The American Gaming Association (AGA) is doubling down on its pursuit of the sweepstakes industry, while state attorneys general across the country are calling for a crackdown on illegal offshore gambling sites.
The AGA recently released a survey showing that 90% of users dispute the notion that the sweepstakes is entertainment, rather than gambling.
Tres York, vice president of government relations at the AGA, appeared on the Indian Gaming Association’s weekly webinar to discuss the data, why it matters, and how the report challenges the narratives of the sweepstakes industry.
“With unlicensed operators evading regulation and responsible-gaming safeguards, lawmakers are beginning to act and this report is shifting the national conversation,” said Victor Rocha, IGA tradeshow conference chair, who hosted the webinar with IGA Executive Director Jason Giles. “For tribes and commercial operators playing by the rules, the stakes have never been clearer.”
The program also dealt with 50 state attorneys general releasing a letter Tuesday asking U.S. Attorney General Pam Bondi to tackle offshore gambling. The group said the sites pose a risk to Americans, especially the young, since they neither comply with gambling regulations nor pay taxes. Citing AGA data, the AGs estimated that it costs states $4 billion in lost tax revenue.
“It felt like the beginning of another Black Friday event,” Rocha said. “This was a big deal.”
York said Tuesday was a good day, with the release of the letter. He recounted that two years ago, the AGA wrote a letter to the U.S. Department of Justice, urging them to investigate and go after illegal offshore gambling.
“At the time, research estimated that more than $400 million was wagered by Americans on illegal gambling platforms,” York said. “Since then, we’ve worked closely with the FBI and DOJ, and individual U.S. attorneys, to raise the profile of this and provide as much information as we could to spur that action. While it’s been incredible to see what state gaming regulators and state attorney generals have been doing to combat illegal offshore gambling, the federal government is really where the jurisdiction and resources are for that type of thing.”
York said over the last several weeks, there’s been a collective effort on the letter from the state attorneys general. He said the AGA worked with its leadership, who have been great partners on the issue.
“The letter cites our research, but it also lays out that this type of action has been undertaken before, which we in the gaming industry talk about as Black Friday. In 2011, the DOJ seized the websites and assets of the three largest online poker sites operating at the time. Real results came out of that. We just want the Department of Justice to do it again. It was a collective effort. It’s rare, unfortunately, in the United States these days to see a swell of bipartisanship. Other than the District of Columbia and three American territories, 46 state attorney generals signed onto the letter.”
York said offshore gambling shouldn’t be a controversial issue. After all, they’re illegal black-market operators.
“It’s really encouraging to see this,” York said. “It sends another clear message to the Department of Justice and to the FBI that this is a major problem, with hundreds of billions of dollars wagered. It’s not only that, but we also know that where there’s illegal gambling, there’s almost always a nexus for other types of crimes – transnational organized crime groups and weapons trafficking, especially on a global scale. There’s no better money- laundering tool than these large offshore gambling sites.”
Findings from the AGA survey on sweepstakes show that 69% describe sweepstakes casinos as places to wager real money; 80% of sweepstakes players spend money monthly and nearly half spend weekly, without the safety nets offered by regulated operators. In addition, the number of monthly sweepstakes players is twice as high in states lacking sweepstakes bans.
Rocha said these operators know it’s illegal, but saw a loophole and wanted to make as much money as they could before they had got out of the business.
“Like I said in October, they were prepared to sneak into the industry, but weren’t prepared to stay,” Rocha said. “All of their arguments have been very weak. They don’t have a leg to stand on.”
“The arguments (from sweepstakes operators) are a lot of deflection. The new research is another tool in the toolkit. We can go to these key constituencies and give them hardcore data that rebuffs a lot of the nonsensical arguments that the other side posts on social media.”
Giles said there hasn’t been a lot of success in the past in shutting down offshore sportsbooks and asked York what can be done differently this time to address the problem.
“Let’s be honest. It shouldn’t take 50 state AGs to take care of something that’s offshore,” Giles said. “The credit card companies don’t want to be enforcers. The internet companies don’t want to be enforcers. It’s interesting Texas didn’t sign onto it, while they’re cracking down on pornography on the internet and you can’t order abortion pills. But they can’t deal with this. I guess they’re distracted.”
York said the toolkit differs between the federal and state governments. The federal government has the resources to conduct complex investigations to figure out who is running these sites when looking to indict someone. They have technological expertise to seize assets, he added.
“The states don’t have that authority,” York said. “The United States government can seize the web domains of these offshore websites and shut them down,” York said. “The payments network is extraordinarily important. Whether it’s Visa or Mastercard, they’re starting to open their eyes a little. Beyond those, companies are facilitating these payments and banks are involved. Those financial institutions can be looked at to seize the assets from individual players and anyone who may be indicted. You can actually shut these guys down.”
York said states could target companies licensed in their states and working with illegal operators in terms of payment processing or being suppliers of technology. They can also target servers that host the sites and work with search engines to combat misinformation that these offshore sites are legal.
“So, Tres, are you saying we’re going to arrest everybody at the next G2E?” Rocha joked. “You can do one of those sweeps where people think they’ve won the lottery, and when they show up, we arrest everyone.”
The AGA survey proves that sweepstakes is gambling, according to Giles, who asked York if he thought that was a breakthrough in this fight.
York responded that it adds to the narrative from the last 12 to 16 months. When talking with state lawmakers, attorneys general, and regulators, the research is important to show them who the players are, how they perceive the operations, and that advertising is targeting citizens within their states.
“It’s mind boggling that half of all the online ads that consumers are exposed to are for offshore or sweepstakes casinos,” York said. “They’re spending the money in California and Texas (neither of which has online casinos). The larger companies are spending hundreds of millions of dollars a year targeting Americans.”
Rocha said the IGA also needs to have a conference with regulators and use the information to keep moving forward as well.
“The response from Indian Country is still very anemic,” Rocha said. “It’s very loud, but I don’t see a lot of weight behind it yet.”
