U.S. Wins and Loses in War on Gambling: Kaplan

The founder of the London based BetOnSports gambling Web site, Stephen Kaplan, was arrested late Wednesday in the Dominican Republic, according to United States attorney, Catherine Hanaway, who is prosecuting a case against BetOnSports.^[1]

Mr. Kaplan was arrested at a hotel in Santo Domingo, “[t]his was a worldwide search, and thanks to the assistance of many law enforcement agencies, this fugitive will soon be back in St. Louis to face the charges against him,” Hanaway said.^[2] Mr. Kaplan has been charged in St. Louis along with the former chief executive of the company, David Carruthers, and nine others in a 22-count criminal case related to Internet gambling.^[3]

However while the U.S. may have won a battle here, they may lose the war. The World Trade Organization (WTO) ruled on Friday March 30, that the U.S. has failed to change its ban on Internet betting to comply with a previous WTO ruling asserting that the legislation unfairly targets offshore casinos.^[4] The Geneva-based trade organization asserted that Washington may maintain restrictions on online gambling, so long as the laws are equally applied to American operators offering remote betting on horse racing.^[5]

The ruling opens the door to possible commercial sanctions against the U.S. In order to avoid such penalties, the U.S. government must either permit Americans to gamble over foreign-based sites or eliminate exceptions for off-track betting on horses.^[6] It however appears unlikely that the U.S. will ease access to companies with servers licensed in Antigua and Barbuda – whose legal efforts were largely bankrolled by British-owned Internet gambling operators.^[7]

In other online gambling cases, Peter Dicks, the former chairman of Sportingbet, was detained in New York but released after former New York Gov. George Pataki declined to sign a warrant extraditing him to Louisiana, where he was wanted on charges of illegal online gambling; and former BetOnSports PLC Chief Executive Officer David Carruthers remains under house arrest in the St. Louis area awaiting trial on federal charges from the U.S. attorney's office based on the 1961 Wire Act.^[8]

Stephen Kaplan is being charged with, among other things, conspiracy to commit racketeering which we have previously discussed as regards to online gambling here, and here.

Racketeering ConspiracyRacketeering conspiracy is covered by 18 U.S.C. § 1962 which states that it is illegal for a person to conspire^[9] to be associated with an enterprise which, through racketeering activity or the collection of unlawful debt, affects interstate or foreign commerce.^[10] Racketeering activity includes conducting, financing, managing, supervising, directing, or owning all or part of an illegal gambling business.^[11] The punishment for a violation of section 1962 is a fine, imprisonment for up to 20 years, or both.^[12]

On a side note, racketeering charges should be always be differentiated from RICO charges. Racketeering is the interference of commerce through threats of violence.^[13]RICO charges,^[14] on the other hand, concern organized crime and systematic racketeering activity infiltration into legitimate organizations. However, because the statutes are written broadly enough to be applied to drug traffickers, it would not have been altogether surprising if these particular individuals had been charged under the RICO statutes, instead of merely the racketeering statutes.

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^[1] Authorities Arrest Founder of Internet Gambling Site, AP (via NY Times), March 31, 2007, available at http://www.nytimes.com/2007/03/31/technology/31gamble.html?ref=business (last visited Apr. 2, 2007).
^[2] Id.
^[3] Id.
^[4] Id.
^[5] Bradley S. Klapper, WTO Rebuffs U.S. on Internet Betting Ban, AP (via Casper Star Tribune.net), Apr. 02, 2007, available at http://www.casperstartribune.net/articles/2007/04/02/ap/hitech/d8o70v9g0.txt, last visited (Apr. 2, 2007).
^[6] Id., Including over the Internet, as permitted under the 1978 Interstate Horseracing Act.
^[7] Id.
^[8] Id.
^[9] 18 U.S.C. § 1962(d).
^[10] Id. § 1962(c).
^[11] Id. § 1955(a).
^[12] Id. § 1963(a).
^[13] See 18 U.S.C. §§ 1951 et seq.; see also Id. § 1961(a) (“racketeering activity” defined).
^[14] Id. §§ 1961 et seq.