.
    • On Apr. 14, federal prosecutors charged five Boston-area men with operating an illegal gambling ring, as well as loansharking and extortion. The type of gambling operation the defendants were alleged to have been involved in was not specified, but the leader of the defendants, organized crime figure Joseph A. Yerardi, has a criminal history of helping facilitate Costa Rica-based sports betting operationsfor the Boston mob.
    • Federal authorities on May 12 reportedly arrested 14 members and indicted 18 members of the Genovese crime family across four New York boroughs for a wide range of crimes, some of which were running an illegal gambling business. Per NBC New York, the sports gambling side of the family’s operations allegedly took in more than $2,000 per day. 
    • 46 people across three states were arrested in late May in connection with an illegal sports gambling ring ran by Robert D’Alessio. The ring was estimated to handle “tens of millions of dollars” per year, and targeted more than 300 bettors in the New York and New Jersey area. Authorities seized $2 million in cash from the ring, which used a Costa Rica-based website, a 1-800 number and more than 50 gambling agents to process bets. 
    • Not to be outdone by the Genovese family, the Lucchese crime family operated another Costa Rica-affiliated online sports book that took in more than $13 million. That effort was broken up by the Brooklyn district attorney’s office on May 27, and those implicated were hit with a 37-count indictment.
    • Far and away the largest U.S. sports gambling operation busted in 2016, a $927 million operation ran by four men in New York and California was broken up by the Brooklyn district attorney on June 30. Like several other recent online gambling busts, authorities allege this operation used a wire room in Costa Rica and offshore websites (www.wagerabc.com and www.hustler247.org) to process bets during the 2015 football season. Authorities claimed the defendants used elaborate tactics to launder their gambling proceeds, including the purchasing of more than 20 homes.

    Other ‘illegal gambling’ in 2016

    Traditional sports betting isn’t the only sports-related gaming product to come under fire from authorities in 2016.

    Attorneys general in Texas, Tennessee, Mississippi, Hawaii, Idaho, Alabama, Vermont andGeorgia have each opined in the past six months that daily fantasy sports constitutes illegal gambling. There have been no actual charges brought against any DFS company, however.

    Illinois AG Lisa Madigan released an opinion similar to those states in late 2015. FanDuel and DraftKings are both engaged in court cases pertaining to DFS’ legality in that state.

    Mississippi and Tennessee’s state legislatures promptly passed bills legalizing DFS, and TexasAG Ken Paxton reached a settlement with FanDuel where the operator agreed not to operate in the state.

    While New York’s legislature recently passed a bill legalizing DFS in response to a settlement agreement with AG Eric Schneiderman, some foresee that the bill could face a constitutional challenge from opponents.

    Original article: http://www.legalsportsreport.com/10643/2016-illegal-us-sports-betting/

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